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Open Network for Digital Commerce

  • 17 Dec 2022
  • 5 min read

For Prelims: Open Network for Digital Commerce, UPI, Initiatives related to e-Commerce

For Mains: Significance of Open Network for Digital Commerce

Why in News?

Open Network for Digital Commerce (ONDC) will charge a “small fee" from platforms that will contribute towards “maintenance and development" of the network.

  • The network will seek to reduce the compulsory commissions charged from sellers and logistics partners on the network by private e-commerce firms such as US-based Amazon and homegrown Flipkart — the two largest e-commerce firms in the country.

What is ONDC?

  • About:
    • It is an open e-commerce protocol set up by the Ministry of Commerce’s Department of Promotion of Industry and Internal Trade (DPIIT).
    • Under ONDC, it is envisaged that a buyer registered on one participating e-commerce site (for example, Amazon) may purchase goods from a seller on another participating e-commerce site (for example, Flipkart).
    • Presently, buyers and sellers have to be on the same app for a transaction which happens through the same platform. For example, a buyer needs to go to Amazon, to buy a product from a seller on Amazon.
  • Objectives:
    • Democratisation and decentralization of eCommerce
    • Inclusivity and access for sellers, especially small and medium enterprises as well as local businesses
    • Increased choices and independency for consumers

What Benefits Does the ONDC Offer?

  • Level Playing Field: ONDC is keen to level the playing field for e-commerce operators and widen the digital market access for Micro, Small and Medium Enterprises (MSMEs) and small traders in the country.
  • Competitive and Innovative Ecosystem: ONDC will empower suppliers and consumers by breaking the monopoly of giant platforms to drive innovation and transform businesses in sectors like retail, food, and mobility.
  • Freedom of Choice for Consumers: Consumers can potentially discover any seller, product or service in a common platform, thus increasing freedom of choice for consumers.
  • Neutral and Regulated Platform: ONDC aims at fostering open networks developed on open-sourced methodology, using open specifications and network protocols, and independent of any specific platform.

What are the Issues with ONDC?

  • ONDC is a complex ecosystem to implement, unlike UPI.
  • Switching customers from the incumbents, which are offering a satisfactory service, will be difficult.
  • Network participants may not make significant market development investments initially.
  • Growth in the seller base will not necessarily improve buyer experience on the network.
  • Monetisation on the network is not very clear.
  • Attaining critical mass will be difficult as buyer and seller sides are disconnected.
  • Lack of clarity on accountability, especially in addressing customer complaints and returns.

Way Forward

  • A better digital space for e-commerce must be built by the government in order to compete with the dominant e-commerce platforms.
    • Along with this, it's important to create a proper digital education policy that takes into account various languages and user-friendly interface for the benefit of the consumers as well as sellers.
  • A massive, well-funded adoption campaign will be needed to bring over tens of millions of kirana stores to the platform.
  • The demand and supply sides should be able to access a secured single window to resolve issues such as information asymmetry, opaque pricing, quality concerns, and buyer-seller disputes.

UPSC Civil Services Examination, Previous Years Questions (PYQs)

Q. Consider the following: (2022)

  1. Aarogya Setu
  2. CoWIN
  3. DigiLocker

Which of the above are built on top of open-source digital platforms?

(a) 1 and 2 only
(b) 2, 3 and 4 onlyb 
(c) 1, 3 and 4 only 
(d) 1, 2, 3 and 4

Ans: (d)

Source: PIB

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