Further path for ONDC beyond the democratization of e-commerce – Natural Self Esteem

Open Network Digital Commerce offers small businesses a level playing field.

New Delhi: The search for markets has always led to countries sending merchants to trade on other continents. This search has shifted from ship to internet over generations, from travel to search engine optimization and from trading posts to e-commerce sites. E-commerce has reached considerable depth in the Indian market today; Amazon and Flipkart packages are a common sight in post offices in Tier 2 and Tier 3 cities. However, the way e-commerce has evolved has raised concerns about competition and misuse of customer data. Barriers to entry for small business owners, product white-labeling, and preferential treatment for certain brands make it exceedingly difficult for smaller, hyper-local brands to even have any chance of being discovered, let alone trading. And this goes against the basic idea of ​​e-commerce as a phenomenon that would allow multiple retailers to host their products on a single platform, giving consumers a range of options to choose from. Consequently, the concept of the marketplace as a public good is being trampled on by these giants.
This is exactly where an idea like Open Network Digital Commerce (ONDC) would come into play. Riding on India’s digital juggernaut – whose impact has been seen in sectors such as identity, payments and finance, retail and service delivery, healthcare and education – ONDC is a game-changer in democratizing digital commerce in the country. Through an open network protocol, ONDC seeks to provide a level playing field for small and local businesses to be discovered by potential customers on a variety of platforms.
Prospects abound, but the real test of a platform like ONDC would be to see if it can truly connect the rural and suburban producers to the urban market. ONDC’s integration with Village Level Entrepreneurs (VLE) and CSC Grameen eStores is already on the anvil. The goal of hosting around 10-20% of the total Indian retail economy (i.e. around $100-200 billion) on its platform in this way should also include companies funded by government programs such as Pradhan Mantri Van Dhan Yojana (PMVDY) be promoted. PMVDY is a program to improve the livelihoods of forest dependent tribes through the aggregation, processing and forward sale of forest products. The scheme has been running since 2018, but much of the sales still take place at local Haat bazaars or village mandis and are restricted to local traders. The tribal communities do not enjoy the benefits of price realization nor are they adequately exposed to the market. However, by incorporating Van Dhan Vikas Kendras (VDVKs) formed under this program, ONDC can offer them the reach that every other major brand enjoys.
Such an integration would also add significant value to customer choices that opt ​​for healthy and sustainable options. It was found that consumers are now more aware than ever of the origin of the products they use. A large proportion of young adults are rethinking their eating habits and beauty solutions; and the move towards nature-based products. A 2017 survey conducted by Euromonitor International found that more than half of Indian consumers said “natural or organic” ingredients influenced their beauty product purchasing decisions. The pandemic has further reinforced this notion. Now imagine if authentic and affordable products such as wild honey or 100% natural Mahua Oil, with its therapeutic and beauty benefits, were made available through ONDC to this increasingly health- and quality-conscious urban population.
The VDVK products could also generate a network effect through ONDC. Consider this: a customer looking to buy a kilogram of honey today can choose between brands that will cost them anywhere from Rs 400 to Rs 5,000, with quality being the biggest differentiator. The freshly harvested, unprocessed honey from the forests of Himachal Pradesh, Karnataka or Bihar, collected at VDVKs, on the other hand, can pass every quality test, including nuclear magnetic resonance (NMR), used worldwide to detect sugar syrup contamination. VDVKs therefore have the potential to become a direct-to-consumer (D2C) brand, selling authentic, high-quality products through ONDC’s platform. It would be truly remarkable to have a system in the form of ONDC that manages both demand and supply-side issues such as information asymmetry, opaque pricing, quality concerns and buyer-seller discrepancies, particularly for small or rural producers. a format for processing, standard setting, packaging and labeling evolves organically. Therefore, this type of technology integration of VDVKs can also solve problems – such as standardization, authentication and market connection – that are left unsolved by the system itself.
Issues such as limited digital connectivity, especially of rural women, lack of market understanding and other implementation challenges are real, but the opportunity is too great to pass up. Touted as the UPI of e-commerce, ONDC may be the future of retail in this country. And ONDC’s linking of VDVK products into the value chain could be a big step in facilitating business operations for one of the country’s most disadvantaged communities.
(Sakshi Abrol works as Policy Manager at Nation First Policy Research Centre; Pragya Singh is Research Fellow at Nation First Policy Research Centre).

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