In today’s edition let’s understand E-commerce and whether ONDC will be as revolutionary as UPI?
📜 The Story
Growing up, my parents always convinced me to buy that pair of shoes from a local vendor rather than from an e-commerce giant like Amazon or Flipkart. Why? Their motto was simple – to promote local businesses and be “Vocal for Local”. But now it’s much more than that.
According to reports, the Indian E-commerce industry is expected to reach 1200 billion dollars by 2026, poised to grow at a compound annual growth rate (CAGR) of 7.6% during the forecast period 2022 to 2030.
Source – Precedence
As we all know the Ecommerce market is dominated by big boys like Amazon and Flipkart and by providing huge discounts they have created a moat and an entry barrier for the new ones who wish to enter. To break this monopoly and encourage small local businesses, the government has come up with a revolutionary plan called ONDC.
Come Watson, come! The game is afoot.Sherlock Holmes
🖥️ So what is ONDC?
Open Network for Digital Commerce (ONDC) is a network based on open protocol and will enable local commerce across segments, such as mobility, grocery, food order, delivery, hotel booking, and travel, among others, to be discovered and engaged by any network-enabled application. Or in other words, it is a super app that covers from online shopping to travel by supporting local businesses.
So while Amazon and Flipkart’s business model uses a platform model and inventory model (buying goods in bulk and storing them near the place where demand is highest) example: A bookseller who sells books at Rs. 200 on Z.com. Where Z would make Rs.20 profit on it. Now with the Inventory model, Z.com will buy the same books for a cheaper price and sell them at higher margins.
Similarly ONDC, on the other hand, has this leverage as all the buyers and sellers are nearby, this will help to cut down the cost, and fastest delivery, ONDC will help buyers to search the product, filter with prices, and get delivered fastest.
Source – Whitepaper
This is how ONDC can be a win-win situation for buyers, sellers as well as technology platforms. But will it be as revolutionary as UPI? Well, let’s see. 🤞🏻
Disclaimer: This blog is not to be construed as investment advice. Trading and investing in the securities market carries risk. Please do your own due diligence or consult a trained financial professional before investing.