ONDC needs to enliven e-commerce and widen gains

Photo: iStock
Photo: iStock


It has begun stirring up India’s food delivery market but must impact e-commerce overall to mitigate power concentration in this field and help spread the gains of an online boom wider.

Efforts to democratize India’s e-commerce space with the launch of the government-backed Open Network for Digital Commerce (ONDC) have been slow. But news of its recent progress suggests that it has begun making its online presence felt. This open e-com platform has made headway in the food delivery market, where it is playing the price warrior to swipe orders that Zomato and Swiggy once held in a duopoly grip. Many buyers in various big cities of India have noted cheaper bills on food ordered through ONDC rather than private apps. Such intensified competition could serve a key purpose just by easing the duo’s dominance, which can ensure that market power does not unduly tilt away from buyers and eateries in need of online sales avenues. Any market gains that ONDC makes could thus be salutary. This network based on open protocols for wide participation has given users of apps like Paytm, PhonePe and Magicpin access to food suppliers with a smaller slice of the deal taken along the way than the big cuts of private app intermediaries. This shows up in lower doorstep prices. And as major private platforms roll back cash burners to target profits instead of habit creation as capital gets dearer, they cannot go too far in increasing their share of the value pie without risking a loss of volumes.

Still, e-commerce relies on scale and network effects, and it won’t be easy for ONDC to win over customers in bulk, as many of us have gotten cosy using platforms that come easily to our thumbs on handsets, just as they had hoped. However, price-sensitive segments clearly exist and even the larger e-com market could do with a shake-up on prices brought about by a fresh dose of rivalry. After all, this was why ONDC was envisioned. In India, e-com websites like Amazon and Flipkart (bought by Walmart) have been market places rather than online retailers, so the idea of an open space for anyone to easily set up shop online always held appeal. For ONDC to make headway that makes a difference in the larger arena of digital deals, though, it would have to pitch itself clearly on its rationale and invite us to check out what it has on offer. As a latecomer, this initiative will take time to crack virtuous cycles of sellers drawing customers who can then lure even more hawkers. For it to reach critical inflexion points needed for success, its best bet would be to rename and package itself as a user-friendly app for smartphones. That way, it would be more than a digital enabler in the background. It would be a hot new platform ready to pack a punch of its own—and act as a market balancer of sorts.

Extra choice for consumers and sellers would translate to their welfare if it moderates prices for the former and reduces the cost of market access for the latter. While these first-order effects are important aims for ONDC, a real marker of its success as a public-good project over the years ahead would be if it helps level the field even for those who have so far been at the raw end of India’s boom in online sales and home drop-offs: delivery agents. An improvement in their terms of work would signal a sectoral transformation for us to be proud of. We’ll know if ONDC has been a worthy intervention once our e-com rivalry story goes beyond raising customer value to achieving scale while pushing up the earnings of doorstep-dashers whose labour services also need to be vied for more intensely.

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