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ONDC Explained with Benefits

Taru M. Taru M.
Published: 06 Oct, 2022

Open Network for Digital Commerce (or ONDC) is an initiative by the Department for Promotion of Industry and Internal Trade (DPIIT) of the Government of India to revolutionalize and regulate the functioning of digital commerce platforms.

There is a dire need to alter the current market structure for the overall growth of Indian digital commerce. And the ONDC framework and guidelines are devised to ensure just that. It reimagines the entire eCommerce chain to be more decentralized rather than being concentrated in the hands of a couple of powerful eCommerce giants.

We are witnessing new developments in the ONDC frameworks every day. And our eCommerce development company is excited to witness the impact of it on the 1.2 crore hyperlocal stores when 90% of them are unorganized and digitally excluded.

With too much information on the web regarding the same, in this blog, we are giving you a fundamental overview of what is ONDC, its visions and objectives, and the protocol powering it. In short, ONDC explained!

ONDC is the new OG of eCommerce

What is ONDC and What it is not.
When we think about eCommerce, what are the two names that instantly come to your mind? Amazon and Flipkart. Right?

According to statistics, these two big eCommerce giants control and regulate over 60% of India’s eCommerce market. This undermines the value of goods and services offered by Micro, Small & Medium Enterprises (MSMEs). Particularly in the context of the Indian market, the MSMEs form an integral part of the Indian economy.

Unfortunately, because of the strong market power of these eCommerce giants, they prevent small business owners, retailers, delivery firms, kirana stores, etc., from coming to the forefront.

So how is ONDC aims to make the digital market a democratic space? But before diving into it, let’s discuss how exactly these eCommerce platforms operate.

Digital Commerce and its Models

Inventory Model

In an inventory-based model, the platform buys directly from the seller in bulk at cheap rates and then sells it at a higher price in the market. Thus, increasing their profit margin.

In an Inventory-based model, the eCommerce platform ends up making the maximum profit, the small suffer the loss.

Another game at play here is the fact that these eCommerce platforms can play favoritism. This means that these platforms have the power to push up the commodities of the sellers they buy most of their inventory.

The platforms following this eCommerce model offer exclusive deals on the commodities they wish to further. Thus reducing the chances of other sellers making a cut.

Marketplace Model

In a Market Place Model, the website or the eCommerce app connects the buyer and the seller, and the platform takes a percentage cut when the product is sold.

Complement with: eCommerce marketplace app development

Even in this marketplace model, eCommerce platforms have an unfair advantage. It is often seen that these eCommerce platforms have the freedom to collaborate with a particular platform and ensure maximum visibility to them.

This allows the eCommerce giants to have a much larger percentage share in the sales of the particular seller.

These two models are primarily used in the Indian eCommerce market. Both of these approaches follow the platform-centric model. This is where the power of the ONDC network will come to play. The availability of ONDC, an open network platform, limits the power of the big eCommerce giants to regulate and exploit the digital market space.

The Vision and Objectives behind ONDC

Vision of ONDC
The ONDC framework of specifications is designed to encourage open communication and interchange between shoppers, platforms, and retailers. With the vision of enabling open network protocols, ONDC envisions going beyond the model where the transaction between the buyer and seller is dependent on one single platform.

There are four main visions and Objectives behind ONDC network frameworks:

Democratization and Digitization

ONDC is the one-of-kind Indian government-backed framework that will help democratize India’s eCommerce ecosystem by enabling open-network frameworks where the buying and selling of goods and services are not devised by a platform-centric model.

It renders an open-playing field to all the major network participants and key stakeholders in eCommerce. This means that sellers, irrespective of their business scale, will be able to showcase their goods and services, choose their logistics partner and be more digitally visible. In the same way, the buyers can choose the sellers they wish to buy from—without being influenced by platform-centric tactics. Thus enhancing the entire value chain.

ONDC also promotes standardized digitization of all functional aspects such as cataloging, inventory management, order management, and order fulfillment of eCommerce, just like the introduction of the Unified Payments Interface (UPI) did for online payment, thus adding value for sellers and buyers.

Technological Self-Reliance

The ONDC framework will also allow technological self-reliance for sellers and buyers.

Sellers will have a considerable amount of autonomy to be digitally visible. Technological and software assistance on the ONDC platform from Gofrugal Technologies, GrowthFalcons, and SellerApp will help sellers in terms of resource planning, digital marketing, and sales insights, respectively.

Similarly, eSamudaay is facilitating the building of a customer-facing interface to allow them to have more choices with respect to goods and services and a user-friendly interface.

Keep a check on eCommerce Giants

ONDC framework aims to provide a level playing field to everyone from big commercial players to small retailers. It is specially designed to prevent big eCommerce platforms from violating Consumer Protection (eCommerce) (Amendment) Rules, 2021. It discourages the concentration of market power in the hands of a few. It builds an open network that will allow data portability by breaking data silos and making room for innovation.

Data Privacy

ONDC framework is devised to ensure maximum security, data privacy, and confidentiality for its users. Some of the key ways the framework will ensure maximum security is by publishing anonymized metrics on network performance and by following a non-mandate policy on sharing transactional data.

Beckn Protocol of ONDC Framework

ONDC protocol diagram
In order to achieve an open network eCommerce platform, the development of the ONDC platform is done following a certain set of functions and protocols. One of which is Beckn Protocol.

The provision of a decentralized and democratized eCommerce platform is built on Beckn Protocol. This protocol allows anonymous aggregation of generated data so that transactions such as discovery, order booking, payment, delivery, and fulfillment can be performed in a standard manner.

Beckon Protocol was developed by Nandan Nilekani, Pramod Varma, and Sujith Nair in partnership with ISPIRT. It adds a third layer to the open network digital infrastructure, which helps in promoting and regulating market competition and anti-competitive behavior.

The latest ONDC network framework truly possesses the power to completely transform the Indian eCommerce market. Since the implementation of ONDC is still in its beta testing face, the owners and developers are regularly incorporating changes to make this framework as optimized as possible for the digital commerce ecosystem in India.

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Taru M. Author :
Taru M.

For over 18 years, Taru M. is a successful technology entrepreneur by profession and a tech enthusiast by spirit. She takes pride in offering expertise in her domain to business people's success across the globe. As a business woman and technology expert, she manages to keep her balance along with her family responsibilities. She did her masters in computers, and her work delivery shows the expertise of her education. Connect with her via Linkedin profile to know more about her exciting personality

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