Explained: What Is An Open Network For Digital Commerce

The Open Network for Digital Commerce (ONDC), according to Commerce and Industry Minister Piyush Goyal, will let small merchants collaborate with big firms and provide customers with contemporary distribution services.

ONDC has picked 5 locations to undertake a test next month in an effort to democratise digital commerce by moving it away from a platform-centric paradigm and toward an open-network model. It hopes to begin countrywide operations by August. In April, a beta edition of the project will launch in Delhi, Bengaluru, Bhopal, Shillong, and Coimbatore with a small set of buyers and vendors.

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The project is considered as a move toward reducing the dominance of platforms like Amazon and Flipkart, which the government has accused of exploiting their monopoly power and breaching the law.

What is an Open Network for Digital Commerce?

The government intends to shift the e-commerce industry's core structure from a "platform structure" to a "open-network model." The ONDC is envisioned as a neutral system that will provide open source standards for cataloguing, vendor match, and price discovery, similar to the Unified Payments Interface (UPI), to provide equitable possibilities to all marketplace participants, including consumers.

This means that consumers and vendors can conduct business regardless of whether they are affiliated with a certain e-commerce portal. The ONDC initiative is based on the Unified Payments Interface (UPI) project, which is widely regarded as a success.

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Likewise, the administration seeks to make sure both e-commerce customers and sellers can trade irrespective of the venues on which they are listed. As a result of ONDC, a consumer registered on Amazon, for example, can buy things directly from a merchant selling on Flipkart.

ONDC's goal is to promote open networks that are built using open-source techniques, open specifications, and network protocols, and are not tied to any one platform. The Quality Council of India has been charged with integrating e-commerce platforms using network-based open-source technology, and has assembled a team of professionals to execute the project.

What does open source mean?

To open source a system or programme, it means that the technology or programming used in the operation is available freely for anyone to use, share, and change. While the iOS operating system is closed source (meaning it cannot be lawfully altered or used), the Android operating platform is open source, allowing smartphone manufacturers such as Samsung, Nokia, Xiaomi, and others to customize it for their respective devices.

Significance of IndiaĄ¯s ONDC

ONDC is projected to digitise the whole value chain, standardise processes, encourage supplier inclusion, improve logistics efficiency, and increase customer value.

When the ONDC is fully implemented and regulated, which is scheduled in August 2022, all e-commerce enterprises in India, regardless of brand, would be required to follow the same standards as Android-based mobile devices.

Smaller online shops and newcomers would benefit from this since discoverability, interoperability, and inclusivity would be improved. By breaking the monopoly of major platforms, it will allow suppliers and customers to drive innovation and alter businesses in sectors such as retail, food, and mobility.

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Transparent laws, light investment, and decreased business acquisition costs are projected to help businesses. It is also anticipated that time-to-market and time-to-scale will be significantly shortened.

Larger e-commerce behemoths, on the other hand, are objecting since they have already invested considerably in R&D and the deployment of their own procedures and technologies.

Why is the government pushing for it?

Reports claim that the ministry believes that ONDC would remove the dominance of a few giant firms in the e-commerce business. According to the reports, the e-commerce market is currently divided into "silos" that are controlled and dominated by these networks. Amazon and Flipkart, for instance, have been blamed of discriminating against sellers on their sites and favouring vendor businesses in which they own a minority interest.

The government intends to level the field by establishing an open network like ONDC that allows customers to buy across channels. According to sources, consumers would be able to access merchants from different channels without having to switch among them.

What do the critics say?

The Hindu states that at this time, the apparent advantages of an open platform for digital commerce are far from certain. For one thing, even under today's platform-centric e-commerce paradigm, vendors already are free to mention their commodities across many e-commerce sites. Buyers frequently purchase across channels as well. Then there are tools like price comparison offered by numerous private websites, which assist purchasers fill in the gaps in their knowledge and make smarter judgments.

The same report emphasizes that as a result, Amazon and Flipkart dominance of the e-commerce business may not be attributable to any captive grip these sites have over shoppers and sellers. Furthermore, the alleged "monopoly" that platforms are believed to have may be no different than any other business's limited monopoly over its assets. As a result, commentators such as journalist Andy Mukherjee have referred to the ONDC as a "solution looking for an issue."

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