India’s e-commerce is dominated by a handful of giant platforms that control the storefront, the logistics, and the customer relationship, leaving small sellers with little bargaining power. The Open Network for Digital Commerce, ONDC, is the government’s ambitious attempt to change the rules of the game: instead of one more platform, it is an open protocol, like UPI for commerce, on which any buyer app and any seller app can interoperate. Launched in 2022 and scaled through 2023-24, it has processed crores of orders across food delivery, groceries, mobility, and more. This is how ONDC works and whether it can dent the giants.

The problem ONDC is solving

Platform monopolies in e-commerce follow a familiar pattern: the marketplace sets the rules, charges commissions that can exceed 25-30 per cent, controls search rankings and customer data, and can launch competing private labels using sellers’ own sales data. Small sellers, from neighbourhood kirana stores to artisan clusters, face a choice between accepting these terms or invisibility. Regulators worldwide have struggled with this; India’s answer is characteristically infrastructural rather than regulatory. Where the US and EU pursue antitrust cases, India builds a public protocol: unbundle the marketplace into interoperable layers, buyer apps, seller apps, logistics providers, and let competition happen at each layer. The intellectual lineage is UPI, which broke the card networks’ and wallets’ grip on digital payments by making money transfer interoperable, and ONDC explicitly aims to be UPI for e-commerce.

How the open network works

ONDC is not an app you download; it is a set of open specifications maintained by a non-profit company backed by the government and financial institutions. In the ONDC world, a customer might search for groceries on a buyer app, Paytm, PhonePe, or a dedicated app, see listings from sellers onboarded through various seller apps, and have the order fulfilled by an independent logistics provider, all interoperating through the protocol. The network handles discovery, ordering, fulfilment, and post-order grievances through standardised APIs. Key registries list participants; the protocol defines how catalogues, pricing, and logistics are exchanged. Anyone can build a buyer or seller app, and sellers keep their customer relationships and data rather than surrendering them to a marketplace. The government’s role is limited to stewarding the protocol and seeding adoption through incentives and onboarding drives.

Where it has gained traction

ONDC’s growth has been fastest in categories with standardised fulfilment: food delivery, where it undercut the duopoly’s commissions and sparked price wars that benefited consumers; grocery, with kirana stores and chains onboarding; and mobility, with auto and taxi bookings through the network in several cities. The network has reported monthly order volumes in the crores, with food and grocery dominating. Government backing helped: public procurement pilots, onboarding drives for farmer producer organisations, weaver clusters, and small sellers, and integration with state e-commerce initiatives. The discounts that fuelled early growth were partly subsidised by network incentives, raising questions about sustainability, but the underlying proposition, lower commissions for sellers, interoperability for buyers, attracted genuine participation beyond the subsidy phase.

The challenges and the sceptics

Sceptics raise serious questions. Network effects are brutal: the giants’ advantages in selection, delivery reliability, and customer trust took a decade and billions to build, and a protocol does not automatically replicate them. Quality control and grievance redressal are harder in a decentralised network: when an ONDC food order goes wrong, the customer navigates a maze of buyer app, seller, and logistics provider, unlike the single throat to choke on a closed platform. Seller onboarding at scale requires digitisation support that small merchants often lack. And the giants are not standing still: they have their own logistics moats, loyalty programmes, and the ability to match prices. Some analysts argue ONDC’s real impact may be narrower than its ambition: disciplining commissions in specific categories and giving small sellers an additional channel, rather than dethroning the platforms. The network’s defenders reply that UPI faced identical scepticism and now processes billions of transactions monthly.

What success would look like

ONDC does not need to kill the giants to succeed; it needs to change the market’s structure. Success looks like: millions of small sellers online who were never on any platform; commissions compressed by competition among seller apps and logistics providers; buyer apps competing on experience rather than hoarding sellers; and categories like agriculture, handicrafts, and local services finding digital channels. The early evidence, crores of orders, growing seller diversity, competitive pressure on food delivery commissions, suggests the model has legs. Whether it scales to the full ambition, a democratic alternative to platform capitalism, depends on execution over the next few years: dispute resolution that works, logistics depth beyond metros, and sustained seller success stories. UPI took years to hit escape velocity; ONDC deserves at least as much patience, and it is being watched worldwide as a test of whether open protocols can tame platform power.

FAQs

Is ONDC an app? No, it is an open protocol and network; you access it through buyer apps like Paytm, PhonePe, or dedicated ONDC apps.

How is it different from Amazon or Flipkart? Those are closed platforms controlling the whole experience; ONDC unbundles buyer apps, seller apps, and logistics so they interoperate.

Who runs ONDC? Open Network for Digital Commerce, a non-profit company with government and institutional backing that maintains the protocol.

ONDC is India’s characteristically ambitious bet: that the answer to platform monopolies is not just regulation but better infrastructure. If UPI is any guide, betting against Indian public protocols is unwise.

Compiled by the Khabar 24h Editorial Desk from publicly available sources.