In today's Finshots we talk about the most requested topic in a long while now - ONDC.

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The Story

Remember what Dunzo did in the early days when they were just starting out?

They promised to deliver items from your neighbourhood stores and they promised to do it in a timebound manner. And to achieve this objective, they had to onboard stores, help them digitize their operations, offer them specialized solutions to manage and catalogue their inventory and they had to do it at scale. It was an unenviable task.

But at the end of it all, they managed to onboard several thousand stores and they’re still building on this each day.

Or take for instance eSamudaay — a company that does something very similar. If you downloaded their app, you could find Sujatha General Store — a small retailer in the coastal city of Udupi. You could browse their catalogue, order a packet of Nandini milk and you could get it delivered right to your doorstep.

And if you’re wondering where I am going with this, well, here’s the thing. There are several companies that are trying to take your mom and pop shops online. Some entities are focused on digitization. Others like Dunzo do everything — from discovery to delivery. Unfortunately, they all operate in silos. You can’t find Sujatha General Store on most e-commerce applications. And you probably didn’t even know eSamudaay existed until now.

But what if you could find every retailer on every e-commerce app, irrespective of who onboarded them? What if you could fire up Paytm on a lazy Sunday afternoon and order from a local Kirana store in Guntur, even if Paytm had never heard of them?

Sounds like it would be a great thing.

However, this begets a few challenges. For starters, why would somebody like eSamudaay want their retailers to be available on Paytm. After all, they did all the hard work, onboarding these small stores, helping them with cataloguing and inventory and getting them digital-ready. Why would they make these stores available on a different app like Paytm?

Well, despite what you may think of Paytm, it offers reach. You may not have downloaded the eSamudaay app, but you probably have Paytm on your phone. And if more deliveries flow through the app, you could figure out ways how to reward eSamudaay in the process as well. So in effect, this isn’t the greatest challenge. If anything both Paytm and eSamudaay have strong incentives to make this happen.

The real challenge however is interoperability.

How do you get the Paytm app and the eSamudaay app to talk to each other. And how do you do it at scale?

Right now, there are many companies like eSamudaay, that are helping your local neighbour stores go online, including retailers that are trying to go online on their own accord — using enterprise solutions available on the market. And consumers have several e-commerce apps at their disposal, alongside Paytm. So you can’t have each individual entity trying to integrate with every other entity out there. It would be a logistical nightmare.

Instead, what you need is something in between — an open network pioneered and promoted by a neutral entity that will help the likes of Paytm talk to the likes of eSamudaay. They have to work on the solution, set the ground rules, evangelize the offering and push for adoption.

And that’s precisely what the Open Network for Digital Commerce (ONDC) is expected to do. The commerce ministry is spearheading the initiative and the entity i.e. ONDC is structured as a non-profit organization with about 150 crores in funding.

And look we’re not just talking about retail stores here. You could even onboard hotels, restaurants, and last-mile delivery partners. If everything goes according to plan, consumers will have more choices and sellers will have a larger audience. Let me illustrate this with another example quoted by ONDC in a masterclass they conducted a few months ago.

On a Sunday afternoon, Vijay logs into Paytm and searches for options to buy Atta. The ONDC network will kick into action and relay this search item to seller apps like eSamudaay. He then receives two options on the Paytm app.

  1. Gupta Kirana Store — Rs. 50 (without delivery)
  2. Nearshop (fulfilled by Modern Kirana store) — Rs. 150 (with delivery)

Vijay chooses to order the Atta through “Gupta Kirana store”. However, since the store doesn’t facilitate deliveries, he will have to choose a delivery option. Once again, he will search for something near his location and the ONDC network will relay all the options available to him. This is what he will see on Paytm.

  1. Dunzo at Rs. 50
  2. Goodbox at Rs. 70

Vijay chooses to go with Dunzo and he finally makes the payment.

I’ve embellished the example and simplified it for greater clarity, but hopefully, the use case is apparent by now. This is a game-changer and as we speak, about 150 handpicked retailers on apps like eSamudaay have already connected to the ONDC network and are showcasing their wares to consumers on Paytm. It’s a pilot — a soft launch currently happening  in Delhi, Bengaluru, Bhopal, Coimbatore and Shillong. And the products will be delivered through Goodbox — the only logistics provider that has been onboarded so far.

In all honestly, this could revolutionize digital commerce in India.

However, like all things, there are a few unanswered questions here. For starters, who takes the liability when things go wrong? When you are interacting with just one entity, you know who to blame. But when you have so many moving parts involved, it gets a bit challenging. There’s also the question of discounts. Can small retailers really compete with massive retailers who can offer deep discounts?

Well, we don’t know. But for now, everybody is excited about ONDC and the infinite potential it holds. So we will just have to wait and see how the pilot takes off.

Until then…

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