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Government-backed ONDC concerns big players like Amazon

By Abhishek Goel 30th May 2022

What is ONDC?

The Open Network for Digital Commerce (ONDC) is an open protocol network that will allow any network-enabled application to identify and engage in local commerce across mobility, shopping, food order and delivery, hotel booking, and travel, among others.

By enabling access to online platforms, the platform intends to open up new opportunities, reduce digital monopolies, and empower micro, small, and medium businesses, as well as small traders. It is a Ministry of Commerce and Industry’s Department for Promotion of Industry and Internal Trade (DPIIT) project.

Why e-commerce giants are worried:

Five cities across India were part of the ONDC’s soft launch on April 29, including Delhi, Bhopal, Bengaluru, Shillong, and Coimbatore. A goal of ONDC India is to match online consumer demand with the closest available supply source. With any compatible app or platform, consumers can now discover any vendor, product, or service.

The proposed government-backed platform aims to create a level playing field for e-commerce behemoths such as Amazon, Flipkart, and offline traders who have been crying foul at the unfair trade practices of these e-tailers. In addition, the platform will comply with the Information Technology Act of 2000 and the pending Personal Data Protection Bill.

Features of ONDC:

  • It intends to promote open networks developed utilizing open-source techniques, open specifications, and open network protocols that are independent of any particular platform.
  • Further, it is planned to digitize the whole value chain, standardize processes, boost supplier involvement, improve logistical efficiency, and increase customer value.
  • ONDC India will also empower merchants and customers by breaking down silos to build a unified network that will promote innovation and growth across all industries, including retail, food, and transportation.

Key stakeholders to the ONDC

Several public and private sector banks have acquired stakes in ONDC, including HDFC, Kotak Mahindra, Axis Bank, State Bank of India (SBI), and Punjab National Bank (PNB). In addition to this, around 80 companies are striving to connect market players to the ONDC platform. 

According to the Economic Times, these companies create enterprise software and apps for vendors, buyers, logistics platforms, and payment gateways. 

Meanwhile, the Business Standard reports that 24 firms are in the process of integrating with ONDC, including high-profile start-ups like Flipkart’s logistics arm Ekart Logistics, hyperlocal delivery company Dunzo, and payment service provider PhonePe.

Among other companies, Paytm has also announced its primary focus in ONDC to explore export opportunities.

Additionally, as per the latest development discovered by reuters, Google is in discussions with the Indian government about integrating its shopping service into the network.

Do Amazon and Flipkart fear the government-backed e-commerce model?

With the recent development from the government in the e-commerce industry, major e-commerce companies have protested since they’ve already invested heavily in R&D and are deploying their own processes and technology. 

Through aggressive discounts and the promotion of favored vendors, Amazon and Flipkart alone have invested a total of US$24 billion to acquire 80% of the Indian e-commerce industry. Retail platforms, shopping apps, and super apps have also been established by Indian retail behemoths such as Reliance and Tata.

Not just this but meanwhile, on April 28th, the Competition Commission of India searched the offices of key Amazon and Flipkart merchants, which happened to be the day before the ONDC was announced. 

Local merchants accused the marketplace platforms of exploitative pricing, heavy discounting, coordination with corporate vendors, and owning the merchandise they sold through a network of holding companies, according to reports.

Apart from this, the Indian government looks confident with the ONDC play. Nonetheless, the government is likely to view India’s e-commerce market worth – to reach US$200 billion by 2027 (predicted by Statista) – as big enough to attract and involve all sorts of business competitors.

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