ONDC Explained — Everything about Open Network for Digital Commerce
Understand the basics of ONDC (Open Network for Digital Commerce)and how you can become part of this network
What problems does the ONDC solve?
To understand what ONDC is, we first need to know why it was made. Platforms like Amazon and Flipkart receive significant traffic in India in E-commerce. The sellers have to be on these platforms if they want to scale. Even the D2C brands get their considerable share of traffic from these sites. This causes some issues:
- The sellers can not set their terms to sell the products.
- High commission rate.
Now let's say a seller doesn't want to sell on these platforms and wants to sell via their platform. They will face problems like:
- High cost of managing their e-commerce stack.
- They need to get buyers for their platform themselves.
- They need to manage logistics and deliveries themselves.
To solve these problems, the Indian Government developed Open Network for Digital Commerce.
What is ONDC?
ONDC is Open Network for Digital Commerce. Now, what does that mean?
It is a network (you can say APIs) that different stakeholders can become part of to enable a complete e-commerce solution. Now, this got complicated so let me break it down for you.
E-commerce without ONDC
There are primarily three different stakeholders in the whole e-commerce experience:
- Seller — Someone who has the product and wants to sell it
- Buyer — Someone who wants to buy the products sold by the seller
- Delivery partner — They will deliver the product to your doorsteps after the purchase.
For an e-commerce transaction to occur, all three stakeholders must be on the same platform. For example, if you want to buy a white shoe, the flow will look something like this:
Here, the seller is registered with Amazon, the buyer comes and browses the product on Amazon, and the Amazon delivery partner delivers. Amazon manages everything. This is where the ONDC is different.
E-commerce with ONDC
In the case of ONDC, the buyer, seller, and logistics partner doesn't need to be on the same platform and can exist independently as network nodes. Let’s see what these nodes are and how they are different from each other.
Sellers platforms
Sellers are onboarded on ONDC by seller platforms.
- They are responsible for managing sellers and getting their catalogs uploaded.
- They will get some percent of the transaction when a product is sold.
- Sellers do not have to worry about selling the products, which the buyer platform will handle.
- While uploading the catalog, a seller can define terms related to what location they want to sell at, if they want to allow returns, etc.
Buyer Platforms
Buyers visit buyer platforms to buy the uploaded products.
- These platforms are responsible for the discovery of the products.
- They, just like seller platforms, get a cut from the transaction when a buyer buys a product.
- They do not have to worry about how to get the products to sell. They need to focus on selling.
Logistics Partner
Once a product is ordered, it is delivered by the logistics partner, and they, just like the platforms, get a piece of the pie.
Now let's take the same example and see how this transaction will occur on the ONDC network:
Let’s see how the e-commerce transaction flows on ONDC:
A seller platform onboards the seller, and they upload all their catalog on the seller platform. That's all a seller needs to do. The buyer platform is responsible for selling the product. It acquires the buyer and makes the product discoverable that was uploaded to the seller platform. They do not need to worry about getting the products. While placing the order, a buyer can choose any delivery partner that is part of the network. Once the order is delivered. The buyer can rate the product, and the reputation created will be reflected in the network.
Current status
The beta for ONDC went live in September in Bangalore(what better city to try this), where the sellers were restaurants and supermarts.
The beta testing started in Meerut in December 2022 to test the model in a Tier 2 city.
Next, ONDC will go live in Q1 2023 in some more tier-2 cities.
Notes
- I am not an expert; feel free to correct me if I need to be corrected.
- Contact me on my LinkedIn if you want to discuss this more.
