Has ONDC Broken Monopolies?

Pick out any English-language newspaper in the country and the chances of finding an article around India’s eCommerce magic wand ONDC are quite high. The reports are either about new participants joining this government-backed digital retail ecosystem or about transactions hitting a new peak or some perspective on how this game-changer can change the world. 

What is common though amongst most of these news reports is their erroneous perception about what exactly is the Open Network for Digital Commerce. An article in the ET calls it a government-backed ‘platform’, while another describes it as the government’s effort to beat the Amazons and Walmarts at their own game. 

In spite of the best efforts of early participants who sought to clarify that ONDC is nothing but a digital protocol that levels the digital retail playing field by allowing anyone and everyone who’s either a buyer or seller of goods or provides payment or delivery services to participate in a network of networks that is non-hierarchical in nature. 

In other words, ONDC is NOT a platform and there is no app where you can go and buy goods from to satiate your nationalistic fervor (a return to the be-Indian, buy-Indian era?). The entity called ONDC was set up as a not-for-profit Section-8 company to create common software language (protocols) that would allow apps to talk to each other (interoperability). 

The protocols are done, what next for ONDC?

Since this task was achieved some months ago, what exactly is the ONDC up to now? And what’s behind all these media statements about hitting daily transactions targets or new entities coming on board as sellers? They’re all very much real and true. What’s hidden though is the massive monopoly of two unicorns – Paytm and PhonePe – on the buyer front aided by the “Soonicorn” Magicpin on the seller front. 

The obvious question that any observer needs to ask is: “So, are we replacing two global names with two Indian ones? Maybe three, when Reliance Retail throws its hat in the ring. Isn’t this just the sort of monopoly that ONDC was created to circumvent? In case you’re using either of the two apps (PinCode is the one PhonePay brought in), it would be worthwhile noting the effort it takes to actually find what you’re looking for. 

Are the monopolies gone or simply changed?

We spoke to some early participants, including one that involves a women’s cooperative from Kerala that hoped to bolster sales of its kitchen products through a nationwide network. “We haven’t really seen much traction thus far as the buyer apps seldom promote our wares unless we are ready to spend big money on advertising,” says a representative of Kudumbashree, a digital literacy and marketing mission run by the Government of Kerala. 

We were told that the state government wasn’t really enamored with the results of ONDC onboarding several months ago and are now preparing to create their own digital network to promote products made from cooperatives and hyperlocal networks. “There’s zero innovation in ONDC in terms of creating networks. What we are seeing is some hype around numbers with the powers that be, even turning a blind eye to monopolistic behavior from some participants,” says an early participant on ONDC. 

When asked how much money the buyer apps seek for promoting products of a brand, the official refused to give a number but said even if the amount may be small for a city-specific brand, it’s too much to pay for a woman’s cooperative making masala and pickles based out of villages in and around Kerala. 

What are the challenges and why are they so?

Of course, ONDC CEO Thampi Koshy believes things take time and points to how a small experiment of ride hailing in Kochi run by Juspay has expanded to Bangalore as Namma Yatri. However, what he doesn’t tell us is that most cab / auto drivers carry other apps such as Ola and Uber as well as that of Namma Yatri. Where does ONDC fit into this equation? 

So, what really is the challenge? ONDC seems to be losing its identity in the need for publicity – both to prove its credibility and add a few brownie points to the government agencies behind it. It hasn’t offered anything over and above what the Amazons and Flipkarts have, barring the flexibility of choosing one’s payment option and delivery agent. 

The customers, who are already getting every household need and beyond, at their doorsteps would be hardly enthused with another participant coming on the scene offering an exact replica of the experience that the tenured ones provide. In other words, the numbers that ONDC is shooting regularly is just a knock-off from existing eCommerce flows. 

For eCommerce to become a level-playing field, ONDC needs to step away from transactions and business analytics and focus on ethics and rules of the game. When PhonePe insists that all ONDC seller network participants go through a special process with them in order to list on Pincode, ONDC should step in. When Magicpin duplicates a seller record onboarded onto ONDC by another seller network participant and routes transactions to their seller record, ONDC should curb this behavior. 

But, given that ONDC is measuring its success through the orders processed metric and not through its governance credentials, all such behavior is ignored at the altar of transaction growth.

So, if India’s digital retail experiment has to see the same kind of traction and success as its digital payments innovation (represented by UPI), ONDC needs to sit back, hyperventilate and then take up the onerous task of building rules of engagement on a network that seeks to be open and transparent for every prospect to participate and grow.