India is building an Open Network Digital Commerce (ONDC) Interface that can herald a new beginning for the Indian retail industry, which is valued at around USD 1 trillion. ONDC can carefully dismantle the hegemony enjoyed by some of the biggest e-commerce players in the country and create a level playing field for smaller and other mid-sized merchants and traders and seamlessly integrate them into the digital grid. 

For the uninitiated, ONDC is a platform-agnostic e-commerce system, wherein all kinds of vendors, sellers, and merchants (big & small) can display their offerings. With ONDC, India envisions a truly decentralized, coherent, and integrated system for e-commerce, which can be used by everyone.

ONDC is somewhat similar to the Unified Payment Interface (UPI), which has enabled everyone with a bank account to utilize mobile payments irrespective of whether they use a particular app or not. Similarly, with ONDC, everyone can use the app, as long as they are part of the system. Vendors would not be required to simultaneously join numerous different platforms. Similarly, even if they do not have their own e-commerce setup, they can sell online.

To explain it further, let us suppose someone is searching for scented candles on Amazon. While doing this, they can also view similar products from other platforms such as Flipkart, Nykaa, Shoppers stop, etc. (provided these platforms are registered with ONDC)

Bringing in a New Era for e-Commerce

ONDC will usher Indian e-commerce into a new era by multiplying the overall discoverability of merchants and vendors. The Indian e-commerce industry is valued at around ~ 40 billion. The industry is still in its nascent stage.

However, Indian digital consumerism is growing at a scorching pace, and as per government estimates, the market will reach USD 200 billion by 2027. India’s highly attractive demographic dividend with an average age of 29  makes the country one of the most suitable e-commerce markets in the world.

As China already has a lot of indigenously developed e-commerce giants, India presently is a natural favourite for most of the global tech giants including Amazon, Walmart, Google, Meta, etc. Most of the major international PE players such as GIC, ADIA, CCPIB, Sequoia, and Warburg Pincus, are betting big on the Indian market. 

Amidst such a positive turn of events, the recent move to develop an exhaustive and democratic system such as ONDC can give a further positive thrust to India’s e-commerce ambition. It can reshape the entire industry.

As per the government estimates, ONDC will be deployed in 100 Indian cities by October . It will directly positively impact 30 million sellers and 10 million vendors. It will also help the buyers by giving them a more democratized digital platform and find better bargains and options.

A Positive Impetus for the Lifestyle Retail Segment

ONDC’s reach will be far and wide. It would not just be limited to general retail, grocery, etc. It can also entail visible shifts in lifestyle retail in India. India’s lifestyle retail is sized at around ~ USD 120 billion. This includes footwear & apparel, small appliances, fashion & personal care, home décor and ambience products, etc.

Digital commerce comprises around 6-7% of the overall lifestyle retail segment. Nevertheless, like other categories, it is growing incessantly and will reach USD ~ 40 billion in the next 3-5 years.

ONDC can give a positive push to the overall lifestyle segment. Like other segments, even the lifestyle segment is run by value-driven and price-conscious customers, which roughly comprise half of the overall market. The term ‘affordable luxury’ is quite popular in India, where buyers seek top-quality products but at a reasonable price.

The ONDC will unlock new opportunities for mid-sized vendors of lifestyle products and help them reach a larger audience. Likewise, it will spur faster digitization for vendors that are mostly relying on the offline model.

Another benefit might be getting away with the listing fees. Currently, getting listed with big horizontal players requires a huge amount of listing fees. Once ONDC becomes operational, it will save retailers from such large fees and the same amount can be channelized towards marketing, operations, and other activities. Likewise, it can also be passed to the customer, thereby accelerating the demand.

Author – Ridhima Kansal, Director, Rosemoore