ONDC sets scorching pace of growth, but not without headache

If UPI has taken the country by storm, can ONDC (Open Network for Digital Commerce), another public digital asset be left behind? This open platform for local commerce is rising meteorically – from only just about 1,000 transactions in January to more than 33 lakh transactions in September, The Economic Times has reported. The objective of creating ONDC is to create a unifying platform to put relatively small sellers in touch with buyers on this digital platform to put speed and eliminate cost in the entire process.

ONDC is expected to retain the blistering pace of growth and might surpass 90 crore in two years. According to the report, this weekend (October 7-8) the platform witnessed in excess of 50,000 retail transactions, with the CEO of ONDC Thampy Koshy attributing the usage to food, grocery and mobility.

The first few months of ONDC indicate tremendous potential. It was piloted in April 2022 in merely five cities. A closed group of sellers and buyers were involved in the pilot. On satisfactory completion of the pilot project, ONDC began beta testing in September 2022. Then it was rolled out in 80 cities. Among the apps that have gone live on the network are Paytm, Pincode, MagicPin, Mys tore, Ola, Namma Yatri, Spice Money, NoBrokerhood, Craftsvilla, Airpay, Meesho. Rapidor and Signcatch are names from the business-to-business domain.

Consultants, too, concur on the platform’s potential. McKinsey thinks ONDC will trigger a five-fold rise in India’s digital consumption to $340 billion. Antler, India’s next startup catalyst report, has stated that the platform will offer an opportunity worth $80 billion for startups in India.

The platform will make its biggest contribution to raising ecommerce penetration from about 4%-5% right now to about 25% in a mere two-year timeframe. Projections state in two years it will put 90 crore buyers in touch with 12 lakh sellers who would have at least $48 billion worth of goods to sell.

In the B2B domain more than 30,000 transactions were carried out in September, which was the first month of launch. The past two months have registered a 200% rise in grocery transactions. Sales promotion exercises such as SuperSaver Weekend campaign and Freedom Sale unleashed the rise in demand.

However, the euphoria of the explosive demand is also tempered with a few challenges. While the number of seller apps on ONDC is about 30-40, there are only two major buyer apps. The problem is it creates some sort of a monopoly situation among the buyers, the report claimed.

“This creates a power imbalance, and this is the biggest problem we are trying to solve in general. We want to get more buyer apps on the network, preferably not as powerful as these two participants. They’re using ONDC’s name to wrangle transactions and are also collecting Rs 8,000 to Rs 9,000 from sellers in the name of marketing,” said a person who wished to remain unidentified.

This person also highlighted that transactions around mobility numbered around 27 lakh in September against only 6 lakh retail transactions. His explanation was that the platform was ” not offering anything new”.