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India’s e-commerce sector has experienced significant growth over the past decade, fueled by increased internet access, widespread smartphone use, and a growing middle class with higher disposable incomes. This rapid development is further supported by government initiatives such as Digital India and improvements in logistical infrastructure.
A noteworthy advancement in this area is the Open Network for Digital Commerce (ONDC), launched by the Indian government to democratize digital commerce. ONDC aims to create an open, interoperable network that empowers small retailers and local businesses to compete with major e-commerce companies. By enabling transactions across any network participant’s platform, ONDC promotes inclusivity, innovation, and greater market access in both urban and rural areas. This initiative is set to transform India’s e-commerce landscape, making it more dynamic and fair. With the onset of ONDC, there are a lot of grievances that come along with it.
Candour legal is one of the best corporate lawyers in Ahmedabad that has specialised in providing legal remedies related to ONDC and other ecommerce matters. Our skilled team, led by Mr. Manasvi Thapar has solved intricate matters related to Companies law, 2013. We are also the best law firm to handle legal matters related to consumer laws in Ahmedabad.
What is an e-commerce platform, and how does it operate?
An e-commerce platform, also called e-commerce software, is an application that facilitates the buying and selling of products online. Businesses use e-commerce platforms to manage their websites and operate their sales and marketing functions.
There are two basic models that e-commerce follows:
Marketplace model—
In the marketplace model, the website or app only acts like a platform that connects the buyer and seller, and the platform takes a percentage cut when the particular product is sold.
Inventory model-
In this model, the platform directly buys from the seller in bulk, using its bargaining power to buy goods at cheaper rates and then sell them at a higher price, increasing its profit margin. E-commerce obviously ends up making the maximum profit from this model. Also, these platforms can push up commodities by sellers who have bought in bulk from project-exclusive deals and offers, thus pushing out other sellers.
Unlike in the USA, India doesn’t allow foreign direct investment in the inventory-driven model, which means that Amazon and Flipkart can only use the marketplace model.
How do e-commerce platforms make a profit?
Even with the marketplace model in place, the e-commerce platform has certain unfair advantages, which are discussed below:
Limiting search results and favouring certain sellers:
They can limit the search results to brands that have tied up with the platform, i.e., throw on top of the search results and show maximum visibility to their favoured seller where they get maximum margins.
Power of pricing in goods and Logistics: Platforms can influence prices in real-time based on factors like demand, customer behaviour, and competitor prices. They offer free shipping only above a certain amount, compelling buyers to add more products than required to avail themselves of the free shipping.
The Indian e-commerce platform has witnessed phenomenal growth during and after the pandemic years. Apprehensions about the dominance and monopoly of a few major giant platforms have arisen, which will eventually hinder fair competition and limit consumers’ choices.
This is where Open Network for Digital Commerce (ONDC) comes into the picture, a revolutionary initiative by the Indian government. It aims to transform the online shopping experience for buyers and sellers, and it carries the same potential to bring about a revolution similar to the one UPI (Unified Payment Interface) did for digital payments. This will be achieved by bringing an open network platform which will show results across e-commerce. Let’s break down the concept of ONDC in detail and how it will benefit us all.
What is ONDC?
The Open Network for Digital Commerce (ONDC) is an initiative launched by the Government of India on 29 April 2022. It aims to modify the e-commerce landscape in India. The Department for Promotion of Industry and Internal Trade (DPIIT) established ONDC as a section 8 company under the Companies Act, 2013, meaning it registered without using the word “Limited” in its name and is governed under the provisions of the same section.
It will function as an open network supported by advanced infrastructure, encouraging immaculate interaction between sellers and buyers.
ONDC aims to democratise e-commerce by furnishing a level playing field for businesses of all sizes, imposing open protocols to expand market access and stimulate healthy competition. By employing standardised procedures such as order management cataloguing, ONDC enables smaller businesses to become more visible online and to compete more efficiently. Customers gain from various options and open pricing policies, guaranteeing an equitable and effective online marketplace.
How does ONDC work?
Decentralised Networks: ONDC will operate on decentralised networks based on global e-commerce standards. Suppliers and buyers will interact with each other without any intermediary.
Agreement to Policies: The government has already set the guidelines. All the buyers and sellers who sign up on this platform must agree to the same policies. The policies will ensure that the transaction is done securely and smoothly.
Diverse Marketplaces: ONDC marketplaces give space to several industrial sectors and also provide global opportunities to them. As consumers, we have a choice to acquire services from local retailers, which will boost market inclusivity.
Reasons for Launching ONDC:
Conventional e-commerce models favoured big platforms, which adversely affected smaller companies and reduced customers’ choices. ONDC addresses these obstacles by promoting interoperability and standardisation, eliminating barriers to entry for MSMEs.
The initiative seeks to reduce monopolistic practices and promote a more equitable e-commerce ecosystem by establishing consumer trust and transparency. The ONDC encourages economic growth and innovation while empowering consumers by giving them access to various sellers and products. The establishment of ONDC represents a calculated move towards achieving the goal of an economically and digitally empowered India.
Benefits of ONDC
The ONDC proposes an advantageous arrangement for consumers, retailers, and logistics firms, promising a revolution in online shopping. The benefits for each of these players are broken down as follows:
- For Consumers: Choice and Convenience
- Competitive Prices: ONDC encourages fair competition among sellers by eliminating platform monopolies, ensuring the lowest prices for consumers.
- Informed Decisions: Biased promotions will end. Consumers can compare prices, ratings, and reviews of various products from different sellers.
- Easy Returns: Uniform return and refund policies across all ONDC platforms ensure a hassle-free experience.
- Seamless Shopping: A unified shopping cart and checkout process across different ONDC apps eliminate the need to log in to multiple platforms.
- Enhanced Security: Monitored payment gateways ensure secure transactions and protect financial information.
- Local Gems: ONDC prioritizes local retailers in relevant searches, offering customers unique and fast local options.
- For Retailers: A Level Playing Field
- Reduced Costs: Minimal membership fees and elimination of high commissions make ONDC a desirable choice for sellers.
- Wider Reach: ONDC enables retailers to tap into new markets beyond platform limitations.
- Simplified Operations: Standardized APIs and technical guidelines streamline business processes.
- Data-Driven Knowledge: Retailers gain access to extensive customer data to understand preferences and tailor product offerings.
- Compliance Made Easy: ONDC adheres to legal and regulatory guidelines, simplifying compliance for sellers.
- Collaborations: Facilitates partnerships with qualified suppliers, expanding product lines and sales.
- For Logistic Companies: Automated Operations and Efficiency Gains
- Decreased Middlemen: ONDC minimizes intermediaries, reducing delivery costs for businesses and consumers.
- Improved Efficiency: Logistics firms can optimize delivery routes and streamline operations.
- Faster Deliveries: Simplified deliveries lead to quicker and more efficient fulfillment for sellers and buyers.
- New Partnerships: ONDC fosters collaboration between small retailers and logistics firms to strengthen the supply chain.
Broader Impact:
Economic Development: This initiative will empower small enterprises to create a level playing field and will eventually contribute to a bigger economy.
Financial Inclusion: ONDC tries to fill the financial gap by collaborating with financial technology companies that offer credit facilities. This will connect consumers with lenders who might not have served them traditionally.
Job creation: The growth in e-commerce will potentially create more job opportunities across various sectors.
Transparency and Fairness: Standardised protocols and open access will promote transparency and fairness within the e-commerce ecosystem.
The Road Ahead for ONDC: Building a Thriving Digital Bazaar
The Open Network for Digital Commerce (ONDC) isn’t just a new platform but a paradigm shift for the Indian online commerce ecosystem. While still in its initial stages, ONDC has already made significant strides. It is currently operational in over 500 cities, and analysts project a staggering 50 million transactions by the end of the current financial year, which indicates a promising trajectory. However, the true test lies in the widespread adoption of ONDC across all sectors.
ONDC isn’t aiming to overthrow existing giant e-commerce companies but rather trying to create a level playing field. It tries to empower local street vendors and farmers to participate in the digital marketplace by simplifying registration and offering minimal subscription fees. Imagine a local panipuri stall or a remote apple farmer showcasing their offerings alongside established brands- that’s the power that ONDC can give to every retailer. It also allows consumers to get apples, fruit and Apple phones in one place.
The future of ONDC lies in collaboration. Partnering with local governments and associations can help onboard smaller players by bridging the digital divide. As ONDC evolves, it has the potential to revolutionise the e-commerce sector in India by offering a more inclusive and competitive marketplace that benefits everyone- from consumers to the local Kirana store owner.
If you’re looking for top lawyers in corporate laws in Ahmedabad, reach out to Candour legal. We are experts in providing legal remedies regarding company laws. Our team, led by Mr. Manasvi Thapar provides on point corporate legal services. Contact us @+91-7228888745 to learn more about different solutions and legal protections regarding ONDC and ecommerce in India.
