ONDC – Democratic Digital Commerce
TL;DR: ONDC (Open Network for Digital Commerce) is not an app or a marketplace. It is a set of open specifications that lets buyer apps and seller platforms talk to each other in a standard way. A buyer on one app can then see and buy from sellers hosted on other platforms. Revenue sharing, order tracking and common terminology still need to be sorted out.
Commerce beyond boundaries: that is the idea behind ONDC.
What is ONDC?
The first thing to understand about ONDC is that it is not another application or platform, but a set of specifications. So ONDC is not a competitor in the ecommerce landscape. It is the custodian of an open architecture that lets buying and selling go beyond individual ecommerce applications and platforms.
How does an ONDC transaction work?
Let us understand this with an example of a complete transaction.
Hrithik wants a sculpture of a tiger, around 6 ft in length and 3 ft in height at most. He registers with one of the ecommerce or marketplace applications and enters his requirement. Let us say the application is BuyZ.
Step 1: Discovery across platforms
BuyZ may well try to find a matching seller in its own ecosystem. The real power of ONDC is unlocked when BuyZ sends a query to multiple other platforms that host sellers. As every platform implements the same interface, it is the same type of call going to all platforms in a loop.
Say SellP and SellQ respond. SellP says that Shahrukh of Chennai can provide such a sculpture, and SellQ says that Sachin of Mumbai has one. On his BuyZ screen, Hrithik sees both choices without realising that they come from two different platforms. Suppose he chooses Sachin from SellQ. To keep the idea simple, we ignore for now Hrithik’s need to talk to Sachin and Shahrukh to understand their work and to be sure he will get what he is looking for.
Step 2: Order and logistics
Now Hrithik places the order. SellQ may handle the logistics itself, or it may go to multiple logistics providers that also support the ONDC protocol and get a quote.
We have kept this narrative very simple to bring out the core idea: different platforms can talk to each other through a standard protocol at different stages of an ecommerce transaction.
What issues still need to be sorted out?
Some open questions remain.
- Revenue sharing: The usual model is to charge the seller a percentage of the selling price, but here a single transaction involves multiple platforms and will need many bilateral agreements. This is similar to the interconnect charges telecom providers pass to each other when a call starts on one operator and ends on another.
- A more complex lifecycle: UPI and telecom transactions are short and involve two parties, and they either succeed or fail. Ecommerce is more complicated. There is a discovery phase before the transaction, transactions are not short-lived and may be aborted midway, and more parties are involved, including logistics and insurance providers.
- Clear specifications: Since ONDC is only a protocol-level play and does not hold the interactions itself, the specifications must outline these nuances clearly. Otherwise platforms will have to go through lengthy agreement cycles before they are ready to be partners.
- Common terminology: Terms need to be unified for a seamless experience, otherwise one-to-one mapping between platforms is needed. One platform may say “order” and another “transaction”, so a buyer might see “Your transaction is on the way” from one and “Your order will reach you soon” from the other.
Sources and further reading
- Open Network for Digital Commerce (ONDC) (in English)
- Open Network for Digital Commerce, Wikipedia (in English)
Image credit: “Indian Street Vendor” by UnknownCopy, via Wikimedia Commons, licensed under CC BY-SA 4.0.
Frequently asked questions
What does ONDC stand for?
ONDC stands for Open Network for Digital Commerce.
Is ONDC an ecommerce app or marketplace?
No. It is not an application or platform but a set of specifications, so it does not compete with ecommerce platforms.
How can a buyer see sellers from other platforms?
Because every platform implements the same interface, the buyer’s app can send the same query to many platforms and show all the responses on one screen.
What is the main challenge of revenue sharing in ONDC?
A single transaction can involve several platforms, so it needs many bilateral agreements, much like interconnect charges between telecom operators.
Why does common terminology matter?
Without unified terms, platforms need one-to-one mapping and buyers may see different messages for the same step, such as “order” versus “transaction”.
