Tuesday, Jul 05, 2022

Can Govt-Backed ONDC Help Small Sellers, Kirana Stores Beat Amazon, Flipkart?

The ONDC platform will allow buyers and sellers to connect and transact with each other online.

Representative image

The government has launched the pilot phase of open network for digital commerce (ONDC) as it tries to end the dominance of Amazon and Walmart-owned Flipkart in the fast-growing e-commerce market.

The ONDC platform will allow buyers and sellers to connect and transact with each other online.

The government document said that "two large multinational players" controlled more than half of the country's e-commerce trade, limiting access to the market, giving preferential treatment to some sellers and squeezing supplier margins, Reuters reported on Thursday.

The platform aims to add 30 million sellers and 10 million merchants online with an emphasis on local languages. It will be launched in five cities -- Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore and will cover at least 100 cities and towns by August.

ONDC's launch comes after India's antitrust body on Thursday raided domestic sellers of Amazon and some of Walmart's Flipkart following accusations of competition law violations.

What is ONDC

ONDC is a platform for small traders and kirana stores to sell online so that they can compete with Amazon and Flipkart in the e-commerce space.

ONDC will enable local commerce across segments, such as mobility, grocery, food order and delivery, hotel booking and travel, among others.
The platform aims to create new opportunities by supporting micro, small and medium enterprises (MSME) and small traders and help them get access of online platforms. 

Indian retailers have long contended that Amazon and Flipkart's platforms benefit a few big sellers, via predatory pricing. 

How ONDC aims to help small traders, Kirana stores

Amazon and Walmart-owned Flipkart account for 80% of the online retail market in the country and they have maintained their dominance with aggressive discounts and promotion of preferred sellers.

ONDC aims to break this dominance by allowing small merchants and retailers reach and larger audience through the online platform. The platform aims to democratise e-commerce by ending the monopoly of big sellers who allegedly get preference on Amazon and Flipkart.

In Amazon or Flipkart, the top sellers are listed based on algorithm and payment of commission. In ONDC, the listing will be based on several parameters including, what the consumer wants, price, location of the seller or the delivery time. 

Apart from sellers and buyers, logistics players and payment gateways will be part of ONDC, which has Infosys co-founder Nandan Nilekani, former McKinsey India head Adil Zainulbhai and National Health Authority CEO R S Sharma, among others, as key advisers.

“It’s an idea whose time has come,” Nilekani told Bloomberg recently. “We owe it to the millions of small sellers to show an easy way to participate in the new high-growth area of digital commerce.”