Democratizing e-Commerce in India: How ONDC and GeM are Leveling the Playing Field

Projected to reach $350 billion by 2030, India’s e-commerce sector stands on the brink of transformation. The current dominance of a few large platforms has stifled the growth potential of millions of small sellers and local businesses. Initiatives like the Open Network for Digital Commerce (ONDC) and the Government e-Marketplace (GeM) aim to dismantle these barriers, promising a more inclusive digital marketplace.

The Challenge: Dominance of Big E-commerce Platforms

High entry barriers on major e-commerce platforms have excluded the vast majority of India’s 12 million sellers from digital trade, particularly those in smaller towns and rural areas. Currently, a mere 0.125% of these sellers have embraced e-commerce, highlighting a significant opportunity for growth.

ONDC: Revolutionizing the Digital Marketplace

Launched as a Section 8 company in December 2021, with foundational members including the Quality Council of India and Protean eGov Technologies Limited, ONDC is set to redefine India’s e-commerce landscape. McKinsey predicts that ONDC could increase digital consumption fivefold to $340 billion by 2030, expanding the digital consumer base from 165-190 million to 450-500 million.

Resolving E-commerce Challenges through ONDC

1. Hefty Commissions and Poor Profit Margins: Traditional platforms may offer wide exposure but often come with high commission costs, reducing profit margins significantly. ONDC provides a more equitable platform with lower or no upfront costs, enabling sellers to retain more of their earnings.
2. Enhancing Visibility and Reach: The oversaturation on platforms like Amazon makes it difficult for individual sellers to stand out. ONDC promotes equal visibility for all merchants, ensuring products are discoverable across multiple digital channels without favoritism.
3. Combatting Shady Practices: The open and decentralized framework of ONDC ensures that all sellers operate on a level playing field, free from underhanded competition and preferential treatment that plague traditional e-commerce platforms.
4. Improving Vendor-Customer Relationships: Unlike platforms that restrict seller access to customer insights, ONDC enables sellers to engage directly with customers and access crucial data through integrated seller apps, fostering better relationships and strategic marketing.
5. Addressing Logistics Challenges: Recognizing the logistical hurdles in reaching remote areas, ONDC facilitates connections with approved logistics partners, allowing sellers to efficiently reach a nationwide audience.

Benefits for Sellers on ONDC

• Wider Reach: ONDC enables sellers from all over India to reach a national audience without the need for physical stores or significant advertising budgets.
• Reduced Costs: The network minimizes dependency on specific e-commerce platforms that often impose hefty fees, making it cheaper and easier for new sellers to enter the market.
• Simplified E-commerce: A common set of protocols across the network standardizes the selling process, reducing complexity for newcomers.

Benefits for Buyers on ONDC

• Diverse Product Range: Shoppers gain access to an extensive array of products, including unique local crafts and goods from different regions.
• Competitive Prices: Increased seller competition leads to more competitive pricing, benefiting consumers.
• Enhanced Transparency: The absence of paid prioritizations in search results and listings ensures a fair and transparent shopping experience.

GeM: A Digital Revolution in Government Procurement

Initiated by the Hon’ble Prime Minister and launched in just five months, GeM transforms the erstwhile Directorate General of Supplies & Disposals (DGS&D) into a modern digital portal for the procurement and sale of goods and services required by various government departments, organizations, and PSUs. As of the last fiscal year, GeM has facilitated:

• 6,279,934 orders with a total value of INR 403,706 crores
• In the current fiscal year, it handled 195,629 orders worth INR 57,382 crores

GeM’s effectiveness is evident in its massive user base and diverse product and service categories, enhancing transparency, efficiency, and speed in public procurement through tools like e-bidding and reverse e-auction.

The Synergy Between ONDC and GeM

ONDC’s infrastructure complements GeM’s objectives by potentially increasing the visibility of smaller suppliers in government tenders. This synergy supports a more equitable business environment and promotes economic inclusivity.

Addressing Challenges and Looking Forward

While the promise of ONDC and GeM is vast, their success will depend on widespread adoption and the enhancement of logistics, especially in less developed areas. Encouragingly, the integration of these platforms with existing digital infrastructures like UPI and Aadhaar suggests a robust foundation for future growth.

Conclusion

The initiatives of ONDC and GeM mark a significant stride towards democratizing e-commerce in India. By leveling the playing field for small businesses and enhancing buyer experiences, these platforms are not only expected to expand economic opportunities but also drive a more inclusive digital economy.

 

*The above information is from secondary sources. GeMTech PARAS is not responsible for its content