ONDC is an Idea, Whose Time Has Come- Nandan Nilekani
Table of Content
ONDC: The Indian E-commerce Story.
What is ONDC?
How does ONDC work?
4 Benefits of ONDC.
8 Major Limitations of ONDC.
4 Scope of ONDC.
5 Potential Implications of ONDC.
Takeaways
ONDC: The Indian E-commerce Story
In recent decade ecommerce has seen rapid growth around the world. Particularly in India's e-commerce market is estimated to be $75 billion in 2022 and projected to be $111 billion and $200 billion by 2024 and 2026 respectively. Growing at a CAGR of 20%-22%.
The number of internet connections in 2021 increased significantly to 830 million, driven by the ‘Digital India’ program (IBEF)
In India, as the nation progresses towards a digital-first economy, various initiatives have been implemented to foster and encourage ecommerce . It is a consortium-driven platform that aims to provide a common digital infrastructure for various stakeholders in the digital commerce ecosystem through the Open Network for Digital Commerce (ONDC).
The digital ecommerce in India is still facing several challenges, namely; lack of instructiveness, high transaction costs, and lack of trust mechanisms in club computing space .
In this blog article we will explore about the ONDC initiative, its benefits, limitations, scope, and potential implications.
What is ONDC?
ONDC stands for Online and Offline Digital Commerce, and it is revolutionizing the way people shop in India. This new hybrid retail model combines the convenience of online shopping and the immediacy of traditional brick-and-mortar stores, with a few additional benefits thrown in.
The Open Network for Digital Commerce (ONDC) is a government-led initiative that aims to create a common digital infrastructure for various stakeholders in the digital commerce ecosystem, including merchants, payment gateways, logistics providers, and regulators. The platform seeks to provide an open, interoperable, and secure network that enables seamless integration of various digital commerce applications and services. The initiative is part of the government's broader vision of creating a digital-first economy, where technology and innovation play a key role in driving growth and development.
e.g. Do you remember the Trivago ad? ONDC is a large scale aggregator that possibly integrates all the industries within it.
How does ONDC work?
The ONDC will function as a middleware layer that will enable interoperability among different digital commerce platforms. It will provide a standardized interface for various digital commerce platforms to interact with each other seamlessly. The ONDC will also provide a common language for digital commerce transactions, which will make it easier for merchants and consumers to transact with each other.
India’s social commerce has the potential to expand to US$16–20 billion in FY25, growing at a CAGR of 55-60%. (IBEF)
At ONDC, customers can shop online from the comfort of their homes, and also visit their stores to pick up items with same-day delivery. The shopping experience is safe and secure, with customers able to track their orders from the moment they start shopping to when their items are delivered.
To ensure a consistently smooth shopping experience, ONDC uses a combination of digital marketing, mobile technologies and artificial intelligence. This includes personalized recommendations for customers, real-time analytics, and the ability to connect with customers online, as well as in-store.
The ONDC model is designed to be flexible and agile, allowing customers to have a seamless experience whether they’re shopping online or in-store. Its combination of convenience and personalized service is winning over customers, and making it an attractive proposition for traditional retailers looking to stay ahead of the curve.
4 Benefits of ONDC
Why is it a game changer for the retail industry?
The Indian e-commerce market is expected to reach an annual gross merchandise value of $350 billion by 2030. (Invest India)
ONDC is a game-changer for the retail industry. It offers a number of advantages over traditional retailing models:
Increased customer loyalty: With its combination of online and in-store shopping experiences, customers can build loyalty both online and offline, increasing the likelihood of returning customers spending more money.
Improved sales performance: By using analytics and AI to track customer behaviors and offer personalized recommendations, ONDC increases the likelihood of customers making sales.
Reduced costs: The use of mobile technology and digital marketing help to reduce costs, as customers don’t need to pay for physical stores or advertising campaigns.
Sustainable practices: By going digital, ONDC can reduce the environmental impact of retail by reducing the need for physical stores, plastics, and paper.
In summary, ONDC has the potential to revolutionize the retail industry by offering a range of benefits to businesses and consumers alike. By embracing this technology, businesses can improve their bottom line, reduce their environmental impact, and build long-term customer loyalty.
5 Ways it benefit consumers?
More than 60 per cent of transactions and orders in India come from tier two cities and smaller towns. (Invest India)
There are several benefits to customers that come with the ONDC’s hybrid model:
Substantial savings: Customers benefit from improved prices thanks to the reduced overhead for the retailer.
Increased product variety: With access to both physical stores and online shopping, customers can access a greater variety of products and services.
Improved convenience: Customers don’t need to travel to brick-and-mortar stores and can enjoy an enhanced shopping experience from their own homes or on the go with their mobile devices.
Engaging and interactive experiences: Customers can use their mobile devices to interact with the stores, enter competitions, and get personalized suggestions.
Increased customer loyalty: The ability to shop both online and offline helps to create loyalty on both ends, increasing the chance of customers returning and spending more.
The ONDC model of hybrid retail is a game-changer that benefits customers significantly. It offers customers convenience, increased variety, cost savings, and an engaging and interactive experience. Customers get the best of both worlds with this model and are more likely to be loyal to their retailers.
5 Ways it benefit businesses?
In 2022, Indian e-commerce and consumer internet companies raised $15.4 billion in PE/VC funding, which is twice the amount raised in 2020 ($8.2 billion). (Invest India)
ONDC’s hybrid model brings many benefits for businesses as well, such as:
Lowered costs: Retailers save on overhead costs associated with operating traditional stores.
Enhanced customer engagement: Customers can interact with their chosen retailer across both online and offline channels, resulting in increased customer loyalty.
Improved customer insights: Retailers can utilize customer data collected from the online and offline stores to make informed decisions about their product offerings and marketing strategies.
Increased profitability: The hybrid model enables retailers to maximize profits by selling more products and increasing customer loyalty.
Enhanced customer service: Customers can buy products with ease, and they can take advantage of customer service both online and in physical stores.
Businesses can enjoy increased profits, cost savings, improved customer insights, and enhanced customer service when they utilize this revolutionary new model of retail. ONDC is definitely set to revolutionize the retail space and benefit businesses and customers alike.
8 Major Limitations of ONDC
The ONDC model comes with some challenges as well. For instance, retailers need to ensure that their online and offline presence is integrated and optimized, and that customer data is adequately captured and managed in an organized manner. Additionally, retailers need to have the necessary infrastructure and resources to support the ONDC model. Following are some of the other challenges that retailers need to keep in mind and be prepared to face:
Dependence on the government: The success of the ONDC platform depends largely on the government's ability to execute the initiative effectively. Any delays or roadblocks in the implementation process could impact the platform's effectiveness.
e.g. The Piolet project is now live in Meerut, UP.
Resistance from established players: The ONDC initiative may face resistance from established players in the digital commerce space, who may see it as a threat to their business models.
Security concerns: The ONDC platform will have to ensure that it is secure, scalable, and reliable to protect against cyber threats and data breaches.
Merchant data integration: Retailers need to ensure that all the relevant merchant data is integrated and up to date.
Regulatory compliance: The ONDC model requires retailers to comply with applicable laws and regulations and ensure that customer data is secure.
Technological advancements: Retailers must remain on top of advancements in technology to be able to utilize the latest tools and platforms to maximize their profits.
Customer experience: To be successful in the ONDC model, retailers need to provide an outstanding customer experience across both online and offline channels.
Logistics: Retailers need to ensure that their delivery and returns process is seamless and efficient.
4 Scope of ONDC
The scope of the ONDC platform is vast and includes:
Providing a common digital infrastructure for various stakeholders in the digital commerce ecosystem
Facilitating easy participation by small and medium-sized businesses
Enabling seamless integration of various digital commerce applications and services
Providing a range of services and tools that will help businesses to easily onboard and participate in the digital commerce ecosystem
Promoting innovation and competition in the sector
5 Potential Implications of ONDC
The ONDC initiative has the potential to transform the digital commerce landscape in India. Some of the potential implications of the initiative include:
Increased participation by small and medium-sized businesses in the digital commerce ecosystem
Greater efficiency and reduced costs in the digital commerce space
Development of new applications and services that enhance the overall customer experience
Increased competition in the sector, which benefits consumers
A boost to the government's vision of creating a digital-first economy
Takeaways
ONDC, a network launched by the Government of India in 2022, aims to provide equal opportunities to MSMEs to thrive in digital commerce and democratize e-commerce.
In conclusion, the ONDC is set to revolutionize the digital commerce landscape in India. It will provide a standardized framework for digital commerce transactions, reduce transaction costs, and enable trust and security in digital commerce transactions. The ONDC has the potential to transform the digital commerce industry in India and make it easier for small businesses and startups to operate in this space. With the launch of the ONDC, India is poised to become a leading player in the global digital commerce market.
This model brings additional benefits to retailers, such as flexible purchase options and improved customer experience, along with cost savings and higher profits. However, retailers must ensure that they have the right infrastructure, resources and capabilities to manage the challenges involved in using this model, such as data integration, regulatory compliance and customer experience. With the right resources and appropriate strategies, retailers can reap significant rewards from the ONDC model.
As the online retail industry in India continues to grow and expand, the ONDC model is likely to become more popular and widely accepted, leading to more and more companies leveraging this model to increase their profits and grow their business.
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Reference
1) Invest India
2) IBEF
3) Wikipedia
4) ONDC
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