Open Network for Digital Commerce (ONDC)

In News

• Recently, the Union Minister of Commerce and Industry has reviewed the progress of the Open Network for Digital Commerce (ONDC).

Key Highlights

• Background: 
  • Since the alpha launch in five cities in April 2022, ONDC has been testing with a closed user group for end-to-end execution to understand their fulfillment. 
• Target: 
  • ONDC expects the number of network participants to substantially increase to more than 30 in the coming weeks. 
  • Then, ONDC will start beta-testing the network with public users in limited areas.
• Focus of ONDC:
  • To assist the small, undigitized trader, who must be assisted to get digitized and avail opportunities offered by the e-commerce ecosystem.
• Why are other e-commerce flourishing? 
  • The existing e-commerce platforms are popular because:
    • They remain consumer focused. 
    • They have created robust trust in their platforms based on their ability to deliver on promises made about products, 
    • Fulfillment of orders in time, 
    • No-questions-asked returns policies, and 
    • Consumer-friendly refunds and cancellations.
  • ONDC will be tested against these benchmarks. 

Open Network for Digital Commerce (ONDC)

• About: 
  • The ONDC is an open technology network based on an open protocol.
  • It is a not-for-profit organisation that will offer a network to enable local digital commerce stores across industries to be discovered and engaged by any network-enabled applications. 
  • It is neither an aggregator application nor a hosting platform, and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network.
• Aim: 
  • To enable buying of products from all participating e-commerce platforms by consumers through a single platform. 
  • Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
  • The platform will allow buyers and sellers to connect and transact with each other online, regardless of what other applications they use. 
• Launch: 
  • It saw a pilot launch in April in five cities — Delhi, Bengaluru, Coimbatore, Bhopal, and Shillong.
• ONDC Model: 
  • It is trying to replicate the success of the Unified Payments Interface (UPI) in the field of digital payments. 
  • The open network concept also extends beyond the retail sector, to any digital commerce domains including wholesale, mobility, food delivery, logistics, travel, urban services, etc.

Image Courtesy: Money Control 

• Features: 
  • The foundations of ONDC are to be open protocols for all aspects in the entire chain of activities in the exchange of goods and services, similar to HTTP for information exchange over the internet, simple mail transfer protocol for exchange of emails and unified payments interface for payments, according to the commerce ministry.
• Control: 
  • The ONDC will not be owned or controlled by a single entity or platform and the idea behind it is to connect buyers, suppliers, payment, and logistics providers through open-source specifications and protocols.
• New Feature: 
  • ONDC has been envisaged as an entity which should be able to work without the need for day-to-day guidance and advisory from the shareholders/members. 
• Financially Independent: 
  • The independence of the management is linked to the financial independence of the entity, and therefore, the entity will be required to get funding independently and have a self-sustaining financial model.

Image Courtesy: Money Control 

Significance of ONDC

• Standardization of Processes: ONDC protocols would standardize operations like cataloguing, inventory management, order management and order fulfilment in e-commerce.
• Bridging gap between online demand and supply: The Department for Promotion of Industry and Internal Trade (DPIIT) conducted an outreach and it found that there is a huge disconnect between the scale of online demand and the ability of the local retail ecosystem to participate. 
• Democratize e-commerce: The ONDC will democratise digital commerce, moving it from a platform-centric model to an open-network.
• Breaking Monopolies: This domination by dominant players like Amazon and Flipkart restrains the interests of smaller and financially afflicted retailers. ONDC will break this monopoly.
• Empowerment and Innovation: ONDC will empower merchants and consumers by breaking silos to form a single network to drive innovation and scale, transforming all businesses from retail goods, food to mobility.
• Level Playing Field: The regulator for the ONDC, to be formed soon, will ensure level playing field and healthy competition through dispute settlement and penalties.

Challenges with ONDC

• Threat to Local businesses in the long run: The local business will find it extremely challenging to compete with the discounts, sales and other lucrative offers, being offered by prominent e-commerce players which may result in local business being squeezed out of the network in the long run.
• Silent on liability for a bad product: The strategy paper is silent on the issues regarding liability on the network in case consumers faced issues regarding transactions, delivery of substandard products and service.
• No clarity on how existing laws will apply: There is also a lack of clarity on the applicability of the existing e-commerce laws to the network.

Way Ahead

• ONDC must create consumer trust through robust mechanisms for ensuring redressal of grievances of consumers and enforcing transparent policies for returns, refunds and cancellations. 
• There needs to be a paradigm shift from an operator-driven monolithic platform-centric model to a facilitator-driven, interoperable decentralized network.
• The policies should be implemented at the network level.

Source: news18