š§ ONDC: A Success? A Reality Check
The government is trying to put small vendors and kirana stores on the same level as Amazon and Flipkart. But will this plan work out?
Choices, bargaining and golgappas: the three things that Indians absolutely love!
Which is why a lot of Indians still prefer shopping offline because they can get all of these things at once.
But what if we told you could get the same choices and the same prices online?
In fact from your favourite seller!
All thanks to Open Network for Digital Commerce! And as the beta run of this ONDC is currently going on, we are here to analyse the platformās wins and losses.
So, ReadOn!
ā” A Brief Explainer on ONDC
Right now, Amazon and Flipkart have 60% of the e-commerce market share.
And thatās kinda sad, because one is a foreign company and the other is controlled by a foreign company (WalMart has a controlling stake in Flipkart).Ā
And with more people turning towards online shopping, these companies are only going to get stronger at the cost of Indian sellers, especially small kirana stores (who are also facing tough competition from quick commerce companies).
But listing on these platforms is unaffordable because Flipkart and Amazon charge around 12%-35% commission. And even after taking this commission, they donāt share data with you or promote your products. Result? Small vendors end up burning cash for little or no visibility.
So, a lot of these vendors started going online through other apps like Dunzo, KhataBook and OkCredit.Ā
But this gave them even lesser visibility thanĀ Amazon would because almost everyone uses Amazon but not everyone knows about these apps.
So, to give them Amazon-level visibility, the government launched ONDC.
ONDC is basically a huge online bazaar, where anyone and everyone can open a store.Ā
And this bazaar can be accessed through any app.
Yes, even if you are a vendor that has been onboarded by Dunzo, people using other Paytm Store will also be able to buy from you.
Okay, but what about delivery? A lot of small stores donāt deliver.
Well, on ONDC, these stores can also choose delivery partners like eKart.
This gives users lots of choices and gives sellers access to a whole new world of customers.
Everybody wins, no? So, is this the happy ending?
š The Reality of ONDC
Well, now that the beta test of ONDC has already begun, we can actually see whether or not it can help kiranas and small vendors or not.
And for now, the results have been mixed.
While some vendors are happy about their registration, others have been cancelling orders.
On the first day of the beta test in Bengaluru (September 30), 174 orders were placed but only 62 of these were delivered.
Though this number has now improved (600 out of 744 orders fulfilled on October 10), many sellers are already thinking of logging off these apps. Why?
You see, no one has really been able to crack the kiranatech space (bringing kirana stores online) Because going online brings its own set of problems:
It makes inventory management more difficult for these stores as they cannot predict demand. So, a lot of items had gone out of stock by the time the orders came. So, these orders had to be cancelled.Ā
Finding logistics partners for deliveries is difficult. A lot of orders were cancelled due to this as well.Ā
On top of all this, grocery stores have razor thin margins (5%-20%). They can't really afford to pay a 3% cut to the apps that brought them onboard, another 2-3% to those who facilitate payments plus bear logistics costs.
Even though this commission is still lower than that of Amazon, it is a lot for kirana stores.
Plus companies like Paytm, which are handling payments, are doing so on a T+6 days basis, so merchants will also face cash flow problems.
Cherry on this cake? Despite this visibility, these stores will struggle to give the same discounts as bigger stores and competitors.
However, this is just the beta run. The government could identify these problems and solve them before the ONDC is officially launched.
But will it be able to truly empower smaller kirana stores?
P.S. This article was researched and written by our intern Navya Gupta.
ā” In a line: ONDC is trying to help small vendors and kirana stores go online but the beta run has exposed some problems in its model.
š”Quick question: Can ONDC become the next UPI?
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