22nd May 2023 (7 Topics)
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Open Network for Digital Commerce
Context
- The Open Network for Digital Commerce (ONDC) aims to "democratise e-commerce" and "provide alternatives to proprietary e-commerce sites," is expected to be officially launched by the Union government this year.
Key Highlights:
- While it has invited businesses to join the ONDC platform, large e-commerce giants such as Amazon and Flipkart have been hesitant to participate.
- The Indian Commerce Minister has requested that these enterprises join ONDC as soon as possible or risk being left behind.
What is the ONDC?
- The government wants to change the fundamental structure of the e-commerce market from a platform-centric model to an open-network model.
- The ONDC is modelled after the Unified Payments Interface (UPI) project, which allows people to send or receive money irrespective of the payments platforms on which they are registered.
- To make such transactions a reality, the government has ordered companies to list themselves on the ONDC.
- The pilot version of the ONDC was launched last year in a few major cities and thousands of sellers have already been on-boarded onto the platform, but Amazon and Flipkart have not yet on-boarded their main shopping platforms onto the ONDC network.
Why is the Centre pushing for it?
- The government believes that the ONDC will end the domination of the e-commerce market by a few large platforms.
- Amazon and Flipkart have been accused of promoting seller entities in which they hold indirect stakes, and food delivery apps such as Swiggy and Zomato have been accused of charging high commissions from sellers.
- With an open network like ONDC, the government hopes to level the playing field and make private platforms redundant.
Way ahead:
- The government's ONDC will be tested to come up with an efficient alternative to e-commerce platforms.
- It remains to be seen if and how the government’s open network will list products offered by various sellers.
- Competition often pushes e-commerce platforms to prominently list products that are most likely to catch the fancy of buyers.
- Platforms may invest money to build exclusive on-boarding and listing processes, but if the open network's rules prevent them from benefiting from these investments, they may cease to make them anymore.
- Building an efficient marketplace for the sale of goods and services may be the key challenge for ONDC.
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