Welcome challenge to e-commerce duopoly
As consumer buying increasingly shifts online, the slated launch of the Open Network for Digital Commerce (ONDC) by September end will give eCommerce the impetus it sorely needs. More importantly, it can provide millions of small sellers with a trading platform to reach buyers.
In the process, the current platform-based e-commerce duopoly, where Amazon and Walmart-owned Flipkart control 60% of the market, will hopefully be broken. Set up by the government as a Section 8 non-profit company, ONDC is working in a few pilot cities and aims to go pan-India with a digital trading platform soon. From the operator-driven system controlled by a few, ONDC will bypass these platforms to be a facilitator network linking the buyer and seller. Once a deal concludes, a logistics company will pop up to deliver the product.
The shooting size of eCommerce is too big to be left to the control of a few monopolistic interests. From churning up expected revenues of $75 billion in 2022, Indian ecommerce may gallop 20–22% a year to touch $188 billion by 2025. Ecommerce will grow from 4% of the total food and grocery, apparel and consumer electronics retail trade in 2020 to 8% by 2025.
As ecommerce grows, so will consumer complaints. The Rajya Sabha was informed that a whopping 5.12 lakh complaints about ecommerce were registered in the National Consumer Helpline between April 2019 and November 2021. In this context, the initiative by ONDC to publish its draft framework for dispute resolution very soon is laudatory.
A third-party agency will track the individual trail of orders and complaints. This will make the system transparent. Complaints will not disappear; neither will unscrupulous sellers be able to duck behind opaque systems. The ‘open’ network ONDC hopes to bring in will ‘democratise’ ecommerce in two crucial ways. First, the current private ‘marketplaces’ operated by Amazon and Flipkart deliver search results of merchants based on brands that give the operators bigger margins or have larger ad spends.
The new network will allow every registered seller to be ‘discovered’ by the buyer apps. Second, the extortionist commissions charged works to exclude the smaller merchants. The ONDC network, on the other hand, will cap buyer-side commission at 3% and seller commission at 15%, making it consumer-friendly. Though all is good on paper, the litmus test will be: can it perform in the actual marketplace?