Open Network for Digital Commerce or ONDC

The Open Network for Digital Commerce's development has recently been assessed by the Union Minister of Commerce and Industry (ONDC).

Highlights

• Background: Since the alpha debut in five cities in April 2022, ONDC has been doing end-to-end execution testing with a limited user group to better understand their needs.
• Target: In the upcoming weeks, ONDC anticipates a significant rise in the number of network participants to over 30.
• The network will thereafter begin to undergo restricted public beta testing by ONDC.
• The primary goal of ONDC is to help small, non-digital traders take advantage of opportunities provided by the e-commerce ecosystem by helping them become digital.

Why are other forms of e-commerce booming?

• Because they continue to be consumer-focused, the current e-commerce platforms are well-liked.
• Based on their capacity to fulfil order fulfilment commitments, no-questions-asked returns policies, and customer-friendly refunds and cancellations, they have built strong trust in their platforms.
• ONDC will be evaluated in relation to these standards.

About ONDC

• On an open protocol, the ONDC is a network of open technology.
• It is a non-profit organization that will provide a network to let any network-enabled applications find and interact with local digital commerce establishments across industries.
• All currently available digital commerce applications and platforms have the option to voluntarily embrace and join the ONDC network; it is neither an aggregator application nor a hosting platform.
• The purpose is to make it possible for customers to purchase goods from all participating e-commerce sites on a single platform.
• A buyer registered on one participating e-commerce site (such as Amazon) may buy items from a vendor on another participating e-commerce site under the ONDC (for example, Flipkart).
• It was introduced in five cities — Delhi, Bengaluru, Coimbatore, Bhopal, and Shillong — as part of a test program in April.
• The Unified Payments Interface (UPI) is being attempted to be imitated by the ONDC Model in the area of digital payments.
• Beyond the retail industry, the open network concept encompasses all digital commerce categories, such as wholesale, mobility, food delivery, logistics, travel, urban services, etc.
• Features: According to the trade ministry, the foundations of ONDC are to be open protocols for all aspects in the full chain of operations in the exchange of goods and services, comparable to HTTP for information exchange over the internet, SMTPP for email exchange, and UPI for payments.
• Control: The ONDC's goal is to connect buyers, suppliers, payment processors, and logistics providers using open-source specifications and protocols. It will not be owned or controlled by any one organization or platform.
• New Aspect: The ONDC has been designed to be an entity that can operate without daily direction and advice from shareholders or members.
• Financial Independence: Since the company's ability to raise money on its own and maintain a sustainable financial model is tied to the independence of the management, the entity must be financially independent.

Significance of ONDC

• Process standardization: ONDC protocols would bring e-commerce activities including cataloguing, inventory management, order management, and order fulfilment into line with one another.
• The Department for Promotion of Industry and Internal Trade (DPIIT) performed outreach and concluded that there is a significant gap between the size of online demand and the capacity of the local retail ecosystem to participate.
• Democratize e-commerce: The ONDC will democratize digital trade by converting it to an open-network paradigm from a platform-centric one.
• Breaking Monopolies: The interests of smaller, less well-off shops are constrained by the dominance of large firms like Amazon and Flipkart. This monopoly will be broken by ONDC.
• Empowerment and Innovation: ONDC will alter all industries, from retail products to food to mobility, by empowering businesses and consumers by shattering silos and creating a unified network that will foster innovation and scalability.
• Level Playing Field: Through dispute resolution and fines, the ONDC regulator, which will shortly be established, will guarantee a level playing field and healthy competition.

Challenges with ONDC

• The long-term threat to local firms: Local businesses may eventually be squeezed out of the network due to their inability to compete with the discounts, specials, and other lucrative deals being made by well-known e-commerce players.
• Lack of discussion of network liability for defective products: The strategy paper makes no mention of network liability for problems with transactions, the delivery of subpar goods, or poor service experienced by customers.
• The application of current laws is unclear: Additionally, it is unclear whether current e-commerce rules apply to the network.

Way Forward

• By implementing clear procedures for returns, refunds, and cancellations, the ONDC must build consumer trust by establishing effective systems for resolving customer complaints.
• A paradigm shift is required from an operator-driven, monolithic platform-centric approach to an interoperable, decentralised network powered by facilitators.
• The policies should be implemented at the network level.

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