Can ONDC do to e-commerce what UPI did to payments
Indians are raving about a new character in the food delivery scene: ONDC. The new entrant has seemingly caught the fancy of consumers, threatening the duopoly of Swiggy and Zomato. ONDC, or Open Network for Digital Commerce, is more than a food delivery platform. It is touted as the disruptor of India's online marketplace. Let's see what it is.
ONDC is an open e-commerce protocol
ONDC is a government initiative supported by private partners. It was introduced by the Department for Promotion of Industry and Internal Trade (DPIIT) in 2021. What you have to understand about ONDC is that it is neither an application nor a service. Instead, it is an open, e-commerce protocol that lets buyers and sellers interact directly.
ONDC fares better than Swiggy and Zomato in pricing
Most of the discussion surrounding ONDC has been about how it would challenge Swiggy and Zomato. You might have seen posts on social media showing the difference in the cost of same food orders across platforms. ONDC comes out on top in this regard, making many consider it a viable alternative to established players. Especially given the ever-increasing delivery fee on Swiggy and Zomato.
Restaurants have to pay much lesser commission on ONDC
The price comparison of ONDC, Swiggy, and Zomato is one of the biggest talking points in India. How is ONDC able to provide the same product at a lesser price? For starters, it is not charging delivery fees from customers. However, the biggest difference maker is the commissions charged from restaurants. While Swiggy and Zomato charge 18-25%, ONDC's commission is around 8-10%.
The government expects ONDC to become the next UPI
ONDC, however, is not just for food delivery. The platform aims to disrupt the established ways of tech-based e-commerce companies, including Amazon and Flipkart. Buyers can purchase products across various categories, including food and beverages, home and decor, electronics, fashion, and more. The government expects ONDC to have the same impact as Unified Payment Interface (UPI).
Buyers can purchase products through listed partners
Unlike standalone apps, ONDC cannot be downloaded from app stores. Instead, it operates through partners like Paytm, PhonePe, Meesho, and Magicpin, among others. Buyers can choose one of the partners and buy from the listed sellers. The partners will charge a small commission for providing their service. On the Paytm app, users can search "ONDC" in the search bar to access the platform.
The platform is expected to make local sellers competitive
According to the government, ONDC will protect small and medium enterprises from the onslaught of e-commerce giants. The platform allows local sellers to compete against the likes of Amazon, Flipkart, Swiggy, and Zomato. Buyers and sellers do not have to be on the same app for ONDC to work. Nor do sellers have to comply with the policies of any specific e-commerce platform.
The price difference will normalize over time
ONDC's challenge to established e-commerce platforms will be mounted on discounted prices. However, the difference in pricing is a short-term discount war primarily funded by ONDC and buyer apps. Like UPI, these discounts are expected to normalize over time. After that, the platform's success will depend on whether users prefer it over other established players.
Sellers have to look for their own delivery partners
The biggest concern regarding ONDC right now is the lack of a dedicated delivery team. When you order on Swiggy or Zomato, you know the companies' delivery partners will deliver your order. In ONDC's case, the restaurant has to look for a delivery executive. There are some inherent issues with this, especially when a restaurant receives multiple orders in a short time.
Refunds, returns, and customer service will be difficult with ONDC
Additionally, as you can imagine, there are fewer restaurants on ONDC compared to other established aggregators. However, due to the low commissions levied, we might see ONDC-specific restaurants and cloud kitchens in the future. There are also issues related to refunds, returns, and customer service. The big companies have standardized these facets of e-commerce. With ONDC, things might get a bit difficult.
