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ONDC is a population initiative to democratize e-commerce: JM Financial

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JM Financial Institutional Securities Ltd. released its report on Open Network for Digital commerce (ONDC), calling the company a population initiative to democratize e-commerce, the detailed report concludes that it has the potential to create a win-win scenario for both established and new entrants. The report also cites extreme operational complexity as the roadblocks for: ONDC.



“With its primary focus on enabling e-commerce for small retailers and SMEs, ONDC has the potential to improve retail digital penetration in the country at an even faster pace than what has been seen during the COVID lockdowns. The network will enable wider customer reach to small retailers and direct customer access to SMBs, creating millions of dollars worth of businesses,” the report said.

Using an open source protocol, ONDC is shifting its approach from closed platforms to a network that creates interoperability between all built-in applications, the report said.

“This interoperability enables unbundling, allowing all participants to leverage their strengths – a banking app with millions of consumers focuses on consumer entry/engagement, while a SaaS provider for online merchants retains the merchants. sticking to their app of choice to access a wide selection, while eliminating the need for merchants to spend time and capital working with multiple platforms in silos. Overall, this can boost capital efficiency for the players, helping them achieve profitability.” the report said.

According to the report, the obstacles to ONDC’s success include resolving the chicken-and-egg situation between supplier and buyer on board, remediating customer complaints (as fragmented process also creates gaps for the process to fall through ), competition issues in case the big established companies or big brands are on board, as well as those related to data privacy and ownership.

“Watch UPIA evolution, ONDC may also need to decide on its positioning as a non-regulatory authority or a regulatory body to ensure that the network remains reasonably aligned so that the small retailer is not marginalized,” the report said.

Open Network for Digital Commerce (ONDC) was incubated with the primary goal of supporting grassroots entrepreneurship and digitizing small, local retailers by making them a participant in the e-commerce revolution in India.

ONDC is committed to an open protocol approach that encourages interoperability across all built-in platforms, thus lowering a retailer’s barrier to entry to sell online. This allows a consumer to purchase any app of his/her choice from any merchant over the network, even if the merchant may not be onboard the app the customer is using.

“We appreciate this move by the Indian government to bring the digital revolution through all corners of the country and believe it could be a huge boost to boost India’s retail digital penetration from the current 5-7 percent to nearly 20 percent.” cents over the next 5 years (current IBEF estimate is 19 percent by 2030), the report said.

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