What is ONDC?

The government has launched a test of its ambitious Open Network for Digital Commerce (ONDC) plan, which aims to democratize e-commerce and counteract the dominance of US-based companies like Amazon and Walmart. The trial program began in five cities.

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ONDC aims to alter the e-commerce market in the same manner that India's digital payments system was transformed by the Unified Payments Interface (UPI). Let's see how it intends to accomplish this.

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 areas such as mobility, shopping, food order and delivery, hotel booking, and travel, among others.

The platform intends to open up new opportunities, break down digital monopolies, and empower micro, small, and medium-sized enterprise, and small traders by assisting them in gaining access to online marketplaces. It is a project of the Ministry of Commerce and Industry's Department for Promotion of Industry and Internal Trade (DPIIT).

ONDC is an open-source network that will help local commerce in a variety of categories, including mobility, shopping, food order, and delivery, hotel booking, and travel, reach and engage more people via a network-enabled application. This program of the Department for Promotion of Industry and Internal Trade (DPIIT) aims to digitize the entire value chain, standardize processes, and promote supplier inclusion, in addition to improving the value and experience of consumers. Nandan Nilekani, the IT guru who co-founded Infosys and later assisted the government builds the Aadhaar biometric ID system, is one of nine members of a nine-member advisory board formed to advise the government on the project.

The ONDC's goal is to promote open networks built utilizing open-source techniques, open specifications, and open network protocols, regardless of platform. The Quality Council of India has been charged with integrating e-commerce platforms through a network built on open-source technology. The implementation of ONDC, which is planned to be similar to the Unified Payments Interface (UPI), may bring many operational features implemented by e-commerce platforms to the same level. Onboarding of sellers, vendor identification, price discovery, and product categorization are just a few of the operational factors. Buyers and sellers can transact on ONDC regardless of whether they are affiliated with a specific e-commerce portal.

Features of ONDC

ONDC is an e-commerce UPI that aims to democratize digital or electronic commerce by shifting it away from a platform-centric approach and toward an open network. Merchants will be able to save their data through ONDC in order to construct credit histories and reach out to customers. The planned government-backed platform attempts to level the playing field for e-commerce behemoths like Amazon and Flipkart, as well as offline retailers who have complained about the e-tailers' unfair trading practices. The platform will also be in conformity with the Information Technology Act of 2000, as well as the pending Personal Data Protection Bill. ONDC intends to use this system to allow vendors and buyers to be digitally visible and transact via an open network, independent of the platform or application they use. It will also empower merchants and consumers by breaking down silos to create a unified network that will promote innovation and scalability across all industries, from retail to food to mobility.

The new framework aims to promote open networks built using open-source techniques, open specifications, and open network protocols that are platform agnostic. It is planned to digitize the entire value chain, standardize processes, boost supplier inclusion, improve logistics efficiency, and increase consumer value. According to the government's official statement, ONDC would take all necessary steps to guarantee the network's data's confidentiality and privacy. Participants will not be required to share transaction-level data with ONDC. Will collaborate with its members to publish anonymized aggregate network performance measurements without jeopardizing confidentiality and privacy. The government has formed a nine-member advisory board, which includes Nandan Nilekani of Infosys and National Health Authority CEO R S Sharma, to design and speed the deployment of ONDC, which is now in its experimental stage.

How will it work?

ONDC is a step forward from the present platform-centric e-commerce system, which requires both the buyer and seller to complete a commercial transaction on the same platform or application. Businesses and consumers will be able to use any compatible application to conduct transactions over ONDC. Marketplaces such as Amazon, Flipkart, BigBasket, Grofers, and Zomato will be required to register on the DPIIT and QCI platforms.

Customers will be able to choose any seller, product, or service they choose by using any compatible application or platform.

What is open source?

• Making software or a process open-source means making the code or process steps freely available for others to use, share, and change.
• While Apple's iPhone operating system (iOS) is closed source, which means it cannot be legally modified or reverse engineered,

• Because Google's Android operating system is open-source, smartphone makers such as Samsung, Xiaomi, OnePlus, and others can customize it for their hardware.

How will it take on big brands?

The government-backed platform will level the playing field for e-commerce behemoths like Amazon and Flipkart, as well as tiny offline merchants operating local Kirana stores, which are the backbone of India's retail sector. Small business owners have long complained about Amazon and Flipkart's exploitative business practices. The government-backed network's largest hurdle would be developing the technology. Because of their proven technology, Amazon and Flipkart have been able to attract merchants and shoppers to their platforms. In FY22, top listed retailers and quick-service restaurant chains opened over 3000 doors, or about nine new stores per day on average, more than doubling their expansion rate from the previous year to make up for the delay in new outlets due to covid restrictions and take advantage of lower rental rates. Reliance Retail, Aditya Birla Fashion and Retail, and others were among the top nine corporations in the previous fiscal year. "Consumers want to interact with brands both online and offline, and they want to have a tactile experience. They want to have the same experience offline as they have online. They want to go back and look at more alternatives online based on what they see offline. As a result, shop expansion is critical "Metro Brands' CEO, Nissan Joseph, stated.

The ONDC's goal is to promote open networks built utilizing open-source techniques, open specifications, and open network protocols, regardless of platform. The Quality Council of India has been charged with integrating e-commerce platforms through a network built on open-source technology. The implementation of ONDC, which is planned to be similar to the Unified Payments Interface (UPI), may bring many operational features implemented by e-commerce platforms to the same level. Onboarding of sellers, vendor identification, price discovery, and product categorization are just a few of the operational factors. Buyers and sellers can transact on ONDC regardless of whether they are affiliated with a specific e-commerce portal.

Importance of ONDC:

If the ONDC is implemented and regulated, all e-commerce businesses will be required to follow the same procedures (like Android Based Mobile Devices). Smaller internet-shops and newcomers could benefit greatly from this. If mandated, this could be a difficulty for larger e-commerce firms, which have their own processes and equipment in place for these activities. ONDC is projected to digitize the whole value chain, standardize operations, promote supplier inclusion, improve logistical efficiency, and increase consumer value.