ONDC has potential to dilute market concentration, Retail News, ET Retail

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The government’s efforts to use technology to make ecommerce more competitive are beginning to show up in food delivery services. Customers are reporting noticeable price differences in orders placed on online apps using the Open Network for Digital Commerce (ONDC), which creates a network of interconnected emarketplaces that makes it easier for small store-owners to tap demand online.

Platform fees for food delivery using ONDC are being reported at a fifth of those charged by the market leaders. This is a considerable reduction in the cost of intermediation. This also holds out the potential to break the dominance of Swiggy and Zomato, and eventually even that of retail platforms like Amazon and Flipkart. ONDC has the potential to dilute market concentration by increased consumer choice and lower entry barriers.

It could be a game-changer on the lines of the Unified Payments Interface (UPI), the infrastructure on which digital transactions are growing in this country exponentially. On its own, however, technology will not be a necessary and sufficient condition to make ecommerce more competitive.

UPI has exposed those limits by being dominated by PhonePe and Google Pay, despite regulators seeking enhanced competition from among a wide field of players. ONDC, designed by the commerce ministry to democratise ecommerce, could get around this by not being a platform, but it needs supporting regulation to break market silos.

A proposal to revive consumer protection rules that make e-marketplaces liable for mis-selling by sellers could impede the progress of ONDC. Sellers should ideally be responsible for information about products, and platformsshould be accountable for communicating it to buyers.

Consumer risks are, in some ways, magnified, in a network of platforms ONDC intends to create. A mushrooming of gateways to facilitate digital purchases has to be accompanied by a set of rules that clearly delineates market risk from product risk.