ONDC: Reimagining Digital Commerce in India

The COVID-19 pandemic accelerated the adoption of digital commerce in India, and, in doing so, it exposed serious inadequacies in the country’s e-commerce system. Through outreach programs to small sellers and entities in hyperlocal supply chains, the Department for Promotion of Industry and Internal Trade in India identified a substantial gap between the quantum of online demand and the local retail marketplace’s capability to meet this demand. Established e-commerce giants had developed ways to maintain and increase their dominance and maximize profits, while small and fringe companies struggled to establish a place for themselves in the e-commerce marketplace. The Open Network for Digital Commerce (ONDC) was a first-of-its-kind initiative to create an open, all-encompassing, and competitive online marketplace in India. The network, which conceptualized itself as offering equal opportunity to all sellers, promised discoverability of digital commerce stores across industries through the use of network-enabled applications. The network was designed to provide a level playing field for sellers and to ultimately democratize digital commerce in India. The benefits of digital commerce would percolate among consumers across socioeconomic strata and even reach remote geographic locations. The intent was to implement ONDC on a population-wide scale and make it a public utility. To truly democratize e-commerce in India, ONDC would be required to incorporate millions of digitally excluded small retailers. For this to happen, the transactions on the network needed to be seamless, customer trust had to be won, and a proper grievance redressal mechanism had to be put in place. Although the initiative had gone through the alpha- and beta-testing phases and was now live in select Indian cities, a certain degree of merchant onboarding and customer involvement was still essential to get the process underway. Many also believed that if the initiative gained the involvement of one or more of the major online platforms, ONDC had the potential to grow much faster, morphing into the “blue ocean” it was envisioned as becoming. However, the cooperation of the digital titans was not guaranteed—they might choose to play the waiting game or refuse to engage with ONDC. This could mean that the company’s ambitions might not succeed. Which strategic initiatives could help ONDC upend the status quo in the Indian e-commerce market?