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Explained: What is ONDC and how it will take on Amazon, Flipkart

Explained: What is ONDC and how it will take on Amazon, Flipkart

By CNBCTV18.com Apr 29, 2022 5:33:28 PM IST (Updated)

Open Network for Digital Commerce (ONDC) is an open-source network that will help local commerce in a variety of categories. The open technology network aims to challenge the dominance of e-commerce behemoths like Amazon and Walmart-owned Flipkart. Here's how it plans to take on the e-commerce giants.

The Centre is all set to launch the pilot phase of the Open Network for Digital Commerce (ONDC), a freely accessible online system for traders and consumers, in five cities today. The open technology network, which will promote an open platform for buying and selling of goods and services, seeks to curb the dominance of e-commerce giants like Amazon and Walmart-owned Flipkart in the online retail space.

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At present, the government will launch the initiative in Delhi NCR, Bengaluru, Bhopal, Shillong and Coimbatore, news agency PTI reported quoting an official as saying on Thursday.

What is ONDC?

ONDC is an open-source network, which will help local commerce across segments, such as mobility, grocery, food order and delivery, hotel booking and travel to reach and engage more people through a network-enabled application.

Apart from enhancing the value and experience of consumers, this initiative of the Department for Promotion of Industry and Internal Trade (DPIIT) seeks to digitise the entire value chain, standardise operations and promote inclusion of suppliers.

Tech czar Nandan Nilekani, who co-founded Infosys and later helped the government with the Aadhaar biometric ID system, is part of the nine-member advisory council that was constituted to advise the government on the project.

What are its features?

The ONDC will work on a format similar to that used in the Unified Payments Interface (UPI). Through the network, traders will be able to save their data, build a credit history and reach consumers.

ONDC will take measures to ensure confidentiality and privacy of data in the network, the government's official statement said. It shall not be mandatory for participants to share transaction-level data with ONDC.

How will it work?

ONDC is a step beyond the current platform-centric e-commerce system where both the buyer and seller have to use the same platform or application to conduct a business transaction.

Businesses and consumers will be able to carry out transactions over ONDC using any compatible application of their choice.

Marketplaces such as Amazon, Flipkart, BigBasket, Grofers and Zomato will have to register on the platform that will be created by DPIIT and QCI.

This will give consumers the choice to pick any seller, product or service by using any compatible application or platform.

How will it take on Amazon, Flipkart?

The government-backed platform will create a level playing field for e-commerce giants like Amazon, Flipkart, and small offline traders running local kirana stores, which form the backbone of the Indian retail system.

Small traders have for long been crying foul at the unfair trade practices of e-tailers like Amazon and Flipkart.

The biggest challenge for the government-backed network would be establishing the technology. Giants like Amazon and Flipkart have been able to lure merchants and buyers to their platforms due to their tested technology. The commerce ministry needs to build something comparable, if not better, to outdo rivals, Bloomberg quoted Anil Kumar, chief executive officer of Redseer Management Consulting Pvt, as saying.

If the government is successful, it would help millions of small businesses go online. They have suffered especially during the COVID-19 pandemic.

Kauser Cheruvanthody, co-founder of a baby products chain in Benguluru, wants to step into the digital space after witnessing a 30 percent decline in offline sales during the pandemic.

“ONDC could change the game,” Cheruvanthody told Bloomberg. “I’m ready to fight Amazon and others, discount for discount,” he said.

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