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“Our Focus Is To Give Small Businesses Access To Large Markets”
The Open Network for Digital Commerce (ONDC) aims to democratise ecommerce by bringing small businesses and unorganised retailers online and increase India’s ecommerce penetration to 25 per cent
Photo Credit : Ritesh Sharma
T. Koshy, CEO, ONDC
T. Koshy, CEO, ONDC in a conversation with Annurag Batra, Editor-in-Chief, BW Businessworld and Arjun Yadav shares the project’s journey and the potential of this network in revamping India’s digital commerce. Edited Excerpts:
Please tell us more about how the idea of ONDC came about?
The Open Network for Digital Commerce’s genesis is due to the pandemic. During Covid-19 triggered lockdowns and disruptions throughout the chain, businesses were challenged in reaching markets and getting goods. The Ministry of Commerce and Department for Promotion of Industry and Internal Trade (DPIIT) understood this concern and began exploring ways and means to bridge the gap between sellers and buyers.
They put together a team that deliberated on creating something that would completely transform the market. That’s when the idea of ONDC came about, which aimed to change how digital commerce is done in India. The team’s philosophy was not to create something proprietary but build an open-source foundation. They then looked at the backend protocol that was already available as the standard protocol used by many sectors such as mobility and health and asked whether ONDC could adopt it with the idea of creating an open foundation.
How do you describe ONDC and what’s the progress of its rollout?
First and foremost, ONDC is not a platform. It’s a network of multiple platforms coming together in a completely interoperable fashion. This would mean that the network's success depends upon more people joining, thereby expanding the premise as we provide a common infrastructure.
In a strict sense, we have already started. We started on April 29 this year. We are doing beta testing in five cities, including large markets such as Delhi and Bangalore and smaller markets like Shillong, Coimbatore and Bhopal.
Our ambition is that by August, we should be present in 100 cities and across the nation by the end of the year. We believe that unless we are willing to put such a stiff target on ourselves, we will never achieve. That’s the philosophy that is driving the leadership and the team.
What will be the impact on buyers and sellers who will use this network for digital commerce?
Today, on some of the existing platforms, we have buyers and sellers who can talk to each other. With ONDC, anybody with digital consumers can bring them all to a common market. Even if you're a small seller coming from a small town and you have something unique to offer, you will have the same discoverability as if you were part of a large platform because you have something special to offer. So, on the buyer side, you will see innovation helping buyers make the right choice without anybody pushing, recommending or influencing them. Similarly, the sellers will have the opportunity to make the right offer to their target customers.
You mentioned small sellers. Can you elaborate more on the opportunity for small kirana and mom-and-pop stores on this network?
One of the challenges these stores face is how to make themselves digitally visible without becoming a part of a big established platform. ONDC is presenting them an equal opportunity to make themselves and their catalogues visible to the network. When the buyer attempts a search, it will be able to discover the kirana store next door and get items delivered. This will resolve the issue of discoverability and many smart buyer platforms will try to take advantage of this convenience and help buyers to discover convenient sources around them for their typical day-to-day procurement. Therefore, in addition to the regular physical set of buyers that these stores have, they will also get a new breed of digital customers.
How will these stores build their reputation on the network among a sea of sellers? Also, are there any quality checks for sellers before getting them registered on the platform?
One of the common facilities that ONDC is going to offer is a network-wide reputation. This will eventually be there for the buyer platform, seller platform, and product. This information will be developed based on a uniform and transparent logic that will be made available to all the network participants. This mechanism will become an essential criterion for people to participate.
Secondly, a free market does not mean a place where anybody can just come, sell something and run away. Every buyer and seller entity will have to establish who they are and there’s a minimum due diligence to be done.
Also, they would have to develop their IT platform to make sure that it complies with the protocols. Only after they pass these two tests, they will become a part of the network. These protocols are also the rules of engagement which will be implemented digitally. This makes it easy to monitor, track and give feedback while making it all digitally enforceable.
What has been the response of the bigger players in this space? How have they reacted?
I can’t speak for others, but the way I see it, this network will become a compulsion for everyone, not because of any legal obligation but because of the market forces. People would want to be a part of this extensive market, especially when they realise that they will have access to one billion-plus consumers. We will encourage a variety of people to come in, and I'm sure they will see the opportunity. So, it is not by mandate but by a natural compulsion to be a part of the big story.
The same thing happened with the Unified Payments Interface (UPI). If you remember, the existing wallets wouldn’t have even expected that we have the capability in India to move from 300 million transactions a month to six billion transactions a month in four years. The design made it possible, which is the same in ONDC’s plan as well that will make this possible for the digital commerce space.
Will there be a transaction fee on the network?
Large platforms today are profit-making entities, and it’s fair on their part as they have the challenge of giving dividends to their shareholders. ONDC, which creates a common infrastructure for all stakeholders in this space, has no profit motive. There’s no dividend to be given, no valuation to be done. We’ll only have nominal charges that will be in place to support our operations.
Usually, the conversation on this topic is limited to the buyer and seller. What’s in there for logistics players and other services?
We are unbundling ecommerce transactions and making them interoperable. Every building block of the transaction is unbundled on this network, and logistics is nothing but another building block.
A prominent seller may have a back-to-back arrangement or private contract with a large logistics provider, but a small entity may not have that luxury due to its scale. This is why logistics providers will be available as a service on the network.
Again, it’s not just a prominent logistics provider. Whenever a seller accepts a buy order, and if it's not a big seller, the software can immediately help buy a logistics service, stitch it together and make a seamless solution for the end buyer. There will also be instances when the buyers may want to bring in their logistics providers. In those cases too such digital enablement will make commerce more seamless.
What is your plan for marketing and outreach to ensure that it reaches the right customer?
Platforms that have digital consumers today are seeing this as an opportunity. They want to collaborate with us. These include banks, telcos, fintech and the like. They are our partners who take this message across the country. It is a win-win deal also because we win only if they win.
The winning strategy is to get as many buyers onto the market so that the sellers have an incentive to come in. On the other side, convincing a variety of sellers is where we are directly working with the ministry of small and medium enterprises at the central and state level, philanthropic capital, developmental institutions, and institutions like NABARD and SIDBI among others. One of the biggest focus areas for us is to handhold entities like small businesses and kirana stores to help and prepare them to take advantage of this network.
What is the biggest challenge for your team in the short term? What can go wrong with this project?
When you are attempting something like this, there is a high level of uncertainty. The challenge is we don’t know what is hiding on the other side. Therefore, we should have the ability to continuously look for these uncertainties and be ready to find newer solutions.
By August, we would like to reach a reasonable number so that the people in the nation feel proud that we are doing something right. When one is trying to do a significant transformation in a country such as ours, it's not overnight. Good numbers will give us the confidence that it is working. Our biggest challenge in the short term is to have a sufficient number of people who believe in the possibility of this coming together and get us the threshold volume to start. Once that happens, we will be in a good place to take off.