ONDC will truly reflect physical market in a couple of years: CEO T Koshy

T Koshy, the chief executive of ONDC, on how the platform will democratise and transform ecommerce, why the network won't scale on incentives alone, and the biggest challenge—getting the industry to adopt this new model

By Varsha Meghani Forbes India Staff

Published: May 23, 2023 03:12:33 PM IST

Updated: Jun 16, 2023 05:54:14 PM IST

Full Bio

T Koshy, MD & CEO, ONDC
Image: Madhu Kapparath T Koshy, MD & CEO, ONDC Image: Madhu Kapparath

Q. Over the last fortnight, social media has been abuzz comparing the prices of food ordered on Swiggy and Zomato versus those routed through ONDC. In many cases ONDC was cheaper by 50 percent. Can the momentum on ONDC continue without such incentives?

The incentives announced by ONDC, and some of our participants and sellers are triggers to jumpstart the network. We don’t believe that the network will scale based on such incentives. But the important point to note is that, unlike the platform-centric model [like Amazon or Flipkart], ONDC’s network-centric model will provide freedom to each of the ecosystem partners to design and roll out their own incentives and offers. So, for example, a kirana store owner can say, I can deliver the items ordered because it is just next door. That way, he is able to optimise, lower his costs, drive efficiencies, and as a result, offer better discounts to his customers. It’s in his hands to decide that.

The advantage of this approach is that once you have a captive set of users, you have significant control. We realised the need to prime the pump, as they call it. Will we continue the incentives ad infinitum… the answer is no, because that is not a sustainable proposition in the long-term. We will continuously assess the situation and see if any tweaking is needed.

The idea is to trigger trials for a short period of time and then it’ll pick up its own momentum. For example, at the end of March, we clocked 1,000 orders a day. At the end of April, it was 10,000. Last week it went up to 25,000 orders a day and then came down. But it won’t go back to 1,000. [ONDC presently gets roughly 15,000 orders a day].

Q. But consumers tend to be fickle…

Think of it like a physical market where different brands, sellers and merchants compete together with equal opportunity and succeed based on the smartness of their offer. Eventually, in a couple of years, ONDC will truly reflect the physical market. What I mean is that everyone will have their own catalogue of products visible in this open network. Different smart buying applications will come which will help their customers buy relevant products. Let’s say SBI wants to offer ecommerce to their clients such as booking airplane tickets, buying financial products etc. They know their clients the best—so as a buyer side application on ONDC, they will make every effort to help their clients buy the right product, without promoting any product. If a client gets that kind of service, he won’t want to shop anywhere else. This kind of innovation and specialisation by different entities on the platform will democratise and transform ecommerce as we know it.

Also read: ONDC is India's next big bet after UPI

Q. But can ONDC truly democratise ecommerce? UPI, for example, set out with the same aim and while it has transformed digital payments in the country, it has also led to the two tech giants—Google and Walmart-owned PhonePe—dominating transaction market share.

One of the biggest challenges of our times is that of power being concentrated in a few hands. Big tech dominates ecommerce globally and in India, Amazon and Walmart-owned Flipkart dominate 63 percent of the market. Governments in the US and Europe are trying to loosen the tech giants' grip through laws and regulations. India has chosen a tech-based solution supported by markets, letting lose innovation and enabling regulation.

Google and PhonePe do have the predominant share, but there is also Paytm. And more will come. For example, I use all three payment applications based on whatever is convenient. I’m indifferent because they are interoperable. But if one of them tries to act smart with me, I’ll just dump them. It’s very easy—there is no exit cost. That is the power of democratisation and an open network. This is the biggest thing to keep in mind.

Second, all said and done, UPI has only one SKU—money. ONDC has millions of SKUs from goods to services to things we can’t even fathom yet. How can one or two players dominate every single SKU? It’s impossible.

Q. What would you say is the biggest challenge when it comes to the adoption of ONDC by various participants?

Convincing people about ONDC and getting the industry to adopt this is our biggest challenge. Especially people who are not yet digitised and not yet on digital commerce—less than 2 percent of sellers are in digital commerce. They need to get comfortable thinking about this new model. We are working with SIDBI and the Ministry of Small and Medium Enterprises to see how we can handhold smaller retailers.

Even when ecommerce started, it was challenging at the outset. Similarly, when the internet came, it was a challenge. With the pandemic we all learnt how to do Zoom meetings. It’s a slow and steady process of bringing adoption and it’s going to be a journey, not an event. Any change takes time. I’ll tell you an interesting story. A hundred years ago, when the Tatas first introduced their commercial electricity conversion motors in Bombay, they had to convince factory owners that this is a better source of energy. The factory owners had all built out their factories for horizontal transmission coming from steam engines. It took some time before they the understood the advantages of this new offering and realigned their factory layouts to handle electric motors and vertical power drives. So, nothing happens like Abra-ca-Dabra.

Also read: How quick commerce can become a game-changer in the ecommerce business in India

Q. If ONDC is truly a win-win for everyone aligned to, why have Amazon and Flipkart not joined the network yet?

As of now, Amazon and Flipkart have developed their models of walled gardens which give them rent-seeking, profit maximising capability. They will be thinking why should we change anything? That said, most entities, except these few who can be counted on one’s fingers, have shown an interest in joining ONDC—it is only a question of when they will jump in.

Think of it this way. Suppose I say I’m going to buy 10 acres of land on the moon. There will be three kinds of people. The first set of people will say what is the price, I will also come. The second set will say has a rocket been made? Show it to me, only then I will come. The third set will say when a colony is made, I will buy a flat. The point being that everybody has a different mindset for innovation and risk. The only thing is that the person who buys a flat will end up spending 100 times more than he would have had he been a part of the exploratory journey.