India govt aims to create an even better e-commerce service

NEW DELHI, 23 June 2022:

India hopes to break the monopoly of multinationals and transform the landscape of the rapidly expanding e-commerce industry – with an initiative that would show goods of neighbourhood stores alongside those from bigger retailers on shopping apps.

The Open Network for Digital Commerce (ONDC) plan will swap out the conventional idea of an intermediary-run network with a system that is accessible to consumers, independent vendors and distributors.

The founders have concentrated on the low e-commerce penetration in India, where they believe that just 90 million people use it regularly – a relatively low figure for the second-most populous nation in the world with more than 1.35 billion inhabitants.

The government initiative will allow offline retailers to compete with big e-commerce giants on a level playing field.

According to the non-profit Open Network for Digital Commerce, the only way to raise these numbers is to act differently from what the large corporations do.

The network seeks to democratise the sector by helping smaller firms to take the leap into e-commerce, giving them the same visibility as larger businesses.

The current companies are “like feudal lords that have an incentive to show you what they want to show you not what you want to see,” said ONDC project CEO T. Koshy.

The project launched its pilot phase in five Indian cities in mid-April.

The ONDC “owes loyalty to nobody and will try to help you to choose faster by asking more smart questions,” he said.

Although the programme is in a nascent stage, the objective is to steadily expand its impact and presence to roughly 100 Indian cities by August.

Unlike e-commerce giants like Amazon, Flipkart, and Reliance Retail, ONDC does not have its own interface, thus escaping the “web-centrism” – as Koshy termed it – and allowing users to simply search for the desired product on any of the platforms that integrate it.

Moreover, when a consumer searches the application or website of one of the participants in the ONDC, they will not only be shown the products of that business, but also the ones being sold by those other parties.

Without a pre-set order, which depends on the filters chosen by the consumer himself, the services of a large company will appear alongside those offered by a small business – giving both their products the same visibility.

“Earlier, the intermediary was a source of power, of value, because with all this information, he could tell the seller, ‘see if you give me some extra money I can get you up.’ This is the fundamental change,” underlined Koshy.

The initiative seeks to end the opacity that characterises e-commerce giants.

In turn, it would help increase the number of e-commerce consumers in India threefold, up to around 250 million, claimed ONDC senior vice president Rahul Handa. “The reason why ONDC is there is to democratise commerce.”

Currently, ONDC has seven companies covering food, health, and agriculture sectors. It is targeting a wider range of products, including airline and train tickets.

ONDC avoids referring to big platforms as the competition, claiming instead that Amazon has already shown interest in the project, as a potential member.

“They are talking to us (…) It would be a good thing for them as well as for us. It is a good thing that any major brand adds to the credibility of the network,” said ONDC chief business officer Shireesh Joshi.

However, the Indian government doubts any real interest from the e-commerce giant, and hopes the development of the initiative – of which they indirectly control 50% – will attract many of Amazon customers to its network.

“A seller wants to have as many customers as he as he can get. Now if he’s on Amazon, he gets only customers who are on Amazon. If he’s on ONDC he gets customers from across the board,” said additional secretary ministry of commerce Anil Agrawal.

Heading the project, Agrawal underlined the non-profit character of ONDC and revealed that following an initial investment of US$1.3 million, it has already raised enough money to sustain itself for the next few years.

The platform allows its operators to levy a very small charge for every transaction that occurs on the network, but that charge will only be in place after negotiations with the network members once the testing phase progresses, he added.

“We are taking special steps to build trust in the system. (…) Unless there is trust, no one will come here,” Agrawal said.