Knowledge Partner
Knowledge Partner
Knowledge Partner
Democratising digital
commerce in India
An open network for inclusive, competitive marketplaces
April 2023
India is on the cusp of a digital transformation. Every aspect of life is gradually being shaped by
digital innovations and technologies. Commerce is no different. Digital commerce has immense
potential to fuel economic growth in the country by empowering small businesses, creating
jobs for the youth, enhancing choice for every kind of consumer, and including deserving but
underserved segments of the country. And yet digital commerce in India is just 7 percent of the
overall market, constrained by various barriers.
Against this backdrop, Open Network for Digital Commerce (ONDC) is working to create a
new paradigm for digital commerce that eliminates many of these barriers. It is determined to
democratise online commerce with an open network that, as the name suggests, has room for
every seller, large or small.
ONDC is a Section 8 company, with a dedicated leadership team and an Advisory Council
comprising senior leaders from the public and private spheres. Since its inception in August
2020, ONDC has been working to digitalise and support grassroots-level entrepreneurs and
local retailers to include them in the digital commerce universe on an equal footing with larger,
more market-savvy, and digitally enabled sellers.
The network will showcase an array of products and services for buyers, exponentially
increasing the number of options available to them at multiple price points. In this way,
ONDC aims to create marketplaces that are more inclusive, competitive, and innovative.
This report presents the vision, architecture, and road map of ONDC. It highlights some early
experiments and spotlights the exciting use cases ONDC could unlock. It describes the
benefits and opportunities ONDC could create for different stakeholders—sellers, buyers,
platforms, and service providers—while also laying out important actions these stakeholders
could take to reap the benefits from this pioneering initiative.
The insights in the report stem from in-depth interviews with business leaders, more than
100 industry experts in India and beyond, and stakeholders across sectors and geographies.
This report draws on joint research carried out by ONDC and McKinsey & Company. We hope
that this detailed report impresses upon you the potential of ONDC and moves you to chart
your own path on this new digital network that could reshape the digital economy.
We also express our gratitude to the many business leaders and industry experts who spared
their valuable time to discuss what they see as the potential and challenges in establishing and
scaling up ONDC:
This report would not have been possible without the efforts and collaboration of dedicated teams
from ONDC and McKinsey & Company.
Multiple leaders and colleagues from the ONDC team have provided inputs to the report, including
Rahul Handa, Nitin Mishra, Harishankar Krishnan, Gautam Ganesh, Saransh Agrawal, Devendra Damle,
Badrinath Mishra, Ramu Menon, Vidushi Singh, Abhishek Passi, Monisha Kumar, Vaibhav Goel,
Neeraj Jain and Nitin Nair.
McKinsey & Company was the knowledge partner for this report, conducting independent third-party
research and analysis. This research was directed by Alok Kshirsagar, Vikash Daga, Kanika Kalra,
Girish Phansalkar, Nikhil Vyas, Anurag Chadha, and Nakul Banga.
Several leaders from McKinsey & Company provided analysis and insights for their respective
sectors of expertise: Jaidit Brar, Neelesh Mundra, Ramdoss Seetharaman, Alessio Botta,
Ashish Pandey, Ankur Bhajanka, Nitika Nathani, Ankit Agarwal, Vikas Siddeshwar, Mahima Chugh,
Nadeem Ahmed, Abhik Tandon, Ishita Kayastha, Anushi Shah, and Abhishi Bhatia. The working
team was led by Shrey Agrawal and comprised Himanshu Agrawal, Subham Chirania, Zarir Marfatia,
Faraaz Mallick, Saurabh Sharma, Sumit Goenka, Romil Shah, Asitava Sarkar, Anamika Mukharji,
Anand Sundar Raman, and Pradeep M. Kumar.
3 4
5 6
Contents
Executive summary 01
Grocery 56
Electronics 70
Pharmaceuticals 82
Mobility 86
Hospitality 92
Construction materials 98
Agriculture 104
Logistics 126
1
India Brand Equity Foundation (IBEF), Telecom Regulatory Authority of India, Comscore, Dataportal, January 2023.
2
IBEF.
3
Based on registered sellers and their activity on prominent digital platforms in India. See “Digital SMBs,” Zinnov.
4
https://Direct Benefit Transfer (DBT)bharat.gov.in/; https://www.bbnl.nic.in; https://lgdirectory.gov.in/.
5
“The Indian unicorn landscape,” Invest India, September 7, 2022.
Health information
Account exchange and consent Unified logistics interface
aggregators platform (ULIP) National digital education
manager
Agri Stack architecture (NDEAR)
Standards/ (ABDM)
framework/ Unique farmer ID
protocols Unified farmer ICEGATE (Indian customs Decentralised skilling and
Goods and (ABHA Number, HFR,
Services Tax service interface electronic data exchange education protocol (DSEP)
HPR, PHR)
(GST) Unified health interface gateway)
Unified
Open Aadhaar enabled
DEPA Payments Digilocker e-Sign Bhashini
utilities Interface payments
Connectivity Mobile network (4G/5G), Smartphone penetration, Wi-Fi (Bharat Net, PM-WANI)
layer
6
IBEF, Telecom Regulatory Authority of India, Comscore, Dataportal, January 2023.
7
Bhashini, Indian Ministry of Electronics and Information Technology, accessed April 12, 2023.
8
Industry expert conversations.
9
Statista, Quarterly retail e-commerce sales: 4th quarter 2022, US Census Bureau, February 17, 2023.
10
India Brand Equity Foundation; Telecom Regulatory Authority of India.
11
Syndicated McKinsey research.
12
Ibid.
13
Based on registered sellers and their activity on prominent digital platforms in India. See “Digital SMBs,” Zinnov.
India has demonstrated digital adoption across payments and content consumption;
digital commerce has considerable scope for growth.
100%
50-60%
35-40%
20-25% 1-2%
Power users
Digital E-retail
(Regular
Access to internet Content consumers payment users transactors
transactors
Population with Use social media, E.g., bill pay, (Product +
on digital
internet access messaging ticketing Services)
commerce)
14
Inc 42 “State of Indian Ecommerce Report Q1, 2022”; 2020 China Industrial eCommerce Market Data Report; Share of US
B2B Sales via E-commerce 2019-2023 by Statista; Europe B2B E-Commerce Market (2022-28) report.
15
Syndicated McKinsey Research.
Over time, as ONDC scales, it could unleash a combinatorial explosion through network of networks the
impact of which could transform the Indian economy.
B2B B2C
Fashion, Ticketing
general historical
Grocery, merchant locations
Pharma
Hyperlocal Online food
goods delivery, Hyperlocal
Agriculture Mobility
mobility Services (Transport, Buses,
Education & Rails metros etc..)
Wholesale grocery, skilling
pharma, other produces B2B
Construction Handicrafts
Infra, Commercial toys, furniture
home building,
office supplies Mobility, Hospitality,
Pan India Fashion
Commerce
Branded products to
get national reach
Embedded finance
and insurance
Financial Consumers Unorganised
Investments and Services and Self professionals
mutual funds Providers employed
White collar
Working capital professionals
finance,
Supply chain
financing, Teachers
Skilling
Schools,
Organisation of colleges
logistics sector Logistics
16
Syndicated McKinsey research.
17
Indian Foundation of Transport Research and Training (IFTRT), https://timesofindia.indiatimes.com/business/india-
business/indias-logistic-costs-higher-than-bricnations/articleshow/14151707.cms
Use cases in the short term could prove the most beneficial for driving early
adoption and scale.
Not exhaustive
Online food
Grocery Fashion Electronics Mobility
delivery
I
n an increasingly digital world, India’s 840 million internet users and 600 million
rapid transformation stands out. smartphone subscribers, and Indians
Drawn by convenience, knowledge, transacted $1.5 trillion worth of digital
and entertainment at their fingertips, payments in 2022 alone. The swift pace of
especially during pandemic-induced digital adoption has fuelled India’s digital
lockdowns, Indians have willingly embraced economy, which accelerated at 2.5 times the
the internet. While digital adoption has pace of the overall economy in the past five
swiftly swept the country, digital commerce years (Exhibit 1).
still has a low share for various reasons. Of the 840 million Indians using the internet,
An open network for digital commerce about 450 million are avid consumers
could establish inclusive and competitive of digital content, glued to their devices
marketplaces online, creating choice and for an average of seven hours a day for
opportunity for everyone, by everyone. social media, messaging, entertainment,
India’s internet usage numbers tell the story and so forth. But only 165 million engage
of a connected, young country (nearly half in digital commerce (buying goods and
of the population is younger than 25 years services online). India’s low share of digital
old)18 , its people ready to experience novelty commerce, at an average of 7 percent,19 is
vicariously through their screens. India has below the averages of 25 percent in China20
and 15 percent in the United States.21
18
Sample Registration System, Registrar General and Census Commissioner of India, 2018.
19
IBEF.
20
Statista.
21
Quarterly retail e-commerce sales: 4th quarter 2022, US Census Bureau, February 17, 2023.
India’s digital economy has grown ~2.5 times faster than the overall
Indian economy since 2016.
Adoption
Internet users
840 Smartphone 600
in 2022 million1 subscribers in 2022
million1
2x 2x
growth growth
since 2016 since 2016
Consumption
Financial activity
Share of
population (age
~80%4 UPI payments
in 2022
$1.5
>15 years old) trillion5
that have a bank 2x
account in 2022 7x
growth
since 2016 growth
since 20196
1
go via the UPI, breeze past highway toll points
with FASTag, and quickly retrieve and store
government-issued digitalised documentation
Emergence of digital public
using a DigiLocker digital locker. These are just
infrastructure (DPI) to a few highlights of the massive digital public
unlock digital inclusion at infrastructure ecosystem emerging in India.
population scale No other country has this sort of ecosystem.
This is the comprehensive DPI that manages
digital identity, payment, and data. It
3
BharatNet gradually connecting rural areas.
Aadhaar, the digital identity for every Indian,
enables single-step identity verification for
Advent of 5G any transaction. Open utilities such as the
data speeds UPI and DigiLocker create a level playing
field for all stakeholders, unlocking access to
digital payments and data for all. Standards,
4
frameworks, and protocols such as Account
Aggregator facilitate interactions and exchange
of customer data for faster banking processes.
Multilingual, conversational AI
technologies to capture the The government is exploring creating a layer
next wave of internet users of digital products and services, of which the
Open Network for Digital Commerce (ONDC)
is a part.
5
Democratisation of data by
moving the power of data
back to individuals and
businesses who generate it
Health information
Account exchange and consent Unified logistics interface
aggregators platform (ULIP) National digital education
manager
Agri Stack architecture (NDEAR)
Standards/ (ABDM)
framework/ Unique farmer ID
protocols Unified farmer ICEGATE (Indian customs Decentralised skilling and
Goods and (ABHA Number, HFR,
Services Tax service interface electronic data exchange education protocol (DSEP)
HPR, PHR)
(GST) Unified health interface gateway)
Unified
Open Aadhaar enabled
DEPA Payments Digilocker e-Sign Bhashini
utilities Interface payments
Connectivity Mobile network (4G/5G), Smartphone penetration, Wi-Fi (Bharat Net, PM-WANI)
layer
22
“UPI product statistics,” National Payments Corporation of India, accessed April 12, 2023.
23
Co-WIN portal dashboard.
24
Indian Ministry of Road Transport and Highways.
25
“DIKSHA,” India Stack, accessed April 12, 2023.
26
“eSkill India – Fostering a future-ready workforce, digitally,” National Skill Development Corporation, accessed
April 12, 2023.
27
“The Indian unicorn landscape,” Invest India, September 7, 2022.
28
Grant Thornton, The Fourth Wheel 2017: Private equity in the corporate landscape, 2017; Venture Intelligence
Report 2022.
29
Sohini Mitter, “India adds more unicorns than China for 2nd year in a row; country accounts for 20% of APAC funding,”
Business Today, March 21, 2023.
Digital public infrastructure such as Aadhaar and UPI are groundbreaking initiatives
with the potential to revolutionise India’s digital ecosystem and, in future, the world.
With the JAM trinity, we now have a billion plus Aadhaar cards, nearly a billion bank
accounts and a billion mobile phone connections that have played a foundational
role in making India’s fintech/startup ecosystem one of the most vibrant and fastest
growing in the world. As we move into a digital era, ONDC could become an integral
component of India’s DPI. Its end goal is to democratise commerce, and onboard
millions of merchants (that do not participate on any digital platforms today) to sell
their goods and services online.
— Dilip Asbe
MD & CEO, National Payments Corporation of India
$1.5 trillion
Transactions in value on UPI in 20221 across 50 mn merchants and
300 mn users
$25 billion
Amount saved 2014-2022 by DBT enabled by Aadhaar, which covers 90% of
India’s population2
96%
Share of tolls in India collected through FASTag in 2021; toll revenues have
jumped by 148% compared with pre-COVID-19 levels3
140 million
Number of people in India (~10% of population) registered on DigiLocker
2015-20224
2.2 billion
COVID-19 vaccines delivered till Dec 2022 on Co-WIN portal, which was
developed within 9 months of onset of pandemic5
$210 billion
Amount credited via Aadhaar payment bridge across 1 bn transactions;6 this
is the world’s largest DBT, which was a critical enabler during the pandemic
75%
Percentage of Gram Panchayats in India connected to internet under
Bharat Net project by 20227
160 million
Enrollments on DIKSHA portal, including >130 mn completed courses across
>30 languages8
1 https://www.npci.org.in/what-we-do/upi/product-statistics
2 https://Direct Benefit Transfer (DBT)bharat.gov.in/
3 Press release 2021, NETC;FASTag dashboard on NPCI website.
4 https://www.digilocker.gov.in
5 Co-Win portal dashboard.
6 https://Direct Benefit Transfer (DBT)bharat.gov.in/
7 https://www.bbnl.nic.in; https://lgdirectory.gov.in/
8 https://www.indiastack.global/diksha/
Not exhaustive
65bn
Private equity and
14bn
~5x
venture capital
investments in India
2016
$ billion 2021
SaaS Edtech
Others
30
Livemint, “5G in India: How next-gen technology changes your life,” October 1, 2022.
31
Inc42, State of Indian ecommerce, Q4, 2022.
32
China’s social commerce market statistical report 2022.
33
Inc42, State of Indian ecommerce, 2022.
34
Expert conversations.
35
Dalberg Advisors and Google, The future of the news in India, December 2021.
36
India Brand Equity Foundation.
37
Peerzada Abrar, “Amazon seeks to tap next 500 mn users in India, expands vernacular offering,” Business Standard,
September 20, 2021.
38
Bhashini, Indian Ministry of Electronics and Information Technology, accessed April 12, 2023.
39
Nandan Nilekani, “India must embrace data democracy,” Carnegie Endowment for International Peace, August 16, 2017.
40
Ibid.
41
Telecom Regulatory Authority of India; Comscore.
42
National Payments Corporation of India.
43
IBEF.
44
ecommerceDB, “eCommerce market in India,” accessed April 12, 2023.
45
Statista.
46
“Quarterly retail e-commerce sales: 4th quarter 2022,” US Census Bureau, February 17, 2023.
India has demonstrated digital adoption across payments and content consumption;
digital commerce has considerable scope for growth.
100%
50-60%
35-40%
20-25% 1-2%
Power users
Digital E-retail
(Regular
Access to internet Content consumers payment users transactors
transactors
Population with Use social media, E.g., bill pay, (Product +
on digital
internet access messaging ticketing Services)
commerce)
Internet users
% of population
60-65 70-75 90-95 80-85 70-75 65-70
Digital commerce
users
20-25 85-90 85-90 45-50 75-80 65-70
% internet users
Digital commerce
% of total retail market
6-7 25-30 14-16 15-20 20-25 2-5
Source: Data Reportal, US Census Bureau, International Trade Administration, Singapore Dept. of Statistics, World Bank, IBEF, TRAI
47
Expert interviews.
48
Based on population data from the 2011 census.
7%
the share of digital
commerce in the
overall Indian
retail market
Today with 160+ million ecommerce consumers every year, multi-category commerce
adoption is being led by 10-15 million ‘power users’.
Fashion 150-160 10
Mobility 120-130 25
Electronics 100-120 35
Pharmaceuticals 10-15 5
Ed-tech2 10-15 5
B2B NA 1
compared to number of urban internet subscribers per 100 of population which stood at 105.06.
Less than 5 million of 100 million existing algorithms and filters often obscure
MSMEs are registered to sell on their presence, by default favouring sellers
who can operate at scale, offer low prices,
e-commerce platforms
and consistently maintain stock in several
The insufficient presence of B2C and B2B locations. Consumers are less likely to find
sellers, as well as of independent skilled the smaller sellers, who are ill-equipped to
professional service workers, is a factor in stay competitive and visible.
the low share of digital commerce in India.
B2B sellers
B2C sellers Business-to-business sellers lag far behind
While about 65 to 70 percent of India’s the global average of 20 percent when it
100 million MSMEs or small businesses have comes to digital penetration (Exhibit 9).
internet connectivity, only 5 to 6 percent can The entrenched distributor system in retail
sell on digital platforms, and even fewer get trade provides credit to customers and
meaningful business online (Exhibit 8). offers prices equivalent to those of digital
B2B marketplaces. For B2Bs, the margins
Sellers, particularly in rural areas, lack
from participating in online platforms are
either digital access or the knowledge to
thin. Many retailers and distributors are also
confidently use digital platforms for trade.
wary of the system, fearing fraud, especially
Even those interested in selling online are
with large and recurring transactions.
deterred by the high cost of digitalising
Compounding these concerns is the
inventory and sorting out or paying for
fact that global B2B companies have not
related infrastructure such as warehousing
invested in India to build an ecosystem that
and logistics. They struggle to access capital
might benefit local companies. Limited
to modernise or expand—the credit gap
standardisation or certification for different
for MSMEs in India is about $300 billion—
product categories makes it difficult to
driving about 60 percent of business owners
digitalise the product category.
to opt for informal credit at prohibitive cost. 49
Even when MSMEs join a selling platform,
49
TransUnion, Empowering credit inclusion global report: A deeper perspective on credit underserved and unserved
consumers, April 2022; BLinC Invest, MSME lending report 2022, December 2022.
Only 5-6% of the 90-100 million MSMEs are participating in digital commerce.
Usage by
MSMEs
1 As
per notification effective July 2021, retail and wholesale sectors have been added to the definition of “MSME”.
Source: Based on registered sellers and their activity on prominent digital platforms in India; Zinnov – Digital SMBs
Exhibit 8
Exhibit 9
Overall
India2 China3
700-750 bn 1-1.5% 28-32%
Offline
675-725 bn
USA4 UK5
e-B2B (GMV)
50
https://labour.gov.in/unorganized-workers
51
Expert conversations.
The Indian consumer is highly aspirational: connected for many hours a day to
the mobile screen, she is now aware of all that is on offer in the bigger cities.
Availability, however, lags aspiration. E-commerce has been a big enabler to
bridge this gap but sectors like grocery and personal care need a different solve
that can profitably go deeper than the top 200–300 cities and enable wider
consumer access to the assortment. ONDC could enable a significant increase in
consumption by bridging the gap between aspiration and availability.
— B. Sumant
Executive Director, ITC
Exhibit 9
Exhibit 10
Platform Platform
Platform Platform
Exhibit 11
Exhibit 11
74.0 1.5
0.9
38.7
18.9 0.4
10.8 0.2
3.7 0.1
0.4 0
CY17 CY18 CY19 CY20 CY21 CY22 CY17 CY18 CY19 CY20 CY21 CY22
Source: NPCI
India has in the past led the world with The next chapter details the vision and
innovative, population-scale initiatives possibilities of ONDC. This could transform
that disrupt the market, such as Aadhaar the landscape and opportunities for
and the UPI. With the UPI, the average consumers and providers, unlocking digital-
Indian enjoys the power to scan and pay led growth for India’s economy and its
on the go. Democratising digital commerce people.
in goods and services—that is, making it
equally available for all Indians through an
open network—could be a transformative,
pioneering move.
O
pen Network for Digital — Include all providers of products
Commerce (ONDC) is a bold and services for both B2C and B2B
initiative to build an inclusive commerce.
digital commerce ecosystem.
— Build multiple rails to the buyer (through
Success stories of open networks showcase
different buyer apps) to connect supply
how ONDC could put India on the cusp of
and demand.
transformative possibilities for stakeholders
and the economy. The opportunities it — Unlock innovations across the ecosystem
unlocks could accelerate the growth of by making it inclusive.
digital consumption in India, bringing to life a ONDC could be the world’s first such digital
vibrant digital commerce universe — bigger, commerce ecosystem, putting participants
broader and more inclusive. on an equal footing and powering a faster-
An open network where consumers and growing digital economy. While the early
providers can transact regardless of the ONDC pilots have focused on a few use
platform or application they use, ONDC is an cases such as hyperlocal grocery and online
alternative to the current platform-centric food delivery, some interesting innovations
model that aims to: highlight the diversity of what the network
could offer (Exhibits 12 and 13).
— Expand digital commerce as a channel for
all transactions between consumers and
providers.
• All charging stations now The number of charging networks across India
accessible on 1 app has increased from 5 to 70+ over the past 2
• A small or big provider years. However, each charging network runs a
stands an equal chance of closed loop wallet leading to challenges like the
business as accessible need to download 42+ Charge Point Operators
through same open network (CPO) apps to operate and pay at different
charging stations, and the lack of a unified view
• A single UEI certification
of chargers for policy makers to take up
replaces the need for
appropriate grid planning activities, etc. This has
multiple agreements
led the Department of Science and Technology
and industry experts to create a decentralised
and open network for electric vehicle chargers
100+
7 ~14 K
Charging Charging
kWh
networks stations of charging
transactions
In these ways, ONDC has the potential to change the game for many stakeholders, from
setting up sustainable market linkages for grassroots artisans to addressing the challenges
of commuting in a sprawling city like Bengaluru. To understand the possibilities ONDC could
unlock, it is important to delve into how it works.
Exhibit 14
Consumer
Registry
Reputation ledger
Open data
October 2022
Beta launch followed by scale up
September-December 2020 Across 5 cities – Delhi, Bengaluru,
Launch of pilot for POC Meerut, Bhopal & Coimbatore with
20+ network participants
August 2020 Open network solution approach was
onboarded and 600+ in various
decided to be deployed
Genesis of ONDC stages of integration
Idea was incubated and POC was
Need for ONDC emerged during demonstrated to Steering Committee
the first Covid wave, when access formed under DPIIT consisting of key
to commodities was restricted and government and industry stakeholders
the fundamental problems of an
undigitised ecosystem emerged. April 2022
Hence, the need for digitisation of ONDC alpha launch
small sellers was realised. A paper
titled “Bharat Commerce Open December 2021 Launched across 86
cities with key
Network” was presented to Establishment of ONDC company categories like
Secretary, DPIIT Post successful POC, ONDC was Groceries, Food &
established as a non-profit Section Beverages
8 company, with a commitment from
public and private banks and institutions
Source: ONDC team
Reimagining
digital commerce
While India has the scope and space to support
both platform-based and open-network-based
commerce, the open network can expand
opportunities across the landscape, as illustrated
by Exhibits 16, 17, 18, and 19. In the fullness of time,
the following ten archetypes of commerce could
take shape on an open network.
01 Boosting the direct-to-
consumer (D2C) ecosystem 06 Taking financial services
further
With the reduced buyer and seller app fees, Without traditional financial records,
sellers could find it financially attractive to businesses and consumers struggle to secure
build up D2C brands. Big brands might rethink credit or qualify for insurance coverage.
their innovation to reach microsegments ONDC’s transaction-based data could support
directly, and small businesses (for example, innovative new offerings. For example, banks
Kanchipuram saree weavers) could find a could track nontraditional metrics to offer
national market. sellers milestone and flow-based financing.
Greater access to credit could address a
range of needs for businesses, including
working capital in B2B (agriculture and
02 Putting
construction, for instance) and supply chain
self-employed professionals financing for retailers and wholesalers (for
on the map example, in electronics and fashion).
07 Growing peer-to-peer
themselves on the open, inclusive
marketplace, attracting attention and
business from newer consumers. It could commerce
be an advantage for skilled workers (e.g., The decentralised platform would eliminate
lawyers, accountants, and doctors) and the need for a middleman between consumer
blue-collar workers. ONDC could bring and provider for peer-to-peer commerce.
workers from the unorganised sector Inspired by influencers, consumers could be
online, connecting them with demand. excited and inspired to shop through social
media. Peer sellers could offer attractive
purchase options by easily showcasing their
goods and services at negligible cost.
Self-employed professionals such as home
03
Digitising B2B commerce chefs and homestay hosts could easily find
individual consumers for their services.
Retailers (such as grocery stores and
pharmacies) could access a wider distribution
08
network, saving time and costs. Direct linkages Empowering more people with
between retailers and manufacturers would be
likely to cut prices, improving margins in education and skills
sectors such as agriculture and construction.
More learners and workers could access a
skills-based education, vocational training,
career counselling, and knowledge of career
opportunities. Allowing for more equity and
04 Amplifying
inclusion, this shift could engender a more
hyperlocal goods and equitable, skills-driven labour market in India,
omnichannel convenience with the ability to upskill and seek
employment available to all on an open
Digital channels would take the network.
neighbourhood market (kirana stores,
stationery shops, electronics goods) online
09
to serve hyperlocal demand, while
omnichannel availability could make it easy Making logistics efficient
to order from home after checking out a
product at a physical touchpoint (such as an Once digitalised, the entire supply chain
electronics or clothing store). could improve price visibility, including for
shippers, fleet owners, and operators across
rural and urban India. Higher delivery volumes
could bring down logistics costs with
batching and multimodal deliveries through
05
Bringing hyperlocal services multiple provider options at each stage.
within reach
Consumers could seek and find a range of
services online, from tailoring to plumbing
to transport. Whether a user needs an
10 Taking India to the world
India’s vibrant internal trade could also ramp
electrician or tickets for a multimodal up globally. The digital commerce
journey from home to the office, the infrastructure could promote cross-border
network could offer it all. trade via marketplaces, particularly helping
MSMEs become discoverable by global
consumers and businesses.
Exhibit 16
New possibilities: ONDC could empower farmers with a one-stop solution to boost
crop production and increase incomes.
Illustrative
Access to eB2B Value-added services, Access to market, e.g., Easier and cheaper credit
marketplace for best input e.g., customised crop selling directly to modern driven by increased
materials at competitive planning depending on trade retail/consumers at availability of alternative
costs (seeds, fertilisers, region weather and soil, better prices due to data sources like digital
pesticides) due to demand forecasting, increased transparency transactions leading to
digitalisation personalised farmer better underwriting
advisory such as pest
warnings provided by
specialised partners on
the network enabled by
unbundling
The Mishras
The Mishras are planning a wedding for their daughter in Patna and
want a hassle-free digital experience. They leverage a buyer app
created to handle weddings.
New possibilities: ONDC could transform the possibilities for self-help groups.
Illustrative
Use SWAYAM/Skill Easy access to Access eB2B Use ONDC Use live commerce
portal to learn financing available marketplace to partnered SAAS to explain and sell
making homemade due to real-time procure raw providers for mahua based
jams & jellies at access to consent materials from services like products directly to
scale and key driven distant places at packaging, license pan India consumer
essentials of doing comprehensive affordable prices partners, etc. to base at minimal
business, e.g., seller data by launch own brand cost
business finance financial services of mahua based
products
There is a high cost of compliance and being included in the formal economy. As a result, the
millions of individuals who run businesses of one—shopkeepers, electricians, beauticians,
daily wagers, house helps, etc.— appear in the population and identity counts of the
country, but are invisible on the larger economic map of India. The opportunity of ONDC is to
connect these individual businesses, ensuring their inclusion in India’s digital consumption
landscape, enabling formalised credit and ensuring they thrive and are not marginalised.
— Vijay Shekhar Sharma
CEO, Paytm
Buyer side apps having high organic traffic and the Seller side apps having a large base of MSMEs and the
ability to create right consumer-centric experience ability to create a much-loved experience for the seller
Multiple archetypes emerge Multiple archetypes emerge
Banks UPI payment apps1
UPI payment apps Banks
Telecom companies Restaurant service providers
Commerce marketplaces/incumbents B2B aggregators
Messaging apps Accounting/ERP software providers
Social media apps Social-media marketplace
Short-form video apps Chat-based business
Telecom and internet providers2
AI-based personalised shopping experiences
Co-working space providers2
Ticketing platforms and OTAs
Home services marketplaces
Browsers/search engines
Distributors
Smart TV/channels
Yellow pages equivalents
Voice-assisted Chat/mobile text IVR
Digital marketing agencies
Man-Machine-Interface
LSPs providing fleet solutions to enable transfer of TSPs providing SAAS solutions like grievance
goods from one place to another management tools, inventory management tools, etc. to
help build and scale business
Multiple archetypes emerge
Multiple archetypes emerge
Hyperlocal Logistics Providers
High end technology service providers such as
Express Service Providers search as service, cataloguing as a service, etc.
Delivery Aggregators Trust-building service providers
Freight operators such as badging, etc.
Warehousing service providers Business optimisation service providers
to digitise businesses such as inventory
Courier and postal services management, coding, digital marketing, etc.
Individuals3
Financial institutions including banks, NBFCs, insurance Public and private associations & organisations with
companies, investment companies, fintech players, etc. deep sectoral expertise to build and scale business
Multiple archetypes emerge Multiple archetypes emerge
Banks
Trade associations
UPI payment apps
Government organisations
NBFCs
Neo banks
Insurance companies
Investment companies
Payment desks
1 Can send voice orders to kiranas via their payment machine for them to accept (say, Paan order going to a paan-shop owner via the Paytm machine).
2 Have access to B2B company data across sectors that obtain fiber connection from them.
3 E.g., Individuals can offer to store inventory of high-value items that occupy small space or carry items when they fly from point A to B.
Exhibit 21
320-340 450-500
60-70 165-190
Broader 8-10x
8-10%
<1%
Digital penetration
in B2B, %
30-40 80-90
5-6 8-10
Digital products and services consumption breakup across key categories, $ billion
# Digital
transacting
users
Categories1 FY22, mn FY22 FY30E
Electronics and
100-120 24-26 70-72
Durables
60-70 320-340
Total
1 Definitions of Grocery, Fashion and Lifestyle, Electronics and Durables, Pharmaceuticals, Food and Beverages and Mobility are in Glossary.
2 Includes books and general merchandise.
3 Includes hotels, homestays.
4 Includes gaming, over the top, film and TV, but does not include B2B advertising spending – estimated at $11 bn in FY21 and $21 bn in FY26.
Source: Syndicated McKinsey research
Over time, as ONDC scales, it could unleash a combinatorial explosion through network of networks the
impact of which could transform the Indian economy.
B2B B2C
Fashion, Ticketing
general historical
Grocery, merchant locations
Pharma
Hyperlocal Online food
goods delivery, Hyperlocal
Agriculture Mobility
mobility Services (Transport, Buses,
Education & Rails metros etc..)
Wholesale grocery, skilling
pharma, other produces B2B
Construction Handicrafts
Infra, Commercial toys, furniture
home building,
office supplies Mobility, Hospitality,
Pan India Fashion
Commerce
Branded products to
get national reach
Embedded finance
and insurance
Financial Consumers Unorganised
Investments and Services and Self professionals
mutual funds Providers employed
White collar
Working capital professionals
finance,
Supply chain
financing, Teachers
Skilling
Schools,
Organisation of colleges
logistics sector Logistics
O
NDC could have a transformative trust, and a new concept like ONDC needs to
impact on consumers, sellers, build early traction and scale in an impatient
technology service providers digital world.
and the country. This could be
Executives of large, thriving companies
a huge achievement for India, a country
and bootstrapped start-ups, traditional
already known globally for high levels of
companies and tech-led disrupters all agree
digital adoption despite per capita incomes
that what ONDC is trying to do has never
lower than those of many other economies.
been attempted, and that it is taking on a
For this pioneering initiative to work, it will
very complex situation. Trust and scale will
be critical to establish trust and scale—a
be mutually reinforcing attributes that could
high-trust environment and widespread
define the success of this huge network.
adoption could make all the difference
between potential and reality. There can be
no substitute for a good experience to build
Exhibit 24
Search
Relay and
1 multicast search1
2
Buyer Seller
application applications
4
5 Seller
3
responses relayed
Responses Sellers
listed responses
1 3 10
Relay select
Select/ Logistics search + Order pickup
2
Confirm select/Logistics
confirm
Logistics
Buyer Seller
service
application applications
provider (NP)
Relay
fulfilment terms
6 4
11 Deliver order
1The logistics procurer decides on the amount it would like to recover from the buyer as fulfilment cost.
2Buyer App can choose to deliver order itself, in which case Buyer App will offer fulfilment terms and become the Logistics Buyer instead of
the Seller App. However, in most cases, it is the Seller App.
Source: Building Trust in the ONDC Network, an ONDC publication, 2022
Exhibit 29
Exhibit 26
Various steps across the customer journey could foster trust and improve experience.
Response time seller apps may vary; Beckn protocol enables asynchronous interaction enabling buyer
consumer experience gets hampered apps to render results as they are received from seller apps
due to non-predictability of
response time Protocol optimisation to reduce data payload between participants
Buyer apps may like to cache
results to improve speed of Guidelines to capture what attributes are synced in real-time
(e.g., price, quantity, store level serviceability), what attributes are
searches. However, caching by
buyer app runs the risk of cached (e.g., product features & images) and what is displayed at
displaying out-of-date results first render
Quality of data sent by seller apps Flagging mechanism for incorrect or poor-quality search results
not sufficient for buyer app
standards for filtering and Cataloguing-as-a-service for small sellers to help digitalise
displaying data inventory and provide accurate data to network participants
Ordering Given the distributed nature of the Transparency in terms and conditions through a digitally-executed
and network, building trust through transaction-level contract for every transaction on the network
fulfilment contracts is essential given there is
no face time between consumers Contract adherence through network mechanisms (e.g. IGM),
and sellers ensuring timely and effective resolution of issues
Seller apps will need to build more Serviceability solution – A digital tool for seller apps to embed to
innovative ways to determine decide serviceability of a location (based on road-distance & current
serviceability. The road distance traffic, time and geographic considerations)
may be significantly longer than the
radial distance between consumer
and seller, resulting in
unserviceability
Various steps across the customer journey could foster trust and improve experience.
Payment across multiple entities Use of nodal-like1 accounts to ensure funds are paid as per system-
requires safeguards against misuse generated triggers, governed by the transaction-level contract (and
of collected funds as per regulation framework in the country)
Returns Determining responsibility among Clear disclosure of terms (encoded upfront into the transaction-
network participants for level contract) regarding returns, refunds and cancellations
cancellations, returns and
replacements in an unbundled Awareness about best practices through non-binding edge-case
network guidelines, for scenarios where liability is disputed/not easily
determined, highlighting process and cost implications to minimised
disputes
Grievances Consumers and sellers require a Consumers and sellers to raise complaints with their respective
single point of contact to raise any interfacing applications (i.e., buyer and seller apps respectively)
complaints
Establishing liability and settling Issue and grievance management (IGM) system2 to handle disputes
grievances in absence of a single and complaints in a timely manner3
authority taking responsibility in an
unbundled network Network participants to log transaction audit trail4 for grievance
redressal (only transaction number to be made public) to help
determine liability
Network’s Issue and Grievance Management (IGM) system clearly lays out a tiered
redressal system.
ODR Service
Buyer App GRO Courts
Providers
Complainant
Yes
Issue
Issue resolved
raised No
Yes Yes
Issue Further
Issue No
resolved legal
resolved
No options?
Record issue, send Yes
No No
solution packet to Initiate
complainant ODR?1 Yes
03 04
Remove barriers that restrict providers Offer a viable economic model that
from going online improves on the unit economics on
platforms
Seller apps need to invest in creating awareness about
the channel and removing their barriers to onboarding Participants could find ONDC a viable and sustainable
(for example, the challenges of digitalising inventory, network on which to remain only if they are turning a
resistance to formalising businesses, and a lack of profit. A robust economic model could be critical to
technological savviness). They could create content that creating this profitability for network participants and
promotes the benefits of participation and provide making ONDC self-sufficient to support a gradual,
additional resources to support providers throughout the eventual scale-up. It could be important for ONDC to
onboarding process. They could also engage in explore multiple commercial models for its own
partnerships with third-party tech players (such as operations, such as flat fees, subscription models,
companies that offer cataloguing as a service) to facilitate and transaction commissions, to ensure that the
the onboarding of small providers. Third-party scoring network is viable as it scales and that its participants
and certification programs could offer providers rewards are self-sufficient.
or improved ratings for inventory digitisation and
fulfilment. The result would be a virtuous cycle of more
providers on the network.
T
his chapter examines the we identified the challenges associated
applications and innovations with digital adoption and the transformative
that could be enabled through role an open network could play. Exhibit 28
an open network. By analysing shows the largest B2C sectors by spend, and
the largest B2C (grocery, fashion indicates the ones focused on in this report.
and lifestyle, electronics, online food Additionally, this chapter outlines priority
delivery, pharmaceuticals, mobility and use cases for each sector, with a focus on
hospitality), B2B sectors (agriculture and the new opportunities enabled by ONDC. 52
construction materials) and cross-cutting
sectors (financial services, and logistics),
52
Unless otherwise specified, analysis and insights in this chapter are drawn from McKinsey research and conversations
with industry experts.
We examined the seven largest B2C sectors by spend to analyse the transformative
impact ONDC could have.
# Digital
B2C transacting Digital consumption market size
categories1 Category users, mn $ bn
Products
Grocery 25-30 4-5
Electronics and
100-120 24-26
Durables
Services
Hospitality3 30-35 3-4
Total 60-70
100%
1 Definitions of Grocery, Fashion and Lifestyle, Electronics and Durables, Pharmaceuticals, Food and Beverages and Mobility are in Glossary.
2 Includes books and general merchandise.
3 Includes hotels, homestays.
4 Includes gaming, over the top, film and TV, but does not include B2B advertising spending – estimated at $11 bn in FY21 and $21 bn in FY26.
1
Less affluent households spend ₹2,000 on monthly
groceries, Livemint, November 1, 2022.
2
Why this is India’s decade, Morgan Stanley,
October 2022.
53
Kantar Research.
Exhibit 30
29
India’s grocery market totalled approximately $400 billion in fiscal year 2022 and
comprises five major segments.
Personal
Grocery & home
Staples SuperFresh Fresh Food care
170 73 92 41 24
(4-5%) (5-7%) (5-7%) (9-11%) (6-8%)
Beverages:
Edible Oil/ Ghee: 46 (4-6%)
11 (13-15%)
Vegetables: 34 (4-6%)
Snack/ Personal
Instant food: care:
6 (7-9%) 17 (8-9%)
Rice: 42 (4-6%)
Dairy: 62 (6-8%)
Flours: 28 (5-7%)
Eggs: 4 (3-5%) Tea/Coffee:
5 (7-9%)
Exhibit 88
30
Penetration of e-grocery and hyperlocal is less than global peers; e-grocery expected
to grow the fastest.
E-grocery UK China
Modern trade
~13%
630-655
General trade
50-55 ~19%
130-140
USA India
~11% ~1-2%
387-400
4-5
28-30
6.0%
p.a 450-470 Quick commerce as share of e-commerce (FY22)
355-365
India China
12-14% 35-37%
FY22 FY30E
Source: Morgan Stanley; Adobe; Grand View Research; Insider Intelligence; Kantar; Syndicated McKinsey research
Daily and urgent grocery trips account for about 65 percent of general trade vs. about
25 percent for online retail.
Split of
consumer Type of channel
Shopping missions basket
General trade
Fill in Hypermarkets/
(monthly) Kirana supermarkets Online retail
“Routine ~40%
needs”
Stock up
(weekly)
~35% ~50% ~75%
“Need for
Daily/top-up ~35%
today”
~35% ~35% ~15%
~65% ~25%
Urgent
(Including “Need it
~25% ~30% ~15% ~10%
impulse now”
purchases)
It is important to acknowledge that while modern retail formats are here to stay and
grow, kirana stores are the fabric of the Indian grocery ecosystem. Even during the
challenging times of Covid, the neighborhood kiranas showed their resilience and agility
in modifying their assortment, managing the broken supply chains, and continuing to
serve the customers. ONDC holds the promise to transform India’s e-commerce sector
by creating an opportunity for millions of kiranas to participate in the digital economy.
As a company that counts millions of small stores as its partners, HUL is committed to
supporting ONDC and helping it reach its full potential. We believe that ONDC will foster
innovation, collaboration, and inclusion in India’s digital commerce ecosystem.
— Kedar Lele
Executive Director – Customer Development, Hindustan Unilever Ltd.
• CPG companies are managing a Accelerate D2C brand build to expand the reach
fast-evolving channel mix with • Ability to offer a large assortment of long-tail SKUs
Company
(Brand) a shift towards e-commerce/ beyond the kirana, including premium SKUs and
Modern trade. D2C brands
• Modern retail has a higher cost • Boost assortment and availability at a local level,
to serve versus General trade, especially in tier 3+; micro market activation
putting pressure on profitability.
• D2C access to building brands that serve niches
• Large CPG players have had few
D2C brands due to high digital
acquisition costs.
• Increased operating costs and Hyperlocal service by local kirana beyond top cities
Kiranas lower growth have caused a • The largest grocery assortment stores can now
10-15% decline in profitability be connected to consumers hyper-locally
among urban kiranas.
• Demand for the kirana could expand on the back
of hyperlocal area
Access to credit to enable a wider assortment
• Lost sales reduction by stocking additional
inventory due to working capital finance
Exhibit 33
32
New possibilities: ONDC could enable a saffron brand based in Kashmir to broadcast
its reputation score across multiple buyer apps to appeal to a wider audience.
Illustrative
Buyer
App
Mystore
Exhibit 34
33
GMV 100
• Assuming ~1% for ATL marketing (ad spend on the buyer app
Marketing 0 ~1.5 to earn clicks and impressions) and ~0.5% for BTL marketing
(e.g., leaflet distribution)
Total 800 180-200 Kirana could gain 20-25% topline growth to hit ~1,000 monthly
orders orders (from 800) driven by:
• Hyperlocal demand redirected from catchment to online kirana
(better product discovery)
• Higher impulse purchases due to access to credit, leading to
premiumisation
EBITDA (INR) 32,000 4,000-5,000 • Assuming an AOV of INR 500, a 13-15% increase in EBITDA
could be realised
1 For a store earning INR ~4 lakhs per month in a rural/semi-urban setting, figures in the chart scaled to 100, and the net margin in offline
business is 7-9%. For 800 monthly orders, the EBITDA is ~INR 32,000.
2 Unit economics is for an online order.
3 Buyer app incurs costs in marketing, employee, IT, and customer servicing, whereas the seller app incurs costs in kirana digitalisation and
management, employee, and IT. Given thin margins, buyer apps could consider grocery as a traffic-generating sector to enhance customer
engagement and seek to cover costs from ad revenue from the brands to reduce the fee to kirana further, thereby improving the kirana
economics online.
Five considerations to
shape digital commerce
in the grocery sector
01 04
Generate demand Improve cataloguing
Buyer apps must mobilise their existing user base There is a need to create a standardised catalogue
to search for their favourite hyperlocal products to to ensure that the brand design, representation, and
drive adoption of a new buyer interface. Financial detail can be easily replicated by multiple sellers.
institutions could help draw customers by offering
monthly credit.
02 05
Digitalise inventory Enhance logistics capabilities
Seller apps could take the lead in driving store Delivery partners could establish multipoint
digitalisation across both kiranas and wholesale. pick-up capabilities at lower costs, while stores
They could begin by leveraging modern retail, stand- could develop their capabilities for short-distance
alone modern trade (SAMT), and company dark deliveries.
stores or distributors with digitalised inventory to
manage product availability. Real-time conversational
order acceptance at the kirana level could be
implemented over time. A convenient and efficient
way to digitalise the small grocery stores inventory
would be a big unlock.
03
Manage change effectively
Seller apps could encourage both the kirana and
wholesale traders to adopt e-grocery by creating a
compelling case for change, that includes structured
incentives and formal credit at fair rates.
54
All numbers in the fashion landscape are taken from syndicated McKinsey research.
55
ET Retail.
56
Digital Marketing Institute Study.
The fashion and lifestyle market in India is expected to double to about $220 billion
by fiscal year 2030.
Fashion and
Lifestyle $108-112 $220-224 8-10% $11-13 $80-82 26-28%
1 Includes gardening, home improvement, smart home, furnishings and furniture; home and kitchen appliances not included.
• Many customers are discouraged • Enhanced omnichannel play could provide the
by the inability to try on items convenience of discovering the nearest offline
when shopping online, especially store to try on products before purchase.
for high-ticket items or categories • Vibrant social commerce and the P2P ecosystem
Consumers where fit is crucial but is hard to enabled by resellers and influencers could empower
assess online, e.g., suits and the customer to make a more informed purchase
trousers require personalisation.4 decision via the online channel.
• Technology features such as virtual try-on present
on the network could attract customers to shop
online.
• Customers could consider buying high-ticket items
with access to finance options (e.g., EMI, BNPL)
from credit lending institutions on the network.
Buyer app 1 Buyer app 2 Buyer app 3 Buyer app 4 Analytics as a service
Cataloguing as a service
Credit financing
Inventory management
Logistics as a service
Four considerations to
shape digital commerce in
the fashion sector
01 03
Explore more interactive and Handle returns effectively
exciting ways to sell fashion Seller apps could train sellers to properly verify and
With the power of fast internet, sellers could process returned products (for example, immediate
innovate to attract customers—for example, dry-cleaning to make the product resale ready).
through live commerce, an immersive experience Buyer apps could also use historical data across
that invites potential buyers to interact and the network to create customer profiles, assess
engage, via make-up tutorials or interviews with their likelihood of returning purchases, and possibly
style icons. In China, a leading short-video social apply tailored charges for returns.
platform converted sales through livestreaming,
with a closed loop for transactions on branded
stores.
02 04
Support sellers to digitalise Design a robust customer
inventory interface
Seller apps could take the lead to support sellers The customer experience is at the heart of online
on complex skills, such as digitalising the inventory fashion, and the buyer app defines this experience.
management process. Technology service providers Buyer apps could build a best-in-class team of
on the network could also offer services such as industry experts and technical/IT professionals to
cataloguing,1 photoshoots and tax management, offer a world-leading, competitive customer
and customer-relationship-management offerings experience. They could also collaborate with
to facilitate smooth online business. leading marketing agencies to design attractive
campaigns to convert and retain customers.
Exhibit 40
36
India’s consumer electronics market is expected to double to more than $150 billion
by fiscal year 2030.
153-159 100%
Others 3%
6%
Accessories
~12%
Modern Trade 19-21
Mobiles 41% ~50
35-37
General Trade 30-32 ~2%
57
Economic Times
Exhibit 41
37
Digital commerce in electronics in India could grow to reach parity with global peers.
India USA
32-34% 58-60%
UK China
58-60% 68-70%
Source: Forrester and syndicated McKinsey research
Exhibit 42
40
• Small sellers find it hard to compete in • The open network could also make it possible for
an aggressive price market. channel participants to be cost-efficient and increase
• Small sellers are unable to dynamically profitability.
change prices.2 ⎻ A greater omnichannel play could increase store
footfall, boosting both online and offline sales.
⎻ Synergies with the existing business for buyer and
seller apps could lead to cost savings that could be
passed on to the sellers.3
Channel
⎻ Digitalisation of the wholesale/in-store inventory
(Distributors
could boost eB2B and help retailers easily discover
and retailers)
the best-priced wholesalers.
⎻ Enhanced availability and discovery could boost
community group buying, particularly from smaller
towns, which could result in the consolidation of
orders served at a potentially lower cost with a
more efficient supply chain.
• The open network could allow small sellers to discover
the best-priced technology professionals to support
them with a pricing strategy for competitive advantage
online.
• Resellers could discover quality certification agencies
at the best price that could verify and certify their
products to enhance their credibility online (Exhibit 38).
• The inability to try out or experience • An enhanced omnichannel offering could allow
products could discourage a segment consumers to try products at the nearest store and
or long tail of consumers from online then buy online for a more informed purchase
purchases, particularly in the case of decision.
more expensive categories such as • The aggregation of the seller and product ratings
Consumer $400-plus mobile phones. across buyer apps, as facilitated by the open network,
• Concerns about damage-free delivery, could strengthen trust.
especially for high-value bulky items,
• Digitalisation of the resale and refurbished products
and after-sales services (such as
market on the network could offer the buyer additional
installation and grievance redressal)
options for price and product discovery.
pushes consumers to shop from
physical stores. • Consumers could be more willing to buy when
• Lack of access to credit could also be a supported with credit options such as EMI, BNPL, and
constraint. discounts.4
1 Brands do not need to register on multiple platforms; by joining the open network as a seller app, the brand could enjoy traffic from all buyer apps
catering to the electronics segment.
2 Sellers charge much higher prices during the initial months of product launch, when most sales happen, and then allow deep discounting.
3 Buyer and seller apps could utilise existing infrastructure (e.g., IT, office space, etc.) and human resources for the new business to realise
some cost savings.
4 Access to consumer data could allow banks and NBFCs to design new financial products and expand their portfolio (win-win for both parties).
New possibilities: ONDC could spur digitalisation of the market for refurbished
electronics goods, creating a support ecosystem for small resellers.
Illustrative
Buyer App
Searches for
refurbished Tablets
Financing Partner 2
Financing Partner 3
1 Customised offer by the buyer app based on buyer’s spend behaviour on the app.
2 Price-recommendation engines (for example, DAX Tech and Omega Engines on Screen 2 in the illustration above) on the network could help the
sellers in adequate pricing of the product.
Four considerations to
shape digital commerce
in the electronics sector
01 03
Catalyse D2C for brands Develop robust logistics
Buyer apps could benefit from effective
capabilities
marketing strategies that harness social media Sellers must ensure the safe, secure delivery of high-
to activate their existing user base. Financing value goods over long distances while minimising the
partners on the network could also ease the risk of product damage or fraud. One way to achieve
pinch for consumers with flexible payment this goal is for brands to use their existing store
options for desirable high-ticket items. infrastructure and provide inventory locally from nearby
stores. Video interactions among sellers, logistics
providers, and consumers could enhance this effort,
04
general trade segment, to tap into digital
growth momentum. As a start, the seller apps
could target well-known modern retail stores in
urban areas to build credibility and then attract Build a support ecosystem for
mom-and-pop stores to their platform. resellers and new sellers
First-time sellers and resellers need to establish trust
with consumers on product quality and price. On the
network, low-cost technology service providers could
facilitate this process by certifying the seller’s products
on pricing and quality.
O
frequencies across mealtimes, OFD could
with more nontraditional formats.
grow sixfold by 2030, achieving revenues of
up to $30 billion (Exhibit 39)58 .
58
Online Food Delivery Market in India 2022 – 2027, Netscribes, October 2022.
d
59
“A global concept with local flavour: Online food delivery in the world’s most populous nations”; Macquarie Perspectives,
https://www.macquarie.com/au/en/perspectives/a-global-concept-with-local-flavour-online-food-delivery-in-the-
worlds-most-populous-nations.html, accessed April 2023.
Exhibit 45
39
$ billion
140-157
30-32 OFD
24-25%
40-45 Offline organised
63-73 10%
5-6
18-22
FY22 FY30E
Source: Prosus Annual Report 2022; Zomato Annual Report 2022; Zomato Q4FY22 Shareholder’s Letter and Results; NRAI India Food Services Report;
Netscribes report 2022
New possibilities: ONDC can unleash the power of the informal economy by
accelerating the digitalisation of small sellers, (e.g., home chefs) and enabling low-cost
marketing (e.g., via WhatsApp) and delivery models.
Illustrative
Select seller
Buyer App Search your
and dish
favorite dish
Option B
Option A
Marwari
Bhojanalaya
User id
Password
Thali Haldiram's
Home-made
thalis by Suman
Search
Shiva
Dhaba
Suman’s house
help delivers the 5 4 3
order on his Buyer selects Order sent to Buyer selects
bicycle, at minimal payment option Suman’s mobile app delivery option
cost to the buyer
Cash on
delivery Delivered by Suman
ETA: 45 mins
Do you want Price: INR 10
to accept
Suman’s
The buyer arranges for Digital wallet the order?
home
logistics to Suman’s Accept Reject Self Pickup
food picked up
Four considerations to
shape digital commerce
in the online food delivery
se c t o r
01 03
Ensure that customer experience Democratise visibility for all
is at par with current platforms business archetypes
Restaurants will gain the benefits of ONDC only Buyer apps could optimise their search algorithms to
when a large number of customers switch to buyer display P2P and non-chain restaurants based on
apps on the network. To attract customers, customer needs (for example, meal preferences and
developers could improve their apps by offering fulfilment ratings) rather than overall ratings and
user-friendly interfaces, a smooth customer advertising spend. This would provide a fair
experience comparable to platform apps (the experience for newer business archetypes such as
existing alternative), and even specific customer- home chefs who compete with the more established
experience features such as correctly tagging restaurants.
restaurant and meal-related information and
displaying dynamic delivery times.
02 04
Scale up logistics capabilities to Support digitalisation of small
meet demand restaurants and home chefs
Logistics players need to meet the anticipated Seller apps could support small eateries and home
growth in demand with adequate scale and capacity. chefs through easy-to-use interfaces that assist with
Third-party logistics providers such as Pidge could onboarding, inventory management, and pricing.
optimise the three-sided marketplace (restaurants, Seller apps could also provide verification and
delivery personnel, and customers) within time- assistance to home chefs (and small eateries) to
constrained delivery guidelines, matching orders acquire the credentials and certifications necessary
based on food readiness, timing, and the availability to transact online.
of delivery personnel.
60
How technology is redefining retail pharmacy to improve community health; Healthworld.com, from Economic Times,
October 2021.
61
E-Pharmacies at COVID-19 Frontline: Fighting the Odds: Serving the Nation, a FICCI publication, August 2020.
62
E-Pharmacy: The Growth Story of 2020; Business World, April 2023.
63
Pharmacy’s new era—in the home, a McKinsey publication, December 2021. Statista.
Exhibit 51
41
$ billion
1-1.5
10-11%
Offline Online
CAGR %
FY22-FY30
6-7% 33-35%
Source: McKinsey and Company article: “Pharmacy’s new era—in the home”, Statista, IBEF and Expert interviews
• High customer acquisition costs • Buyer app and seller app could pass on cost savings
may inflate cost structures online, achieved via synergies from the existing business
crushing the margins of the to the pharmacist, making online a profitable and
pharmacy. attractive proposition for them. For example, the
buyer app could monetise its existing user base to
• Additional costs incurred in
lower customer acquisition costs. And the buyer and
digitising and managing inventory
seller apps could use their existing business
(>5,000 SKUs in a pharmacy),
Pharmacy functions such as Finance, Human Resources, and
handling product returns, and
infrastructure such as IT, call center, etc., to realise
performing BTL marketing could hold
cost savings.
back pharmacists seeking to move
online. • The pharmacy can also cut procurement costs by
accessing a wider distributor network to find the
• Lack of enough online demand in
best-priced distributors and wholesalers.
Tier-3/4+ regions due to customer
preference for offline purchases. • The digitalisation of the local pharmacists whom
buyers trust could boost online demand in Tier-
3/4+ regions, attracted by a wider product
assortment and better discount offers.
• Concerns around counterfeit • Sellers could gain credibility on the open network as
medicines, particularly in Tier 3/4+ reliable, genuine medicine providers by aggregating
towns, further deter consumers from seller and product ratings across buyer apps. This
shopping online. could create transparency and trust.
Customers • The lack of online access to • Increased digitalisation of pharmacies at the local
medicine delivery in Tier 2 and Tier level could allow customers to discover more
3 towns due to logistical constraints products online.
could mean some medicines might
• Hyperlocal logistics could flourish with the
not be available.
aggregation of demand across multiple use cases
• Lack of credit availability that (e.g., grocery delivery, online food delivery, etc.),
restricts ability to subscribe to high- providing convenience and quick delivery.
priced drugs (e.g., year-long
• The availability of credit from lending institutions
subscription for chronic medicines)
based on customer’s past purchase behaviour could
due to lack of credit availability.
allow customers to make a high-value purchase.
Five considerations to
shape digital commerce in
the pharma sector
01 04
Create a great customer experience Build robust logistics and
storage capabilities
To spur greater adoption of online pharma on the
network, buyer apps must offer a user-friendly interface Logistics players will need to develop cold-chain-
with robust customer acquisition strategies. Financial storage capabilities, particularly in smaller regions,
institutions could accelerate the momentum by offering to store and distribute medicines properly.
credit on high-ticket purchases (for example, a
subscription plan for chronic disease medication).
02 05
Tap systemic cost efficiencies Offer additional support services
Buyer and seller apps need action-oriented cost Buyer and seller apps need to offer customers add-
reduction strategies through automation (for customer on services such as prescription verification (for
management, return handling, prescription verification, example, Optical Character Recognition technology)
and other actions) and cultural changes (such as and doctor teleconsultation (some customers might
leadership-driven interventions to create lean teams that require online consultation to obtain a prescription).
optimise speed with quality of output). This could This could create a comprehensive, end-to-end
enhance the unit economics for each stakeholder. offering that attracts customers to online pharma.
03
Digitalise the inventory
Given the vast numbers of SKUs in the industry,
pharmacists need to develop real-time online
inventory management capabilities to fulfill orders in
an optimal way. Technology service providers (e.g.,
cataloguing agencies) on the network could support
this endeavour.
1
This chapter is entirely focused on digitally
accessible means of transport. The word “mobility”
is used to represent “digital mobility.”
64
NFHS.
Exhibit 54
42
India’s mobility market is expected to grow at 11 percent, from ~USD 4 billion in FY22
to ~USD 10 billion by FY30.
9-12
2-3 2W 4%
12%
40-45%
3-4 3W
FY22
3.5-4.5
20-25%
~0.5
0.5-1
84%
4-5 4W
2.5-3 4-5%
1 COVID-19 led to a sharp contraction in the market both from a demand and a supply front.
Exhibit 55
49
1 Synergies with existing functions for buyer and seller apps could reduce the need for high take-rates to maintain the same EBITDA as incumbents.
2 On average, the idle time faced by a driver is 25-35% and the gross asset utilisation is 65-70% with 10-20% spent in dead run
(arrival and wait times).
New possibilities: ONDC could transform India’s mobility sector and give rise to a
journey-focused ecosystem.
Illustrative
Digitalisation of Digitalisation of
small hotels small eateries
Digitally book a hotel Book meals in advance of
room in advance journey at different roadside
eateries for takeaways
Possibility of hiring an
EV cab for the trip Digitalisation of
refuelling/charging
Find highly rated stations Discovering service
affordable mobility Discover EV charging
providers on the route
services stations to better plan the (e.g., get vehicles
trip out serviced during break-
downs)
Four considerations to
shape digital commerce in
the mobility sector
01 03
Create an enhanced user Ensure support for the ecosystem
interface and user experience from transport authorities and the
Buyer apps will need to enhance the current user government
interface and experience (UI/UX) by developing a Public transport authorities could support
single app for travellers to purchase different digitalisation efforts and enable integration across
mobility services and access various public modes of transport, while making sure that the
transport networks. Widespread adoption of this system complies with existing fare structures and
app would provide an early use case for scale. regulations. Local and state governments could
partner with unions that have state backing, thus
providing support and resources to integrate the
taxi and auto industry with the network.
02 04
Invest in digitalisation Build a support system
efforts for the driver
Seller apps will need to manage the onboarding of A powerful way to bring more drivers on board
taxis and autos onto the network, including would be to develop a supportive ecosystem that
developing adequate technology and algorithms to addresses their pain points—this could include an
bring offline cabs into the digital fold. Doing so improved app, financing programs for cars, health
would require investment in optimisation insurance for families, education loans, and
technology and the onboarding of new partners. admission support for their children.
65
U.S. Hotel & Lodging Market Report 2021 – 2025, Phocuswright, March 2022.
66
China online accommodation market - Growth, trends, and forecasts (2023 - 2028), Mordor Intelligence
Exhibit 59
44
The hospitality market could nearly double by FY30 with a CAGR of about 6 percent.
0.5-1
+6%
CAGR %
FY22-FY30
2-3% 14-15% 10-11%
ONDC could make it possible for consumers to find multiple solutions on the network, such
as accessing all their vacation needs in one place (Exhibit 45).
Illustrative
Availability of
Order food online
financial services
from regional
Like BNPL to fund
eateries
the vacation
ONDC
Three considerations to
shape digital commerce
in the hospitality sector
01 03
Improve UI/UX and grievance Establish comprehensive
management onboarding rules and accurately
The disaggregated nature of the open network represent inventory
makes grievance management and dispute
Seller apps will need to define a comprehensive set
resolution more complex. Buyer apps will need a
of onboarding rules for hosts while addressing
user interface and grievance management process
potential safety concerns around the home-sharing
at par with those of current OTA leaders to execute
model. To reduce listing discrepancies and build
this use case. Third-party service providers could
credibility among consumers, seller apps will need
also build solutions using augmented and virtual
to accurately represent hotel rooms and homestays
reality to allow potential guests to preview
online.
properties in detail before booking, providing an
enhanced level of transparency and confidence in
their decision making.
02
Ensure fair visibility for all hotels
and homestays
Buyer apps can create ranking algorithms for
impartial visibility to all accommodation options
based on customer preferences. Network
participants can have transparency on how
rankings work.
1
Crisil Report; EMIS reports on construction sector.
2
Ibid.
The residential construction value chain ONDC could also enable a large number
comprises four key stakeholder groups— of MSME manufacturers in this space to
customers, architects, contractors, and connect directly with buyers (Exhibit 46).
manufacturers—each of whom faces a Buyer apps could access key building
unique set of barriers to widespread digital materials and products across multiple
adoption. brands through various seller apps. SKUs
across a wide range of product categories
Customers struggle to find reliable could be catalogued in a standardised
builders and contractors due to their lack way, and contractors could achieve lower
of trust in the quality and price of materials sourcing costs through demand aggregation
procured and the quality of work delivered that enables multiple product purchases
by contractors. They must manage a from a single touchpoint.
multitude of stakeholders in the process and
experience frequent project delays that lead 2. Financing: Easy access to credit and
to higher total costs. loans
Contractors could qualify for financing
Architects face challenges in growing their
at better-than-industry rates through
businesses due to limited discoverability
partnerships with non-banking financial
(mostly word of mouth) and difficulty in
companies (NBFCs) and fintech players,
establishing trust and credibility to potential
which would benefit from a large, untapped
customers.
customer base. Through ONDC, contractors
Contractors serve as the linchpin in the could take advantage of innovative
current ecosystem. However, their margins underwriting (for example, through
are highly sensitive to procurement prices milestone-based funding and improved
(saving about 2 percent leads to an increase transaction visibility). In addition, they can
in margins of 18 to 20 percent), and they access companies that offer bill discounting,
frequently struggle to secure formal loans purchase order financing, and asset
and credit, which can increase financing financing, which could fill working capital
costs. Like architects, the growth of gaps and in turn could help them scale their
their business is often impeded by low businesses.
discoverability (word of mouth) and the
3. Logistics: Unbundling to improve
difficulty of gaining trust from prospective
distribution
customers. In addition, they have limited
ability to engage with and cross-sell to Stakeholders across the value chain could
customers who have needs across product take advantage of unbundled logistics on
categories (such as tiles and sanitary the network to improve the distribution and
ware). Finally, a lack of coordination among last-mile delivery for SMEs. For example,
different stakeholders frequently leads to they could enhance supply chain efficiency
project delays. by using logistics players to aggregate and
service demand from multiple sources.
Similarly, contractors could achieve better
How ONDC can unlock value for
inventory management through expanded
the sector logistics networks to enable the shift from
Four use cases illustrate how ONDC can bulk to frequent purchasing. Such services
address many existing pain points to drive could enable contractors to access a
digital adoption and boost the construction wider pool of customers and expand their
materials industry. operations beyond local and regional plays.
Amongst various B2B archetypes, transactions involving MSMEs stand to benefit the
most from digitalisation.
MSME
MSME
Large
enterprise
Government
Large
enterprise MSME
Large
enterprise
Government
1 Facilities for working capital financing, such as bill discounting and purchase order financing.
By overcoming inefficiencies, ONDC could reduce the cost to serve for small and
medium-size enterprises by 5 to 10 percent.
Cost to serve
100%
(Baseline)1
Financing 0.5% Lower cost of capital due to lower credit cost from
formal sources
Cost to serve
90-95%
(with ONDC)
1 Indexed to 100%.
Challenges and considerations for items with customised pricing and product
successful adoption specifications, which can result in quality
assurance issues when products are
ONDC and network participants will need
procured through digital channels.
to overcome specific challenges to drive
adoption of high-priority use cases and ONDC and network participants can
unlock the full potential of ONDC in India’s alleviate these concerns in several ways.
construction materials industry. Buyer apps can redirect their people and
resources from offline to online customer
1. Sourcing: Discovery for online
acquisition, for example, by providing
procurement
online purchase incentives. Seller apps
Today, some 60 to 70 percent of business can help MSMEs digitise their inventory by
on potential seller apps is conducted offering cataloguing services. Meanwhile,
through offline channels. More than technology service providers on the
90 percent of MSMEs lack the robust IT network can improve quality assurance—for
systems and productivity tools they need example, by implementing a pan-network
for digital commerce. Furthermore, many scoring and badging system.
B2B buyers are looking for high-ticket
1
India’s century: Achieving sustainable, inclusive growth,
FICCI and McKinsey, December 2022.
2
Agricultural statistics at a glance 2021, Government of
India, May 17, 2022.
Without access to formal credit, many of When it comes to selling their products,
India’s farmers rely on informal loans from farmers struggle with low price visibility,
local money lenders or retailers, with interest low margins, and low bargaining power in
rates that can be up to ten percentage hyperlocal markets. They often lack accurate
points higher than those associated with and up-to-date information on prices in
formal credit. 67 The lack of transparency and other markets. Most produce is sold through
effective collection mechanisms makes it multiple parties and intermediaries, which
difficult for banks to expand formal credit means farmers may earn significantly less
through digital channels. Long gestation than the retail price of their crops. As a
periods exacerbate the cost of credit, as result of geographic restrictions, farmers
farmers must wait until after harvest to pay often have no choice but to sell at their local
back the loans that they took out before mandi, which in turn further diminishes their
planting. Furthermore, many Indian farmers bargaining power. Moreover, the lack of
do not have any type of crop insurance, an effective quality assurance mechanism
making them particularly vulnerable to bad and complex legal frameworks that vary
harvests and unforeseen weather events. across states and districts make it difficult to
digitalise the transport and sale of goods.
Planning, planting, and in-season care
Farmers often have limited access to the
67
India’s century: Achieving sustainable, inclusive growth, a joint report from the Federation of Indian Chambers of
Commerce & Industry (FICCI) and McKinsey, December 2022.
68
Rituraj Tiwari, “Focus on farm mechanization to cope up with increasing food demand,”
Economic Times, January 31, 2020.
69
Achieving sustainable, inclusive growth, December 2022.
A highly fragmented value chain poses challenges, with minimal digital penetration.
Value chains and margins vary between different inputs and outputs
Input value
chain
Manufacturer Distributor Retailer Farmer
Aggregator/ Modern
trader trade retail
Output value
chain – Crops
Aggregator/
HORECA
trader
Processors
While existing platforms have made progress — Price discovery. The open market could
toward alleviating these pain points, they allow farmers to gain price visibility
have not yet built the scale to provide an across multiple seller apps and choose
end-to-end digital offering for farmers the most affordable inputs. Similarly,
and customers. To enable value creation, consumers and retailers could gain price
interventions must address farmers’ transparency among sellers without
pain points and allow them to improve solely relying on mandi pricing.
productivity. This would create economic
— Logistics efficiencies. ONDC could
surplus that can then be distributed across
create efficiencies and prevent waste by
the value chain. By cutting across current
facilitating the discovery of cold-chain
platform archetypes, ONDC has the
infrastructure and on-demand logistics
potential to enable solutions to many of
providers. Sellers could extend their
these challenges at scale and transform the
geographic reach by accessing a wider
value chain across the entire industry.
range of distribution partners and options
Four use cases illustrate how ONDC can for hyperlocal delivery in underserved
accelerate digital adoption and unlock value markets.
across India’s agricultural sector:
— Traceability. The open network could
1. Accelerate direct-to-farmer commerce improve product traceability by enabling
ONDC could enable direct linkages between end-to-end tracking of produce from
farmers and other stakeholders across farms in the case of exports.
both agricultural input and output value 3. Accelerate better access to formal credit
chains. On the input side, farmers could
ONDC could help bridge the formal credit
purchase directly from manufacturers—
gap by improving farmers’ access to credit,
potentially resulting in higher margins for
innovating new financing structures, and
manufacturers and enabling farmers to make
digitalising credit functions. Through the
more informed product choices, which could
open network, farmers could discover
lead to improved yields and better on-field
multiple formal credit sources from both
outcomes. On the output side, farmers could
banks and NBFCs with fewer geographic
sell directly to large businesses, retailers,
constraints, instead of relying on retailers for
and individual consumers—which would
informal credit. ONDC could spur innovative
minimise wastage, reduce touchpoints in
financing structures—including operations-
the value chain, and improve farmer profits.
based funding, credit issued against
ONDC could also bring together multiple
transaction history on the network, and
platforms that operate in niche areas,
credit based on nonconventional markers
widening the farmer base and the potential
(such as PM Kisan credit, subsidy flows,
market for sellers. By digitalising the
and crop insurance debit). Integrations with
certification and licensing process, ONDC
existing solutions (such as Agristack) can
could make it easier for retailers to secure
also leverage farmer data to inform credit
authorisation and tap into the open network.
decisioning. Moreover, ONDC could help
2. Improve transparency, traceability, and digitalise and simplify the credit journey
efficiency for customers by eliminating the need
By increasing the transparency and reach for bank branch visits and streamlining
of the market, ONDC could enable better documentation requirements.
price discovery, more efficient logistics, and
4. Improve on-farm efficiency Potential impact on a typical
Bringing farmers into the digital commerce farmer
marketplace could increase their access As a result of the four use cases described
to better advisory and forecasting tools. above, ONDC could increase a farmer’s net
With more access to information and more income by 25 to 35 percent (see Exhibit 49
opportunities to connect with market for an illustrative example). This additional
players (such as agtech start-ups), farmers revenue is derived from four distinct levers—
could access personalised crop advice cost reductions, improved productivity, price
and incorporate the latest tools and realisation, and other services.
techniques to increase yields, reduce input
costs, boost productivity, and improve
sustainability. Through the ONDC network,
Challenges and considerations for
farmers could also gain access to better successful adoption
demand forecasting, weather forecasting, ONDC and network participants will
and pest attack forecasting. With these, need to address user behaviour and
farmers would be able to optimise their input ecosystem challenges to drive adoption and
requirements; improve the timing of their transform India’s agricultural sector. The
irrigation, fertiliser, and pesticide purchases; critical challenges and considerations to
and minimise the loss of crops due to pest successfully implement each of the four use
attacks. cases are as follows:
Exhibit 69
49
Current value
100%
(Baseline)
Total ~125-135%
Source: Farmer survey, deep structured farmer interviews, interviews with agronomists, traders, retailers, off-takers, press search
70
https://www.ceicdata.com/en/indicator/india/total-deposits; https://www.investindia.gov.in/sector/bfsi-banking; Global
Findex Database; ACI Worldwide.
71
Global Findex Database.
Exhibit 71
50
India is among the top countries globally on key aspects of financial services
In last 10 years,
Total deposits have grown ~1.8x from $1.2 tn to $2.2 tn (9% CAGR)
Loans have grown ~2x from $0.8 tn to $1.6 tn (10% CAGR)
…supported by
Account penetration in India has doubled in the past ten years, from 35 percent in
2011 to about 80 percent in 2021.
90
80
70
60
50
40
30
20
10
0
2011 2014 2017 2021
72
Empowering Credit Inclusion 2022 by TransUnion.
73
Ibid.
74
IRDAI.
75
NSDL, CDL.
India has a significant lending gap across the retail and MSME segments.
Out of total 400-440 mn eligible people, only 120 mn are covered by formal lenders, i.e.,
approximately 25-30% of base is covered
1,320-1,400 460-470
(100%) (34%)
Active loans, mn
Wealth threshold
55-65 Credit card 71
90-100
(4%) 315-325
(7%)
(23%) Personal loan 58
400-440
(30-32%) Consumer durable 41
2-wheeler 22
Total <20 years >65 years Urban Rural Eligible Business Loan 12
population old old population population customer
in India (low (low base
income) income) Total base 120-140
42%
30%
14%
10%
300
Informal credit
~500
~200
Source: National Commission July 2020, UN Population Prospects, Periodic Labor Force Survey FY21, CEIC,RBI
Exhibit 75
53
India has seen several inflection points in the last few years..
mn bn
1,400 >1.3 bn Aadhaar cards have 130
been issued, covering more than
90% of the population Aadhar enrollments
1,300 120
Jan-Dhan 50
700 UPI transactions up 7x
Yojana over past three years
e-KYC 40
600
through
Aadhaar 30
500 UPI
UPI launch, Bharat 20
QR demonetisation autopay
400
10
300
FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22
ONDC can unlock key areas of growth in financial services with implementation of targeted use cases.
Exhibit 76
Illustrative
>1 bn consumers
Consumer
>500 lenders
for underwriting
>50 insurers
Value added services like
ACCOUNT AGGREGATOR
advisory, taxation, and GST filing
e.g., Policy Bazaar,
e.g., Government e.g., Unilever-Shikhar, Groww, ICICI Prudential
e-marketplace, Indiamart Berger- Paints Suvidha e.g., Dukaan, Khatabook and Open
Asset Management
Credit bureau
e.g.,Equifax, Experian,
TransUnion, CRIF Integrated payment gateways
bureau
4 Credit
e.g., BBPS, UPI
Self employed
Supermarket
Kiranas and other service
retailers
providers
>90 mn sellers
1 Buyer-side apps interact with seller apps via gateways.
Exhibit 78
55
New possibilities: ONDC can unlock credit access for small businesses.
Illustrative
The integration of ONDC with multiple MSMEs could get unsecured business
platforms—such as Government loans to support their expansion plans (for
e-Marketplace (GeM), Sahay, Trade example, for a restaurant owner to upgrade
Receivables Discount System (TreDS), operations) as well as working-capital lines.
and Receivables Exchange of India Ltd Suppliers could benefit from embedded
(RXIL)—could enable the relevant data insurance products to safeguard their
flow to process supply chain and invoicing goods during shipping and export. Financial
finance loans (Exhibit 56). Underlying this institutions might also provide MSMEs with
is a complex, enabling layer from ONDC other value-added services such as tax
that integrates data from the Income Tax filing, advisory services, personal financing,
Department, GST, Credit Bureau, and and legal counsel—on their own or through
Supplier Banking Data from AA, along with ONDC network partners.
ONDC’s supplier scores.
Bank 2
DONE
1 2 3 6
Seller signs up on the Seller app nudges Seller receives offers from Loan is disbursed
seller app and declares seller to explore multiple credit providers immediately and
various identity and invoice financing and selects offer no KYC is needed
license-based, verifiable Customised offer
tokens in the process based on PO details
(e.g., GST, Permanent 4 5
shared and consent-
Account Number, based data across Seller sets up Seller accepts
Udyog Aadhaar) below- mentioned data repayment method loan terms and
sources pulled from AA conditions
Tax data GST data Credit bureau Supplier data Supplier score Supplier banking
Income Tax Filings, historical Financials and Payment and enabled by ONDC data enabled by
Return statements, etc. transaction transaction Overall supplier Sahamati
data data of score based on Accounts data,
suppliers customer and outstanding
fulfillment ratings loans, etc.
New possibilities: Buyer apps can provide an array of financial services, including
travel protection and financing solutions, to enhance the customer experience.
Illustrative
Consumer financing
Bank 1
Bank
10%
Bank 2
10%
Bank 3
10%
Bank 4
10%
Embedded insurance
While booking flight on the buyer app, customers can
also get travel insurance from multiple providers,
depending on profile
New possibilities : NBFCs and fintechs with a focus on specific use cases can expand
offerings in financial services to drive higher engagement and monetisation.
Illustrative
Six considerations
for digital commerce
in t h e f ina ncia l
services sector
01
Stitch together digital public goods such as AA
and UPI with ONDC for a seamless commerce,
payment, and lending experience
Issuing credit to those who are deserving but New seller apps could emerge to cater to previously
underserved could become smoother as ONDC unserved MSMEs—unlocking their access to secure
scales up. Its buyer apps could bring more than a funds at lower rates than they would get from
billion potential consumers to the marketplace, unorganised providers. Financial institutions could
while its seller apps could bring nearly 100 million tailor offerings to MSMEs—for example, with granular,
small businesses and more than 500 lenders. The lower-ticket products that fit with their repayment
integration of protocols for a digital lending cycles and working-capital needs. Various
gateway and AAs (to provide data to lenders for participants in the ecosystem could also enable the
underwriting) with ONDC could mean a new unlock seamless disbursal of credit. Personal financial
for MSME credit (Exhibit 59). services for MSMEs could ensure financial fitness,
As an illustration, a supplier app loan service embed insurance across the supply chain (for
provider (LSP) signals a nudge to a credit-seeking example, covering products that could be damaged in
MSME and brings it on board. With the MSME’s transit), and ensure that businesses have the goods
consent, the lender accesses an account to support day-to-day functioning.
aggregator to receive consolidated financial
information. Armed with this information, the lender
offers a loan, in parallel with offerings from other
lenders. The supplier then selects the offer,
completes the KYC, and provides disbursal account
details, setting up repayment through E-NACH or E-
Mandate. After the agreement is signed, the MSME
allows monitoring, and the loan is disbursed.
In this way, both the borrower and lender have
made an informed choice to borrow or to lend,
creating inclusion and empowerment in a free-
flowing, transformed lending landscape for both
consumers and MSMEs.
Stitching together of digital public goods e.g., AA, UPI with ONDC could scale up
credit access for underserved MSMEs.
1 bn+ Buyer side app 1 Buyer side app 2 Buyer side app N
consumers
ONDC
mn
MSMEs
1 4
Account aggregator
02 05
Improve underwriting through Drive supportive product
availability of alternative data policies and mindset changes
sources enabled by ONDC across financial-services and
Access to open data would make it possible to assign ecosystem partners
scores to financial services. The financer could
access MSME data across sources for better The enactment of supportive credit policies to
enable machine-led underwriting could eliminate
underwriting, whether for invoice financing, a
the need for certain manual and cumbersome
working-capital loan, or capital financing
processes, such as validating customer profiles.
(Exhibit 60).
The adoption of ONDC would represent a huge
shift from traditional ways of working. Therefore,
04
guidelines for full digital lending—that is,
existing KYC norms and limits—need
reevaluation to enable full STP digital
Engage and enable ecosystem lending journey especially for MSME
segment.
players (TSPs, fintechs) to
accelerate the digitalisation of
financial-services journeys
Technology service providers and fintechs could
facilitate the digitalisation of financial-services
journeys in ONDC for a seamless customer
experience. This could include providing services
such as virtual KYC, fraud checks, NACH (National
Automated Clearing House) mandates, and more.
Availability of alternative data sources enabled by ONDC to help drive data and cash
flow-based underwriting.
Taxes
Balance
Reputation data sheet
Financial
Transaction and ITR PnL reports &
platform data trxns
Cashflow
History of
Verifiable identity Credit tax filings
and tokens (e.g., bureau
FSSAI)
Enquire Bill payment
delinque history
Data of Merchant Utilities
supplier ncies,
distribution payment
apps credit Spending
(online/offline) GST history
enabled already pattern
by ONDC available
etc. Summary
financials
submitted Balance (Credit
for tax
and debit) Banking
calculation
Enquiries made details
enabled by
Bank A/c AA
statements
Key benefits
Real time access data for No requirement of collateral due Increased MSME
better underwriting and to comprehensive data and credit penetration, especially
monitoring cash flow backed underwriting among micro enterprises with
limited bureau history
1
Indian Foundation of Transport Research and Training
(IFTRT), https://timesofindia.indiatimes.com/business/
india-business/indias-logistic-costs-higher-than-bric-
nations/articleshow/14151707.cms
Exhibit 84
61
Warehousing,
VAS 35-40
Railways 25-30
Ports 4-5
Water-ways
0.5-1
Freight
2-3
forwarding
Total 190-200
Demand aggregation of hyperlocal deliveries could help cut last-mile logistics costs.
Pharmacy Kirana shop Apparel shop Pharmacy Kirana shop Apparel shop
New possibilities: ONDC can enable embedded insurance and credit for logistics
service buyers, protecting them from mishaps.
Illustrative
Truck 2
Seller app
Insurance Credit 4
3 5
Truck 3
1 2
ONDC
7 6
Buyer Buyer app
Flow of goods Information flow towards the Information flow from the
network, through buyer app network, towards end-nodes
Railways
(Another mode)
OR
Batching
of orders
4 A middle mile provider is assigned; the same truck can also be assigned to multiple other first mile trucks,
leading to the possibility of batching
5 The middle mile provider searches for a suitable last mile logistics provider
Four considerations to
shape digital commerce
i n t h e lo g is t ic s s e c t o r
01 03
Ensure a robust supply network Upskill delivery personnel to
handle different goods
As ONDC facilitates greater digital adoption, the
demand for first- and last-mile delivery services Even with ONDC allowing demand aggregation and
could increase significantly. To be able to scale better use of delivery personnel, logistics players
their operations and truly benefit from this growth, must take responsibility for ensuring their delivery
logistics players will need to build a robust supply personnel are properly trained to handle a variety of
network and create an ecosystem that is equipped goods and services seamlessly. This means
to manage this surge in demand. implementing effective training methodologies and
processes to ensure that all delivery personnel can
meet the standards required to maintain quality and
reliability across the logistics value chain.
02 04
Create an unbiased reputation Set up technology infrastructure
economy to implement digitised proof of
Although ONDC can enhance price visibility and
delivery
transparency in the market, buyers need to still be While digitalised proof of delivery (PoD) has
able to shortlist logistics providers based on
the potential to significantly shorten payment
performance and scale to make informed choices.
cycles by reducing paperwork, its effective
ONDC could establish a robust reputation economy
implementation requires appropriate tech
by partnering with third-party providers to
infrastructure investment by shippers and logistics
showcase unbiased and accurate ratings of
players. Furthermore, seamless transactions
logistics players. depend on widespread acceptance of digital PoDs
among truck drivers, fleet owners, and shippers
without disputes or delays.
Each sector has a set of considerations to drive digital commerce, with the onus resting on specific
stakeholders. However, the opportunity does not end with them. The unbundling of discrete services on the
open network could create infinite opportunities for incumbent companies and new entrants to carve out
niches for themselves.
ONDC could provide additional opportunities for both incumbents and new
entrants to participate.
A
lthough ONDC is being tested As the network grows, it could influence
in India, the problems it seeks digital commerce on a global scale in two
to solve are global in nature. primary ways: by promoting cross-border
Even in developed countries, trade and by accelerating and democratising
internet access alone does not necessarily digital commerce across markets. For ONDC
translate to the widespread adoption of to transform digital commerce beyond the
digital commerce across all sectors. Despite borders of India, four key enablers must be
the rise in internet connectivity around in place—seamless cross-border payment
the world, cross-border trade and digital settlements, stringent grievance redressal
commerce remain out of reach for many systems, a globalised taxonomy, and a global
companies, especially small sellers, and for coalition to support digital commerce.
billions of consumers.
76
Market details for developing and developed countries are taken from the official website of International Trade
Administration, and from Statista
Exhibit 66
2
1Person to Merchant.
2NIPL (wholly owned subsidiary of NPCI) is taking the lead in exporting indigenously developed offerings and technological acumen like UPI to
foreign markets.
Source: NPCI: https://www.npci.org.in/npci-in-news/press-releases
01 02
Support seamless cross-border Create robust grievance
payment settlement and redressal frameworks
information flows Consumer protection laws vary across jurisdictions,
Any scenario of cross-border payment will require and protections in one country may not align with
very clear information on country-level regulations those of the country where the business is
and rules for settlement. registered. A robust redressal framework could
ensure fast, satisfactory resolution of grievances,
inspiring trust among global users.
03 04
Build a globalised taxonomy Develop global co-operation
Buyers anywhere in the world seeking a specific for digital commerce
product (for example, a consumer in Thailand who ONDC could partner with international buyers and
wants a Kanjivaram saree) should be able to find it seller apps to build an ecosystem that would give
easily online. In addition, a taxonomy could ensure consumers access to local digital commerce
buyer and seller apps know about country-specific experiences.
guidelines for the sale of products. For example, the
United States prohibits the import of many wildlife-
based products.1 Designing and implementing a
standardised taxonomy across countries could help
ensure a seamless experience for consumers.
1 “Bringing animal products into the United States,” Centers for Disease Control and Prevention, updated September 14, 2022.
O
NDC holds the potential to create First, they could determine which use cases
open, inclusive, and competitive have potential to scale fast and which would
marketplaces in the virtual world. take longer to yield results. And second,
It will be important for companies they could evaluate where they are best
to carefully evaluate the options available positioned to play—through the lens of the
to them as they consider entering this market opportunity, their own capabilities,
space. This could help them to identify plays and the consequent feasibility of investing in
that maximise benefits from the immense specific use cases. This could support them
opportunities unlocked by the open network. in making the most relevant investments
to achieve their company’s strategic
As company leaders look to make the most
objectives.
of the opportunities ONDC offers, they could
explore the possibilities across two themes.
Exhibit 67
1
Use cases in the short term could prove the most beneficial for driving early
adoption and scale.
Not exhaustive
Online food
Grocery Fashion Electronics Mobility
delivery
CASA – Current account savings FD – Fixed deposit LCL – Less than Container Load
account
FICCI – Federation of Indian LLM – Large language model
ChatGPT – Chat generative pre- Chambers of Commerce & Industry
LPA – Lakh per annum
trained transformer
FPO – Farmer producer
LPPT – Logistics planning and
CII – Confederation of Indian organisation
performance monitoring tool
Industry
FS – Financial services
LSP – Logistics service provider or
COGS – Cost of goods sold
FSSAI – Food Safety and lending service provider
CoWIN – COVID Vaccine Standards Authority of India
LTL – Less than truck load
Intelligence Network
FTL – Full truck load
Sector
Exhibit 2 Definition
Grocery Staples (rice, flours, etc.), super fresh (dairy, bakery, etc.), fresh (fruits,
vegetables, non-vegetarian), grocery food (beverages, snacks, etc.)
Fashion and lifestyle Apparel, footwear, accessories, and home (furniture, gardening, décor, etc.)
Electronics and durables Mobiles, computers, televisions, home appliances (home audio, etc.), large
appliances (laundry, refrigeration, air treatment), kitchen appliances
(dishwasher, microwave, etc.), small appliances (personal care, fans, irons,
heating, etc.) and others
Food and beverages Online food delivery (OFD), organised offline food market
Hospitality OTAs, hotel websites, homestays, offline (walk-in and travel agents), and
corporate; focus on OTAs
Agriculture Crop, livestock, fruits and vegetables, forestry and logging, fishing and
aquaculture, condiments and spices, drugs and others
Construction materials Utilities and power, infrastructure, industrial, institutional, commercial, and
residential; focus on residential
Financial services Bank accounts, digital payments, insurance, and credit; focus on insurance
and credit