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What Is ONDC And How It Works? May 26 2023Market Psychology

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ONDC, or the Open Network for Digital Commerce, is an initiative introduced by the Government of India (GOI) to create a network where sellers, apps, websites, and platforms can join and offer their products and services. It aims to provide a platform for digital commerce that rivals the likes of Amazon and Flipkart, and offers advantages such as lower prices and a wider range of options.

For a shopkeeper in a rural village who wants to bring their high-quality products online, they would have a few options:

Create their own website: They can set up their own website to showcase and sell their products directly to customers. However, this option requires them to handle various aspects such as supply chain management, promotion, after-sales service, and delivery charges, which can divert their focus from maintaining the quality of their products.

List on platforms like Flipkart and Amazon: They can choose to list their products on popular aggregators like Flipkart and Amazon, which would handle delivery and after-sales service. However, these platforms would also charge a commission for their services, and there is a risk of their product being duplicated and sold under a different label, as these platforms primarily focus on their databases.

The introduction of ONDC aims to solve these problems. ONDC is not a platform itself but rather a network that allows various platforms and sellers to register and join. Users don't necessarily have to visit the ONDC platform directly. For example, if Myntra is on the ONDC network, all products listed on ONDC will be visible on the Myntra platform as well. ONDC is not limited to e-commerce of products; it also includes services like food, clothing, movie tickets, groceries, and electronics.

It is too early to say what will happen to platforms like Swiggy, Zomato, Amazon, and Flipkart. The government is not looking to compete with them directly, and ONDC is more focused on providing opportunities for small and medium-sized enterprises (SMEs) to avoid unnecessary cuts and data sharing with big giants. The government aims to bring more balance to the e-commerce market, which is currently dominated by Amazon and Flipkart.

Many investors and companies have already joined the ONDC network, including logistic arms like Ekart and Dunzo, Flipkart-owned PhonePe, Paytm, Meesho, various banks, venture capital firms like Accel and Sequoia, and telecom firms like Bharti Airtel and Vodafone Idea.

Some challenges for ONDC include ensuring quality control, timely delivery, and after-sales service. Unlike platforms like Amazon, which have mechanisms for refund, return, and exchange, the presence of any seller on ONDC may not guarantee proper after-sales service. If ONDC can ensure quality and better after-sales service, it has the potential to minimize the role of intermediaries. However, if it fails to do so, platforms like Amazon, Myntra, and Flipkart may introduce their premium versions that offer better customer support.

Overall, ONDC aims to revolutionize digital commerce in India by providing a network for sellers, platforms, and apps to join and offer their products and services. Its success could lead to a more balanced e-commerce market and potentially lower prices for consumers.

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