ONDC: A game changer in e-commerce

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ONDC: A game changer in e-commerce

Wednesday, 29 March 2023 | Ashwani Mahajan

ONDC: A game changer in e-commerce

ONDC provides an outside-the-box solution to e-commerce problems to ensure that buyers and sellers are not exploited

For more than a decade, e-commerce has seen exponential growth in India and around the world. About 6.5 percent of India's retail business happens through e-commerce. E-commerce has made life easy, as people get commodities and services conveniently with the click of a button, sitting at home. In today's world, whether it's a rail, bus or plane ticket, a hotel reservation or taxi, or auto commuting, everything has become very convenient. Not only this, various domestic and business services can be easily accessed through e-commerce.

Today, numerous types of businesses are conducted using e-commerce—consumer goods, e-pharmacy, e-grocery, delivery, payment, travel, hotel booking, taxi, vehicle pooling, car rental, household, financial, employment, matrimonial match-making services, etc.

However, at the same time, the dominance of some big e-commerce companies has increased, causing huge losses to conventional businesses. Due to their monopoly over data, these e-commerce companies discriminate against different sellers and give preference to their favorite sellers, thereby creating a disadvantage for other sellers.

Though these companies claim to provide cheaper goods and services, apparently through technology, this isn't due to their efficiency, but to their cash-burning business models. Due to their financial muscle, these companies offer hefty discounts to consumers to destroy the businesses of small, traditional shopkeepers, travel agents, etc.

If we look at cab aggregators, we find that in the initial phase, they also made people travel for free with their own money. They also gave huge incentives to attract drivers. But now, after establishing their business, consumers are made to pay through the nose, and almost one-third of drivers' earnings are snatched by these aggregators.

E-commerce companies, acting as aggregators, eat into the incomes of small vendors and poor workers, leaving them with only two options, either get exploited or leave the business. Be it grocery shops or garment shops or electronics and home furnishings showrooms, or traditional travel agents, the employment of people in different types of retail business has been affected by e-commerce companies. These companies can do so because they have more information about consumer preferences, purchasing power, location, etc.

Due to all this information, they can reach consumers more easily than conventional businesses, and with artificial intelligence (AI), they gain an undue advantage. Sometimes e-commerce is also exploitative, resulting in job losses. Apart from this, it is also seen that to maximise their profits, e-commerce giants procure from anywhere in the world, mostly from China. Indian products are flushed out by these e-commerce giants, with the result that our youths are reduced to becoming delivery boys.

We can't stop e-commerce and there is no need to do so; the issue is the protection of vendors’ and consumers' interests. Can we put a limit on the greed of e-commerce giants? The answers to these questions are found in the Open Network for Digital Commerce (ONDC), started by the Government of India, as a not-for-profit company, registered under Section 8 of the Income Tax Act.

ONDC provides an outside-the-box solution to the problems of e-commerce. Buyers and sellers are provided with an interface that isn't exploitative in any way. In this system, e-commerce companies cannot discriminate between sellers through monopoly over data and AI. Overall, ONDC will be a channel where consumers can easily find sellers, service providers, etc. It is possible for sellers and buyers to be promoted based on competition instead of monopoly in the e-commerce market.

What is ONDC

ONDC is not a platform like normal e-commerce companies. E-commerce companies work through a platform. Vendors or service providers register themselves on respective platforms and must register on multiple platforms. As a result, these platforms try to attract consumers and sellers by luring them with discounts and incentives, riding on their deep pockets. However, once their business is established, consumers and sellers exploit both to maximise their profits.

Platforms and consumers connect through ONDC, which does not work for profit. Currently, in normal e-commerce, sellers and service providers must register on the platform, so they depend on those platforms. Consumers see only those sellers on the platform who are registered on that platform.

ONDC is a system which provides the facility of taking on different types of platforms. But ONDC's condition is that the goods and services offered by all the vendors or service providers who have registered themselves on any of these platforms are seen by all the customers visiting ONDC. That is, ONDC is a system which is not opaque.

This system works through GIS, and therefore, location plays a crucial role in the ONDC system. This can provide convenience to lakhs of vendors and crores of consumers. For example, if a consumer wants to order food from a restaurant sitting at home, then in the ONDC system, all the nearby eateries will be presented to him, who can provide what he wants. If he wants to buy groceries, he will see the vendors around him first.

All these vendors and service providers, despite being registered on different platforms, will be visible to prospective buyers on ONDC. E-commerce platforms on which vendors are registered can continue to charge fees as per their agreement with the vendor. However, competition among platforms to attract business may automatically reduce commissions. If a platform charges a higher commission, then its goods and services will become more expensive and it will lose its business. In such a situation, every platform wants to keep its commissions low in order to attract maximum business. Once ONDC expands fully, all types of e-commerce can come under the same.

Thus, ONDC frees e-commerce from the monopoly of platforms and encourages healthy competition. It makes goods and services cheaper for consumers by reducing commissions, with transparency. ONDC can change the rules of the e-commerce market.

E-commerce companies, though, have shown interest in joining the ONDC regime and some platforms and payment companies are also registered with ONDC. Taxi services like Ola and Uber have not registered themselves on it yet, but some new e-commerce mobility companies are showing interest in ONDC.

As ONDC was introduced recently, only a small amount of business has been done, but it is expected that it will grow exponentially in the near future. This can help small e-commerce platforms reach consumers without heavy advertising expenses. All registered sellers will be equally visible to consumers in the ONDC system, as the ONDC protocol cannot differentiate between different sellers.

Significantly, so far all technology-supported efforts by the Government seem successful. Today online payments through UPI are convenient and free. More than 40 per cent of all online transactions happen in India. In the same way, ONDC is also being seen as a system that may not only prevent exploitation of consumers and sellers but also be able to increase GDP and employment enormously, by providing convenience to local businesses.

((The author is Professor, PGDAV College, University of Delhi)

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