Mixed messaging
The confusing signals from the government on how it envisions the construct of the Open Network for Digital Commerce (ONDC) and the conditions set out for big players could end up alienating prospective participants and hurting the interface. The stated objective of the ONDC protocol has been to ‘democratise’ e-retailing in the country by creating a level-playing field for vendors of all sizes. That would imply that the existing ecosystem isn’t ‘democratic’ which, to be fair, isn’t really untrue because the two biggest platforms—Amazon and Flipkart—account for about 70% of the transaction value even if there are several niche retailers—a Nykaa or a Bigbasket, for instance.
The government has been wanting to create a platform for micro, medium, and small enterprises (MSMEs), which need a leg up. ONDC, it believes, would help them to do business profitably since they would not need to pay stiff charges to the seller applications; on the large e-commerce platforms vendors pay hefty charges. Supporting small enterprises is a laudable objective; such merchants will benefit enormously from the access they would get to a very large catchment of consumers without having to pay hefty charges. However, at the same time, the government has also been heard talking about the participation of the big marketplaces, which experts believe, is something of a contradiction.
In fact even in the early days, the ONDC management had said it was talking to Flipkart and Amazon. The sense one got at the time was that the government was keen to have these big players on board. However, none of them has come on board yet. The recent observations of the Union minister for commerce & industry and consumer affairs Piyush Goyal regarding the participation of the bigger e-commerce apps are somewhat surprising. In late April, Goyal said e-commerce companies would not be permitted to join ONDC via specially-built apps, making it clear that they must come on board via their main apps. The government is apparently concerned that should these large e-retailers participate on the ONDC via specially-built apps, they would be benefitting unduly from ONDC’s customer base without sharing their customer base.
Experts point out there is a good chance the presence of big marketplaces on ONDC could hurt the prospects of small vendors. While the MSMEs may not pay hefty charges to their respective seller apps, they would not find it easy to compete with the Amazons and Flipkarts and even smaller niche players. That, however, remains to be seen. It is possible, for instance, that some part of the customer base on ONDC, which is relatively new to e-commerce, is less fastidious than the buyers on an Amazon and Flipkart and is willing to settle for less-than-seamless service even if the prices are attractive. Rather than being overly concerned about whether the established e-retailers come on board or not, the government should instead focus on making the network an efficient one that attracts customers in big numbers. If the system works and the many seller and buyer apps are able to get going, the network will attract customers. This is not going to be easy because of the complexity of the protocol and the fact that many apps need to talk to one other. If ONDC does take off, the government would not need to concern itself with the large marketplaces.
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