Open Network Digital Commerce provides a level-playing field to small businesses.
New Delhi: The search for markets has since the days of yore made countries send merchants to other continents for trade. This quest has, over generations, shifted from ships to the internet, from voyages to search engine optimisation, and from trading posts to e-commerce sites. E-commerce has today gained substantial depths in the Indian market; Amazon and Flipkart parcels are a common sight at the post offices of tier 2 and tier 3 cities. However, the manner of evolution of e-commerce has triggered concerns around competition and misuse of customer data. Entry barriers to small entrepreneurs, white labelling of products and preferential treatment to certain brands make it exceptionally hard for smaller, hyper-local brands to even stand a chance to be discovered, let alone trade. And this goes against the very foundational idea of e-commerce as a phenomenon that would allow multiple retailors to host their products on a single platform thus allowing consumers to select from a range of options. Consequently, the very concept of market place as a public good is being trampled upon by these behemoths.
It is precisely here that an idea like Open Network Digital Commerce (ONDC) would be seem. Riding on the digital India juggernaut–the impact of which has been seen in sectors such as identity, payments and finance, retail and service-delivery, healthcare and education¬–ONDC is a pioneering idea to democratise digital commerce in the country. Through an open network protocol, ONDC seeks to provide a level-playing field to small and local businesses to be discovered by potential customers across a wide range of platforms.
Prospects galore but the real test of a platform such as ONDC would be to see if it could truly link the rural and peri-urban producers to the urban market. Integration of ONDC with Village Level Entrepreneurs (VLE) and CSC Grameen eStores are already on the anvil. The aim to thus host about 10-20% of India’s total retail economy (i.e. about $100-200 billion) on its platform should also subsume businesses promoted through government schemes like Pradhan Mantri Van Dhan Yojana (PMVDY). PMVDY is a scheme for enhancing the livelihood of forest-dependent tribes through aggregation, processing and forward sales of forest produce. The scheme has been operating since 2018 but a bulk of sales still take place at local haat bazaars or village mandis and is restricted to local traders. The tribal communities neither enjoy the benefits of price realisation nor do they get sufficiently exposed to the market. By plugging in Van Dhan Vikas Kendras (VDVKs) set up under this scheme, ONDC can, however, provide them the reach on scale enjoyed by any other big brand.
Such an integration would also add significant value to customer choices gallivanting towards healthy and sustainable options. It has been noted thatconsumers are more conscious today about the origins of the products they use than ever before. A large section of young adults is rethinking their eating habits and beauty solutions; and moving towards nature-based products. A 2017 survey carried out by Euromonitor International revealed that over half of the Indian consumers reported that “natural or organic” ingredients influenced their decision to buy beauty products. The pandemic has further reinstated this thought. Now imagine if authentic and competitively priced products like wild honey or 100% natural mahua oil with its therapeutic and beauty benefits were made available to this increasingly health and quality conscious urban populace through ONDC.
The VDVKs products would also be able to create a network effect through ONDC. Consider this: a customer wanting to buy a kilogram of honey today can choose from brands that cost him anywhere between Rs 400 to Rs 5,000 with quality as the single largest differentiating factor. The freshly extracted, unprocessed honey from the forests of Himachal Pradesh, Karnataka or Bihar collected at VDVKs, on the other hand, canpass any quality test including the Nuclear Magnetic Resonance (NMR) used globally to detect sugar syrup contamination. VDVKs, therefore, have a potential to become a direct-to-consumer (D2C) brand selling authentic, high quality products through the platform of ONDC.It would truly be remarkable to have a system in the form of ONDC that navigates both the demand and supply-side problems like information asymmetry, opaque pricing, quality concerns and buyer-seller mismatch especially w.r.t small-scale or rural producers.It is also possible that as VDVKs start hosting their products online and getting exposed to consumer expectations; a format for processing, standard-setting, packaging and labelling evolves organically. Thus, this kind of technology integration of VDVKs may also solve for issues–such as standardization, authentication and market linkage–left unresolved by the scheme itself.
Problems like limited digital linkage especially that of the rural women, deficient market understanding and other implementation challenges are real but the opportunity is too big to be missed. Touted as the UPI of ecommerce, ONDC can be the future of retail in this country. And linkage of VDVK products to the value chain through ONDC could be a big leap towards precipitating the ease of doing business for one of the most deprived communities in the country.
(Sakshi Abrol works as Policy Manager at Nation First Policy Research Centre; Pragya Singh is a Research Associate at Nation First Policy Research Centre).