“In the physical market, everybody gets an opportunity to compete based on the strength of their products, and their marketing strategies unlike in e-commerce where the intermediary platforms has the stranglehold,” declares T Koshy, CEO of the Open Network for Digital Commerce (ONDC), an entity that has been capturing everyone’s imagination.
As he explains, there could be premium shops catering to elite clients, there could be the kirana stores frequented by the middle class, street vendors catering to masses and so on. “Every kind of seller is there helping their kinds of clients to buy what is relevant for them using a suitable delivery channel.” However, in the digital commerce marketplace, so far, people think that everything has to be integrated in one approach. “That is why penetration on the buyer side is only five to six percent. And on the seller side just one or two per cent because only a limited set of merchants will be able to use it as per the conditions of the platforms.”
ONDC hopes to disrupt digital commerce by unbundling the building blocks of transactions, making it interoperable and inviting everyone to participate in the growth. The vision is that just as UPI revolutionised financial transactions, ONDC will transform e-commerce.
Open, Unbundled and Interoperable | How ONDC is radically changing e-commerce
Koshy, an engineering graduate from Trivandrum and an IIM-B alumnus (batch of 1989), who had helped in the creation of NSDL in 1996 and is no stranger to tech innovations, dreams that in the next few years every product provider and service provider’s offerings would be visible to all in an open network. Excerpts from a conversation with him.
ONDC has been likened to UPI a lot. When will it achieve that kind of traction and scale?
UPI has proved that the idea of unbundling is workable and scalable. But UPI has only one SKU — that is money. Here there are diverse categories and it also involves physical delivery which makes it more challenging and exciting. Eventually my dream is that in the next 5-6 years, every product/ service provider who has a catalogue of products/ services will make his or her products visible in an open network using the ONDC protocol. Diverse kinds of buying platforms will come online which will help their kind of buyers to buy what is relevant for them. This will drive innovation and specialisation
ONDC will be a journey. If you look at UPI when it started, digital financial transactions in India were about 250 million per month, now it is nine billion, soon it could become 20 billion. This is because the model provides for participation by a diverse set of entities with diverse solutions — all interoperable. A street vendor does not need a device, all he needs is a picture of a QR code.
It is being said that ONDC has the power to break up duopolies. How so?
If you look at the US market, they were worried that with the proliferation of big tech, and big online platforms that act as gatekeepers in the digital markets, the mom-and-pop shops would suffer. They are trying to address it through regulations like the America Innovation and Online Choice Act. The Europeans too are trying to address it through regulations like the Digital Markets Act.
But if you look at the regulatory approach, there will be enough people to fight it in courts for 20 years. The Sherman Antitrust Act came into being in 1890. But they could do nothing to AT&T till 1984 when the decisions came in the class action suits.
In India, instead of regulations, we are trying to look at technology, markets and enabling policy to solve this problem of concentration of power. When we started UPI, it was a tech solution. UPI grew at that speed because it was a smart natural solution and not regulatory.
If there are only 2-3 platforms, every innovation will happen on their platforms and only those innovations will get accepted on those platforms that help them grow their market share and help their shareholders. No other innovations get a chance to play a part. Further, the platforms have a stranglehold on market data. But our ONDC is open. Innovation is in the brand manager’s hand and not in the hand of the intermediary.
What exactly is the ONDC structure?
It’s a Section 8 company, with shareholding only by banks and financial institutions with no government shareholding. But government sponsorship, support and endorsement is very much there. In the board there are three government nominees of relevant ministries, which includes DPIIT, Consumer Affairs Ministry and MSME Ministry. They are participating and helping.
Onboarding must be the toughest thing in the journey to scale. How are you creating awareness?
In many states, we have done awareness building jointly with the State. Some have taken very definite steps forward. For example in Kerala, Kudumbashree an initiative to support women by government of Kerala, is online and has done more than 500 orders in the last three months.
SIDBI is handholding artisans and micro enterprises to come on board ONDC. In fact, as part of employee remunerations it has given ₹10,000 to every employee to buy from the ONDC network products by those artisans that SIDBI helped onboard. Few others, like D&B are doing similar things. We also plan to launch an ONDC gift coupon for Diwali which company owners can gift to employees. Also, companies can create special schemes for customers that buy from ONDC.
Will you advertise the way Amazon and Flipkart do?
We are not in competition with them. Ours is an inclusive network. The network participants and sellers now will launch their own marketing and advertising as they have the opportunity and relevance to do in an open network. It is with this collective effort that we will see the network flourishing.
What are the categories that are taking off right now on ONDC?
We are adding one by one, some will take off fast, some will be slower. We started with groceries and food. Mobility we introduced in just two cities, but it exploded without any incentives. Mobility is a state subject. To be honest, we thought grocery would pick up fast, but actually food picked up first surprisingly. Almost 20,000 restaurants were onboarded by Magic Pin, which gave the first jump in Food Segment. Mobility has crossed more than 40,000 rides in a day.
What about other categories?
Already five or six of them are out there like home decor, and fashion. And many are checking it out. For example Snapdeal is right now testing it out, and once they come fashion could take off. Eventually every category will come - financial products will come, gig economy will come. My hope is that every sector should come.