What is the Open Network for Digital Commerce and How Will it Impact Online Retailers in India?

Posted by Written by Naina Bhardwaj Reading Time: 2 minutes

India is working on setting up an Open Network for Digital Commerce (ONDC) to democratize digital commerce (e-commerce) in India and to provide alternatives to proprietary e-commerce sites. A steering committee has been set in motion to oversee the execution of the ONDC project.

The initiative is touted as a measure to end the dominance of platforms like Flipkart and Amazon, which have been accused by the government of exercising monopoly, contrary to the law. However, industry stakeholders have labelled it as detrimental to foreign players in the segment.

What is the Open Network for Digital Commerce?

To provide equal opportunities to all marketplace players, including consumers, the ONDC is envisaged as a neutral platform that will set protocols for cataloguing, vendor match, and price discovery in open source on the lines of the Unified Payments Interface (UPI). What this implies is that buyers and sellers can transact irrespective of whether they are attached to any specific e-commerce portal. For instance, even if a seller X is registered on A platform, while the consumer is registered on B platform, the consumer can directly purchase products of seller X without registering on A platform, once ONDC is implemented.

ONDC aims at fostering open networks developed on open-sourced methodology, using open specifications and network protocols, and independent of any specific platform.

The project to integrate e-commerce platforms through a network based open-source technology has been tasked to the Quality Council of India, which has established a team of experts for project execution.

What does open source mean?

To make a process or a software open source implies that the technology or code deployed for the process is freely made available for everyone to use, redistribute, and modify. For instance, while the operating system of iOS is closed source (it cannot be legally modified or used), the android operating system is open source, making it possible for smartphone manufacturers, such as Samsung, Nokia, Xiaomi, etc. to modify it for their hardware.

What is the significance of India’s open network for digital commerce?

ONDC is expected to digitize the entire value chain, standardize operations, foster inclusion of suppliers, usher in efficiency in logistics, and augment value for consumers.

Once the ONDC gets implemented and mandated, all e-commerce companies in India will have to operate using the same processes, akin to android-based mobile devices, irrespective of the brand. This would provide a boost to smaller online retailers as well as new entrants by ushering in discoverability, interoperability, and inclusivity. It will empower suppliers and consumers by breaking the monopoly of giant platforms to drive innovation and transform businesses in sectors like retail, food, and mobility.

Businesses are expected to benefit from transparent rules, lightweight investment, and lower cost of business acquisition. It is also expected that the time-to-market as well as time-to-scale shall also be substantially reduced.

However, larger e-commerce giants are protesting as they have already invested heavily in the R&D as well as deployment of their own processes and technology.

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