ONDC: Getting The First Billion Transactions

  • In October 2019, UPI had its first month with a billion transactions.
  • What would it take for ONDC to get to that threshold?
  • Tushar GuptaSaturday, September 10, 2022 2:49 pm IST
     Challenges against ONDC
    Challenges against ONDC

    From the key ministers in the government to the technocrats, everyone is hyped about the Open Network for Digital Commerce (ONDC), and rightfully so.

    Eager to roll out the service in several cities, starting with Bengaluru later this month, the challenges against ONDC must not remain unaddressed.

    Concerns around delivery times, refunds and replacements, value-added services, logistics partners, product quality, and payments remain and will linger on for the near future.

    However, from a long-term perspective, ONDC is the best bet to onboard millions of MSMEs as the economy moves towards digitisation.

    Within ONDC, sellers, buyers, and other service providers (logistics, etc.) will be participants in a plug-and-play network, unlike the current closed-door system where a single platform is responsible for all possible dispute resolutions, logistics, and seller and buyer onboarding.

    The open network gives the sellers more leverage with commissions, most importantly.

    With online trade and commerce, the most significant factor is trust, enabling consumers to sign up on a platform, engage with sellers they do not know, and make payments in advance.

    Thus, with ONDC, the question is of getting the first month with a billion transactions, for that threshold is the most difficult to achieve, as the success story of UPI tells us.

    Who would drive the first month with a billion transactions on ONDC, where can they come from, and what are the low-hanging fruits that can be utilised to achieve the benchmark?

    To begin with, ONDC must be imagined as a case study that would yield different results and insights from region to region and city to city.

    Thus, the results from Bengaluru or Pune would differ from Noida or Gurugram, and similarly for Mumbai and Delhi.

    Hoping to be proven wrong, the author would assume that the success of ONDC in second and third-tier cities would not be instantaneous and would need long-term adoption and tweaking. So, where to ideally begin?

    One, the focus should be on restaurants and eateries for two reasons:

    • They have the greatest recall value when it comes to customer satisfaction and trust.

    • They are the ones most pained by the current platform model, where they lose a large chunk of their profits to hefty commissions.

    Onboarding restaurants would do ONDC what onboarding local retailers and mom-and-pop stores did for UPI, encouraging consumer adoption.

    The logistics of the eateries are restricted to a few kilometres, so the chances of disputes would be lower. Also, most eateries are accustomed to the online model, thus negating concerns about quality and service delivery.

    From a pricing perspective, platforms engaged in food delivery would be without much leverage to compete with ONDC, unlike online retail, where the likes of Amazon, Tata, and Reliance can offer steep discounts.

    Discounting the delivery partner fee, both the buyers and sellers could get a better deal within the ONDC network when it comes to food deliveries.

    Two, the local kirana stores. UPI’s adoption success story began in India’s kirana stores, where ONDC will also find its footing. The key challenge here would be to ensure the steady stock and availability of all items.

    Unlike the big retailers, local kirana stores have a routine customer base, and thus the trust and routine adoption part is taken care of.

    Three, there are plenty of local businesses beyond the purview of Amazon, Reliance, or even UrbanClap. For long, for cost reasons, they have not invested in the online model.

    Thus, the ONDC must encompass such businesses (local bakeries, boutiques, individual service providers, mechanics, and so forth).

    Platform-centric, the perspectives on e-commerce have been mainly restricted to either FMCG products or whatever Amazon sells. However, several businesses can now go online and cater to a vast customer case through the ONDC.

    Eventually, these businesses can go intra-state, between cities, inter-state, and international but with value-added service partners.

    Four, the local delivery partners. Within the ONDC ecosystem, logistics enterprises have great potential to shine. Zomato and Swiggy have demonstrated the economic feasibility of local deliveries and their business models.

    In ONDC, where buyers and sellers can select their delivery partners for several services, logistics partners, even restricted to an area within the city or a few sectors can succeed.

    The backbone of ONDC would be the VAS partners, where logistics becomes essential. For restaurants, for instance, employing their delivery fleet may make economic sense. For some, a hybrid model.

    But five-ten years down the line, innovation in logistics, with respect to time of delivery, type (inter-city, inter-state), and trust, would guide the ONDC ecosystem.

    Five, the ONDC can explore the possibility of having enterprises that connect buyers and sellers and aid dispute resolution. The seller apps may want to employ their fleet of customer service executives.

    However, in the future, in the ONDC ecosystem, dispute resolution would have to be instant, as with platforms today, and that would warrant a thriving network of enterprises engaged in connecting buyers, sellers, and VAS partners (handshake mechanism, as they call it).

    UPI took close to three years to hit a billion transactions per month and then three more to hit close to six billion transactions per month.

    With ONDC, given the multiple stakeholders, a billion transactions or orders will take a while to complete, but it is that benchmark that the planners must aim for beyond that, it is an ecosystem that will learn from itself, improvise itself, and only excel.

    Also Read: ONDC Is The Future, But Will Need Time To Flourish

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