Insights from ONDC Whitepaper

ONDC Whitepaper: https://ondc-static-website-media.s3.ap-south-1.amazonaws.com/res/daea2fs3n/image/upload/ondc-website/files/democratising-digital-commerce-in-india-april-2023.pdf

Selective insights from the 160 page report

• Consumers have shown neither the ability nor the willingness to absorb supply chain costs (30 to 100 rupees per order), especially for smaller orders
• While the early ONDC pilots have focused on a few use cases such as hyperlocal grocery and online food delivery, some interesting innovations highlight the diversity of what the network could offer
• Another player, Unified Energy Interface, empowers electronic vehicle owners to locate, access, and pay for the use of charging networks hosted by seven providers, both big and small, across 14,000 charging stations
• Estimates and goals: India could see digital consumption surge fivefold to reach $340 billion by 2030, with 500 million digitally transacting consumers
• The net work coul d be broader, with digital penetration across B2B companies growing to 8 to 10 percent.
• A core characteristic of the open network is that it unbundles a series of services that would otherwise be unified on a single platform.
• In an unbundled environment where no one player controls the end-to-end value chain, multiple challenges affect the customer journey, from search and discovery and order placement and fulfilment to payments, returns, and grievances
• Having sufficient participants on the network could help to unlock benefits such as simplified, efficient logistics and lower customer acquisition costs. It could also encourage providers to invest in the capabilities required (such as inventory digitalisation).
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• Digitalisation and the open network could make an immense difference to B2B enterprises in India. In particular, it could benefit small businesses: MSME-to-MSME commerce is the most underserved type of transaction for multiple reasons and could receive a vital boost on the open network.
• India’s logistics sector is constrained by infrastructure challenges and higher logistics costs (11 percent) than in several countries, such as the BRICS economies
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• India’s low share of digital commerce, at an average of 7 percent,19 is below the averages of 25 percent in China and 15 percent in the United States
• Stats: 16.5GB/month data consumption, 7.3 hours/day screen time, 35% of time spent in social media, social commerce has 3x’d from 2019
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• While nearly 65 percent of internet users from the top eight cities shop online, the figure for rural India is less than 5 percent
• The purchase of high-demand skilled services performed by workers such as carpenters, plumbers, and beauticians, and of unskilled labour such as domestic help, is largely undigitised beyond the top ten cities

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• Sellers, particularly in rural areas, lack either digital access or the knowledge to confidently use digital platforms for trade. Even those interested in selling online are deterred by the high cost of digitalising inventory and sorting out. paying for related infrastructure such as warehousing and logistics. They struggle to access capital to modernise or expand—the credit gap for MSMEs in India is about $300 billion— driving about 60 percent of business owners to opt for informal credit at prohibitive cost. Even when MSMEs join a selling platform, existing algorithms and filters often obscure their presence, by default favouring sellers who can operate at scale, offer low prices, and consistently maintain stock in several locations. Consumers are less likely to find the smaller sellers, who are ill-equipped to stay competitive and visible.
• B2B seller issues: The entrenched distributor system in retail trade provides credit to customers and offers prices equivalent to those of digital B2B marketplaces. For B2Bs, the margins from participating in online platforms are thin. Many retailers and distributors are also wary of the system, fearing fraud, especially with large and recurring transactions. Limited standardisation or certification for different product categories makes it difficult to digitalise the product category.
• UPI:
• Wedding ecosystem:
• Archetypes for the different sides:
• One weak link in the entire chain, or one underperforming entity, can bring the customer experience crashing down.
• Buyer app sorts and displays the most relevant results gathered from the network
• It has a three-step escalation matrix (classifying the problem into an issue, grievance, or dispute depending on the escalation level and resolution timelines)
• Buyer app handpicking their sellers - solved by: Parameters used in sorting algorithms by buyer apps must be made public and uniformly applied to all search results
• How will ONDC scale up?
  1. Attract consumers by focusing on goods and services more frequently purchased
  2. Bring providers on board multiple networks: ONDC has also introduced economic incentives for buyer apps, seller apps, and providers that reach transaction-based milestones on the network.
  3. Remove barriers that restrict providers from going online
  4. Offer a viable economic model that improves on the unit economics on platforms