What is the ‘Open Network for Digital Commerce’?
Context:
- The existing “platform-centric model to an open-network model” of the e-commerce business is what the government intends to change.
- The administration is certain that the ONDC will end the dominance of a few major platforms in the e-commerce business.
- The biggest hurdle for ONDC may be creating a successful marketplace for the exchange of goods and services.
Points to Ponder:
Introduction to ONDC
- The Indian government has launched an initiative called the ONDC to shift the e-commerce business from a platform-centric approach to an open-network paradigm.
- It is modelled after the well-known Unified Payments Interface (UPI) project, which enables smooth money transfers across various payment providers.
The objective of ONDC:
- The government wants to democratise e-commerce and offer substitutes for exclusive e-commerce websites.
- The objective is to dismantle the monopoly of a few big e-commerce platforms by enabling customers and sellers to trade regardless of the platforms they are registered on.
Government’s Motivation:
- The government is motivated by its perception that the current state of the e-commerce business is split into silos ruled by private platforms.
- Food delivery applications have come under fire for charging exorbitant commissions, and marketplaces like Amazon and Flipkart have been accused of favouring specific suppliers in which they have indirect stakes.
- By connecting buyers and sellers across platforms, the ONDC is viewed as a solution to level the playing field and eliminate the need for proprietary platforms.
ONDC criticisms:
- Detractors claim that there is little certainty about the advantages of an open network for digital trade.
- Buyers frequently browse across platforms, and sellers are already allowed to post their goods on different sites.
- Private services that assist consumers make smarter selections already fill the information gap, such as price comparison websites.
- Platforms like Amazon and Flipkart might not only be dominant because of captive grip, but also because of competition and limited monopolies.
Challenges for ONDC:
- As ONDC is implemented, the government’s capacity to develop a productive substitute for e-commerce platforms will be put to the test.
- A seamless marketplace and the capacity to list the products offered by different merchants will be essential.
- E-commerce platforms spend on exclusive onboarding and listing procedures, and the quality of services may suffer if the open network’s restrictions prevent platforms from reaping the benefits of such investments.
- A major difficulty for ONDC is creating a productive marketplace for the exchange of goods and services.
