Why ONDC Is A Game Changing Innovation For India

August 7, 2023ONDC A Game Changing Innovation For India

On 24 February 2023, Amazon announced its plans to join ONDC. In May of 2023, ONDC announced a 500x boost in its daily transactions – from 50 in January 2023 to over 25,000 in May. Seen as a revolution in the online commerce realm, ONDC or Online Network for Digital Commerce is a hot-button topic that everyone needs to know about. Given the barrage of news articles and developments on ONDC we are seeing right now, the ShoppingGreedy team has curated this post to explain what ONDC is and how it shall impact online shopping. Let’s get started! 

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Digital Commerce in India – Key Statistics

The Indian digital commerce arrangement is massive. And the numbers affirm this statement.

  • India was home to 140 million online buyers in 2020.
  • After the United States and China, India had the third-largest base of online shoppers as of 2020.
  • 80% of India’s retail sector rests on the shoulders of 12 million local neighborhood grocery stores or “kiranas”.
  • As of September 2020, only ~20% of web users in India shop online.
  • E-retail penetration in India stands at 4.3% of total retail Gross Merchandising Value (GMV) as of 2020. This is paltry, given the penetration rates of 25% in China and 23% in the United Kingdom.

All statistics have been taken from the ONDC Strategy Paper published in January 2022. The document can be accessed through ONDC Website.

Problems Plaguing Digital Commerce

Digital commerce, or eCommerce, has transformed the manner in which goods and services are made available for consumption. Online marketplaces have made it easy for buyers to connect with sellers (and vice versa). However, one cannot overlook the limitations and challenges accompanying digital commerce.

  • Not all sellers can cope with the investment required to set up an integrated online marketplace. While platforms such as Etsy have simplified the process of opening a digital store, owning an eCommerce store is still a far-fetched dream for many, especially those in third-world countries.
  • As the existing platforms grow in size and reach, the risk of monopolization increases significantly. Ask a random person about the names of some online shopping websites and their response is likely to be limited to Amazon, Walmart, eBay, Flipkart, and maybe a couple of others.
  • Established eCommerce platforms can leverage their capital and influence to bar the entry of small and medium-sized businesses. Hence, established platforms can end up controlling the market.
  • The trust and credibility of sellers might take a hit when they decide to move away from an eCommerce platform. For example, if a seller on Amazon’s network decides to part ways and move to Flipkart, they may have to give up the trust, values, and credibility built on Amazon. In other words, the platform becomes the “keeper of sellers’ values”, not to mention the vicious cycle of vendor lock-in.
  • Sellers that want to remain on multiple digital commerce platforms at the same time need to adhere to the different compliance, system, and infrastructure policies of these platforms.
  • Buyers and sellers need to be on the same platform to discover each other. Searching for “kirana near me” will get you acquainted with the kirana stores near you but it does not inform the kirana stores about your existence.

These problems underscore the need to revolutionize the digital commerce landscape in India. And this is where Open Network for Digital Commerce or ONDC steps in.

The Need for Shift from Platform to “Network”

Consolidating multiple platforms into one humongous store is not the solution. The way out is to transition to a decentralized network that:

  • Anyone, be it a buyer or a seller, can join. Whether it is a kirana or a billion-dollar shopping giant, the network should provide a neutral ground for all.
  • Ensures discoverability and trust in the enrolled platforms.
  • Strives to achieve common goals, objectives, and ultimately the success of end-users (buyers and sellers).

An Open Network

The network must adhere to the following requirements to maximize value for every participating stakeholder.

  • All applications, platforms, protocols, and other systems/processes need to be interoperable. For example, email services such as Outlook, Gmail, AOL, etc. can flawlessly communicate with each other because of common, underlying protocols like IMAP and SMTP which enable interoperability.
  • The network must be “open” to technology and innovations of the future. This includes but is not limited to, blockchain, generative AI, etc.
  • Rather than relying on intermediaries, the power must be in the hands of buyers, merchants, and support providers. 
  • The network should not be limited to a specific industry or vertical. If the network is being used for retail today, it should be extendable to other scenarios like travel.

The Origin of Open Network for Digital Commerce (ONDC)

During the COVID-19 outbreak, the Department for Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Commerce and Industries wanted to understand the impact on small sellers and hyperlocal supply chain, i.e., how goods and services are delivered in a specific geographical area like one’s locality. The outreach efforts highlighted the limited participation of the local retail system and its inability to keep pace with online demands.

The problems associated with digital commerce also came under the radar. Different Ministries and experts got together and ideated Open Network for Digital Commerce as a concept to address the identified issues. A steering committee by DPIIT recommended the Quality Council of India (QCI) to realize ONDC.

ONDC Defined

The ONDC Strategy Paper defines the Open Network for Digital Commerce framework as follows:

ONDC is a network that enables location-aware, local digital commerce stores across industries to be discovered and engaged by any network-enabled applications. It is neither a super aggregator app nor a hosting platform. All existing digital commerce apps and platforms can voluntarily choose to adopt and be a part of the ONDC network. In addition, the responsibility for onboarding of sellers and buyers and the management of the end-to-end order lifecycle will also continue to reside with the network-enabled applications

In short, ONDC is:

  • A framework of sorts that is not an application, platform, government body, or intermediary.
  • A way to level the digital commerce playing field for all with emphasis on interoperability, open protocols, open-source APIs, voluntary adoption, and community-driven innovation.

The Benefits of ONDC

The advantages of Open Network for Digital Commerce (ONDC) extend to buyers, sellers, and platforms.

ONDC Advantages for Buyers

  • Buyers gain visibility on hyperlocal retailers such as their neighborhood grocery stores.
  • Unified customer experience since all sellers and platforms on the network will have to follow certain policies and procedures.
  • A gateway to continuous innovation in the digital commerce space. 

ONDC Advantages for Sellers

  • Sellers do not have to suffer from the troubles of vendor lock-in.
  • Access to a vast pool of buyers.
  • Availability of support services such as logistics providers via ONDC.
  • Improved digital brand and presence.

ONDC Advantages for Platforms

  • Ease of compliance with policies and procedures.
  • Ability to focus on customer acquisition or seller acquisition with other participating network entities (logistics, packaging, etc.) taking care of miscellaneous aspects.
  • Safe pathway for up-and-coming ventures working in the retail segment.

How India Stands to Benefit from ONDC

The minds behind Open Network for Digital Commerce envision the following outcomes from its implementation over the next five years:

  • 1.2 million sellers in the network.
  • 900 million buyers utilizing ONDC.
  • Enablement of INR 7.3 billion in additional annual purchases through ONDC.
  • INR 37.5 billion in additional Gross Merchandising Value.

ONDC is also expected to facilitate the trade of locally manufactured goods, improve geographic coverage of digital commerce, and reduce inventory costs & overhead costs (building a digital brand, etc.) for Indian businesses, particularly small- and medium-sized ones.


The title of this post sums it up right. Open Network for Digital Commerce will prove to be a game changer for India. With the scope for innovation that comes with ONDC, one cannot help but wonder what else is in store for the Indian digital commerce segment. If you are interested in understanding the technical foundations behind ONDC, we recommend you check out the ONDC strategy paper that is available on www.ondc.org. And follow ShoppingGreedy for other interesting posts and guides on online shopping!

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