The Department of Promotion of Industry and Internal Trade’s recent pilot of the Open Network for Digital Commerce (ONDC) in five major cities of Delhi, Bhopal, Coimbatore, Bengaluru and Shillong, is a welcome move.

The vision and impetus behind this is to democratise the e-commerce landscape in India by facilitating an independent, transparent and impartial online platform for small businesses and start-ups. ONDC will act as a neutral platform that will allow products and services from all registered e-commerce businesses and platforms to be displayed together.

The government deserves full credit for taking this initiative to provide an opportunity to the above entities tap into the online customer base. ONDC is estimated to help on-board almost 900 million customers and 1.2 million businesses in the next five years. However, to achieve its ambitious objectives, ONDC will need to address many challenges.

In the last few years, smart utilisation of technological resources and customer trust have become the hallmarks for driving high engagement by major e-commerce platforms. Over the past decade, they have established a certain kind of credibility and trust towards selling high-quality products. Favourable exchange and return policies, guaranteed speedy delivery and enhanced post-sales services have provided customers on these platforms with highly satisfying retail experiences.

Additionally, these platforms have a quick and efficient return and refund policy. Even if there is an occasional instance of a product being counterfeit, they possess a robust grievance redress mechanism. These USPs stand tall in the minds of the customer, establishing high recall value. ONDC will also be expected to operate at the same efficiency of supply chains, functioning of warehouse systems, payment gateways.

A challenging task

Getting on a par with the above could be a potential challenge for the ONDC. Currently there is a lack of clarity regarding the mechanisms that will govern ONDC, including whether ONDC or the seller will take accountability and responsibility in case of counterfeit or damaged products. Furthermore, the utilisation of AI-enabled tools, such as chatbots and customer preferences synced with almost every social media and or digital platform of the customer, may present strong challenges to ONDC.

ONDC also has to take up the difficult task of convincing small retailers to join this new platform, which at this nascent stage may not have the platform credibility that is crucial to ensure its success. Small businesses run a high risk of bleeding money for bearing the cost of running both online and offline channels, and there could be a need for adequate incentives and opportunity to ensure MSME growth through the platform to persuade businesses to make this transition.

In its current form, ONDC appears to be marketplace-agnostic with network-based discovery of sellers and catalogues. India’s e-commerce policy is still a work in progress and in such an environment, there needs to be more understanding on the potential role of ONDC in this ecosystem.

Hence, while ONDC is a positive move undertaken by the government to expand India’s digital ecosystem, the concerns on whether the platform itself will be enough for customers to move from established e-commerce platforms that already have served them during the pandemic times need to be addressed. Thus, this calls for greater collaboration between existing and emerging players of the digital ecosystem to build a more robust online retail environment.

The writer is Independent Director at Cyient, and ex-Secretary to the Government of India

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