How ONDC India helps small retailers reach their customers

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OWhen Jay Prakash, a 35-year-old shopkeeper, inherited his father’s local convenience store in Bengaluru, he had a reliable clientele from a wealthy apartment block known as the Diamond District. His 400 square foot store sold rice, lentils, bread, snacks and fresh produce, earning nearly 15,000 rupees a day. But that was before the pandemic hit, and people started staying indoors. Now, he says, people shop online through grocery services that promise extremely fast delivery times – 20 minutes or less.

Prakash says his daily income has been cut in half. “Old customers who knew the quality of the product still buy from us, but it is not the same.” For Prakash, a high school dropout, it didn’t seem possible to open an online store to compete. Designing a website, spending on marketing, and managing a delivery fleet was incredibly daunting.

But a sea change in recent weeks has revived hope for his two-decade-old business, thanks to a new initiative by the Indian government. In a bid to create a level playing field for online and offline players and reduce the dominance of US Big Tech, the Indian government is piloting its own solution that allows all kinds of sellers to display their products in apps. shopping alongside major retailers. It’s called the Open Network for Digital Commerce, or ONDC. The system will allow offline retailers to compete with larger online retailers, including the many fast grocery delivery services that have sprung up over the past year. Customers will be able to open their preferred shopping application (provided it is integrated with ONDC) and find products from all sellers that are part of ONDC. This would also include nearby local neighborhood stores.

Pilots are underway for food and groceries, but the ONDC protocol will eventually be used for all kinds of businesses and services. According to reports, US tech giants Amazon and Google are in talks to join the protocol, which would mean that when a customer opens the Amazon app, for example, they will be able to purchase products from any seller. registered with the ONDC.

A screenshot of one of the seller dashboards with ONDC

An unusual solution to a fundamental problem

In a world dominated by online players and Big Tech, this solution is unusual: a federal government creating a protocol to bring together all kinds of sellers under one umbrella. Previously, the Indian government introduced a payment protocol, United Payments Interface, which enables real-time interbank transfers through smartphone apps, providing online payment capability to everyone, including offline merchants. In May, nearly 6 billion UPI transactions were processed, showing the potential scale that could be achieved when the government builds tech tools for merchants. In fact, UPI is now also allowed to be used in countries other than India.

“This [ONDC] is made to solve the fundamental problem of a platform-centric model leading to market concentration that is recognized worldwide,” said T. Koshy, CEO of ONDC. “We have found a smart solution that is participatory, fair, inclusive and democratic.”

The government plans to link 30 million vendors and 10 million traders to the ONDC and expand it to 100 Indian cities by October. Industry experts say e-commerce has disrupted the industry and is expected to take away some of the traditional business, but it will also redefine the way people do business, with ONDC set to play an important role. “The establishment of ONDC will definitely redefine the entire segment,” said Kumar Rajagopalan, CEO of Retailers Association of India. “Indians go online for the discovery phase of shopping, and if the customer’s trusted shop owner is online, then they’ll just switch.”


Swiggy delivery people on cellphones in Amritsar, India on March 28, 2020.

Narinder Nanu—AFP/Getty Images

Why small retailers needed help

The explosion of e-commerce has been brutal for Indian retailers over the past decade with the proliferation of Flipkart, owned by Amazon and Walmart. As internet penetration increased, Indians started using their smartphones for other services including ordering groceries. While this slowly eroded local store businesses, it was the launch of the new category of instant grocery delivery – in 10-20 minutes – that made the situation even worse. “These apps are giving discounts that we can’t afford,” said Uttam Kumar, a shopkeeper in Bangalore who has seen his customer base grow from 800 to 200 a day. “I see some of these apps have reduced the retail price and then given discounts on that as well.”

The instant grocery delivery market started in India less than a year ago and is already worth more than $700 million, with an estimated growth of almost 15 times its current size, for reach $5.5 billion by 2025. That would put it ahead of China and the EU in terms of adopting these services, according to local research and consulting firm RedSeer. Super-fast online grocery delivery has taken hold in the United States and Europe as well, growing during the pandemic when many wealthy people stayed indoors. Headquarters include Glovo in Spain, Gorillas in Germany, Cajoo in France, Zapp in London and Getir in Turkey.

In India, as in other countries, the apps have side effects: more delivery people on the streets (and at risk of accidents) and more small traders losing customers. But there is one thing that is different in India: scale.

The unprecedented potential of online delivery

With an average age of 29 and the second highest population in the world, India has one of the youngest populations, with high levels of disposable income and no time to shop due to jobs. at high pressure. This, combined with the steady rise of India’s middle class, means more Indians are using the growing number of online delivery services in the country.

One such user is Keertana Rumalla, an architect from Hyderabad, for whom ordering groceries has become a daily affair. She orders from Swiggy’s Instamart – a fast grocery delivery service – and buys only the limited supplies she needs to make lunch for the day. And, a daily Toblerone bar. “I’m so dependent on the app right now. I’m working from home and I don’t have time to go shopping,” Rumalla, 31, told TIME, just as she walked away. is excused from calling to pick up her groceries for that day when the doorbell rang, “I’m definitely addicted to using this app.”

Many of these startups that users like Rumalla rely on are backed by venture capital funds from Western countries, including Accel Partners-backed Swiggy Instamart, Y Combinator-backed Zepto, Google-backed Dunzo, and SoftBank-backed Blinkit. India has about 10 such services. Together, these companies have spent over $1 billion on instant grocery delivery.

But the ONDC protocol can help tip the balance in favor of offline sellers, who will now have a platform to compete with deep-pocketed startups. Koshy says ONDC will help a vendor succeed based on what they can offer and what they specialize in, rather than the scale that venture capital money helps achieve.

On May 14, Prakash fulfilled his first order through ONDC: instant noodles and coffee. Since then, he has only received four more orders through the portal. But, he is optimistic about the impending change, remembering the benefits of the government payment system, UPI. “When the government introduced UPI, I slowly realized the benefits of using this service,” says Prakash. “With ONDC, I hope it will bring my business back to what it was before the pandemic.”

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