India aims ‘democratise’ online shopping ecommerce network
India is preparing to launch a government-backed ecommerce initiative to “democratise” online shopping with the ambitious aim of cementing the dominance of companies like Amazon and Walmart-owned Flipkart in one of its fastest growing markets to challenge the markets of the world. Open Network for Digital Commerce, a non-profit organization founded by India’s commerce ministry last year, is conducting trials in more than 85 cities, including the tech hub of Bangalore, ahead of a nationwide launch next year. While companies like Amazon operate proprietary services that control everything from vendor registration and delivery to the customer experience, ONDC is an “interoperable” network that allows buyers and sellers to transact independently. apps or services they use. The open-source network would allow a customer to use an app like fintech service provider Paytm to find and order groceries from a supplier registered with another platform like small business hub eSamudaay. This can then be done through the alternative platform, e.g B. Dunzo’s delivery service, which can do this for the fastest and lowest price. Indian authorities say opening up transactions between platforms in this way will create a much larger pool of sellers and consumers and lead to lower costs and accelerated growth of e-commerce in the country of 1.4 billion. of inhabitants. They point to the success of the UPI mobile payment network, developed in 2016, as a model.
ONDC chief executive Thampy Koshy also said it can offer an alternative to the oligopolistic tendencies of big ecommerce platforms at a time when authorities around the world are trying to rein in the power of big tech. “Trade around the world has grown like walled gardens,” he said. “This has created serious concerns for both developed and developing markets.” With ONDC, “everyone has to compete with what they have to offer, not with the locked-in user base they have.” According to investment bank Jefferies, India has about 200 million e-commerce users, and international and domestic e-commerce companies have invested billions of dollars to expand their platforms there. Still, the sector remains concentrated in relatively affluent urban areas, with just 0.1% of the country’s 12 million retail stores “digitally enabled,” Jefferies said.
According to the authorities, the barriers to entry remain too high for small companies, which thus lose market share to the benefit of the big players in e-commerce. Indian officials view the correction as part of a broader push to grow the country’s digital economy through tools like UPI and ONDC. UPI transactions have reached over 7 billion per month as cash-based businesses begin to migrate to digital currency. Authorities hope the ONDC can encourage physical stores to sell online. It raised Rs1.8 billion ($22 million) from a range of investors, including the government-run State Bank of India and private lenders such as Kotak Mahindra Bank. But analysts say the ONDC will be much more difficult to operate. “The problem with this is that UPI is the movement of money from one digital wallet to another,” said Satish Meena, an independent analyst. “In this case we are dealing with physical goods. It is very difficult to do locally. According to local media, the attempts have run into difficulties, with users in cities like Bangalore complaining of cancellations, delays and catalog mix-ups.
Meena was also sceptical of the ONDC breaking oligopolies, pointing out that tech giants like Google and Walmart-owned PhonePe now dominate the market share of UPI transactions. Not everyone agrees with ONDC. While Paytm has joined, Amazon and Flipkart are not yet live on the platform, although they have publicly announced their membership. Koshy acknowledged that larger e-commerce companies will “take a little longer” to sign up as they weigh the pros and cons of participating. But he added that other difficulties, such as those of the trials, would have been resolved. “It could change the entire supply chain,” she said. “There’s no reason it shouldn’t work.”