Will ONDC Kill the E-Commerce Monopoly?

Will ONDC Kill the E-Commerce Monopoly

ONDC is slowly coming into the limelight. Many reports claim that ONDC will soon kill the e-commerce monopoly. But, what is ONDC, and how will it kill the e-commerce monopoly? Let’s find out.

Firstly, let’s understand the problem of what’s happening in the e-commerce space.

Online shopping these days has gained a lot of traction. Whenever we talk about online shopping in our friend circle, Flipkart, Amazon, or Myntra somehow manage to enter the conversation. 

Ever wondered why this happens? Well, these are colossal e-commerce superpowers dominating the Indian retail markets. You would agree to this. Even for the slightest purchase, we rely on these online platforms. For buying bread and butter, too, we rely on 10-minute delivery chains like Swiggy Instamart or BlinkIt. And why does this happen? Well, hitting the order now button is convenient, and you get your order delivered at the comfort of your home. 

These e-commerce companies are slowly killing retail businesses. They act as aggregators between customers and manufacturers/sellers. Right?

The second reason to buy from these platforms is that the products are sold at discounted prices. Remember, whenever we go to a local store, we tend to compare the cost with the products available on Flipkart or Amazon. Even if these e-commerce aggregators are selling at discounted prices, they are still making profits. This means that during a sale if you buy a watch worth Rs 2,000 for Rs 500 from an e-commerce website, these companies are still making huge profits because sellers manage to reach you directly with the help of these aggregator platforms. On the other hand, a local watch retailer won’t sell the product at such a massive discount because they sell with small margins. Hence, the e-commerce businesses or aggregator-based businesses are hurting offline retailers.

To reduce this abuse of aggregator superpower, the government has come up with the ‘Open Network for Digital Commerce.’

What is Open Network for Digital Commerce or ONDC?

ONDC is an open-source network which will help local businesses to go digital through a network-enabled application. 

In simple terms, the ONDC initiative is taken for micro and small sellers. This will enable local buyers and sellers to digitally transact through an open network. So, it will also help small sellers create an identity on the platform. 

Any local retail business can make an account and sell its products on this platform. So, you can order things from your place, and they will be delivered to your doorstep. This will, in turn, break the dependency on one platform by creating a wide network of retail entities like aggregators, sellers, logistics, etc. You never know, you might find some good options on the ONDC-based platform as well. 

Now, let’s understand with an example of how ONDC would work.

Let’s say you wish to buy bread and butter. In today’s times, what would you do? You would go to Swiggy Instamart on Swiggy’s app and place the order, and their delivery person would deliver to you in minutes by collecting bread and butter from their dark stores.

But in the case of ONDC, as soon as you place an order on the platform, the order will be served by the Kirana shopkeeper. They will keep your order ready. A local logistics company will pick up the order and drop it at your place. So, a single entity isn’t providing the entire service and breaks the monopoly.

Why Has the Government Taken This Initiative?

Currently, there are a few drawbacks in the e-commerce space. 

Let’s quickly check them out.

  1. Firstly, a few sellers who deal in volume and timely delivery get more traction on an e-commerce platform. They are also preferred because they offer products at a competitive rate. So, small sellers listed on its website are pushed down with the option ‘two more sellers selling at 999’ section. 
  2. The second reason is its deep discounting model. These aggregators work with this strategy where they offer huge discounts on branded products while selling. So, this hurts offline retailers. 
  3. Lastly, you might have encountered this situation where you search for an AC, a mixer, or a towel and find a Flipkart or Amazon brand selling it. So, what is the chemistry behind this? Well, as these aggregators offer you services, they also research customer behaviour. So if their algorithm notices that in Mumbai, people prefer to buy a 5-star inverter AC in white colour, they would manufacture it under its brand name and sell it at a lower price. And as this is their platform, they list their products higher with a best seller label. This search result is shown to all people living in Mumbai. It grabs customers’ attention, which leads to low sales of other products.

What Lies Ahead?

ONDC seems a great idea and may also be a game changer in the next few years. It would surely help many small retailers and logistics companies. Minister of Commerce and Industry Piyush Goyal said, ‘Open Network for Digital Commerce will end monopolistic practices in digital commerce in India.’

In April, the centre launched ONDC in five states in the pilot phase. 

But, if we look at the framework of ONDC, various questions are yet to be answered on the customer experience end. 

  1. With every other retailer listed, will it guarantee standard quality products? 
  2. Because various entities like different logistic companies and different sellers are involved in the process, won’t it make more room for scams? 

Well, as of now, ONDC is a work in progress. Let’s see what happens next. 

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