Reimagining Indian MSMEs with open network for digital commerce

Over the past ten years, SMBs faced several hurdles while adopting digital tools. However, the government’s new ONDC (open network for digital commerce) initiative aims put power back into the hands of small and independent entrepreneurs.

India’s small and medium businesses (SMB) economy is one of the most vibrant in the world. Even before the country could boast of having the world’s third-largest startup ecosystem, SMBs quietly went about their business of being the backbone of the Indian economy, contributing massively to household incomes, jobs, and other national economic indicators. 

However, with digital commerce and a tech-forward economy, India’s SMBs found themselves in unfamiliar territory. 

Despite the high penetration of internet connections and mobile phones across India, small and medium businesses have lagged behind in digital adoption and have had to become dependent on aggregators. However, the government’s new ONDC (open network for digital commerce) initiative aims to challenge this status quo and put power back into the hands of small and independent entrepreneurs. 

Why is ONDC being welcomed?

Over the past ten years, SMBs faced several hurdles in adopting technology such as lack of skilled personnel and access to capital to invest heavily in new-age tech tools. 

So, when aggregators came by promising to take on the responsibility of customer acquisition and retention, small and independent entrepreneurs readily embraced the change. 

All they had to do is sign on to these platforms and they did this thinking it was for their own benefit. However, a few years in, it was evident that an unequal bargain was struck because in exchange for technical assistance and in the initial promise of boosting business, small and independent businesses lost out on their branding and pricing power, and their profit margins eroded because of hefty commissions paid to aggregators.

Thus, in order to reimagine this system that is inherently unfair for small and independent businesses who remain dependent on the mercy of a few large aggregators who tend to be monopolies wielding excessive power, the GOI has introduced ONDC. 

The basics of ONDC 

Akin to what UPI (unified payments interface) did for payments in India, ONDC will enable buyers and sellers to be digitally visible and transact through an open network, no matter what platform or application they use. 

Currently, a small taxi fleet operator is totally dependent on Uber’s customer base and does not have access to the database of other cab aggregator companies like Ola, thus, resulting in a loss of greater visibility and customers for the taxi driver who is trying hard to make ends meet. 

ONDC aims to challenge the hegemony of monolithic platforms that operate on closed systems. It aims to democratise the digital commerce space by granting equal opportunities for all and creating open systems that are fair to all stakeholders. 

How will it benefit MSMEs?

For small and independent businesses, this would translate into a huge advantage as their business will be visible/ discoverable to all buyers on any B2C (business-to-consumer) platform or via a direct search. 

There would also be the added benefit of the decreased cost of doing business as they would save on steep aggregator commission fees. 

Overall, it will help to promote fair trade and return power to the hands of small and independent business owners as they will once again have the ability to connect with their customers directly and not be cut off from them due to an aggregator barrier. 

Also, they will be digitally empowered through the ONDC platform and won’t have to completely rely on the mercy of ecommerce companies with whom they have very little leverage to strike an equitable bargain. 

Trust Portability is an advantage with ONDC. Take for instance, a good taxi company that services its customers well but doesn’t have any brand visibility as it is tethered to aggregator apps such as Uber or Ola. ONDC aims to change this as it will allow for a taxi fleet company like this to be visible to many more sets of potential customers, thus increasing the trust portability factor for small and independent brands and services. 

Small and independent businesses today are increasingly looking for tech platforms that can serve as a medium and not the middlemen. 

Initiatives such as ONDC are all set to shift power from the middle towards the ends, ending the era of middlemen aggregators who act as barriers between customers and service providers, and ushering in an era of de-aggregation, unbundling and interoperability.  

The government of India has an ambitious target for ONDC; it aims to bring onboard 30 million sellers and 10 million merchants online, covering both goods and services. 

Further, the aim is to cover at least 100 cities and towns and focus on apps in local languages for buyers and sellers. All of this is good news as it will help bring SMBs across the board, small merchants, rural consumers, and multiple other cohorts of buyers and sellers onto one transparent digital platform.   

India’s digital commerce space has been ripe for disruption for far too long, and ONDC promises to positively reimagine this ecosystem so as to provide an equitable scenario for all stakeholders.

Edited by Affirunisa Kankudti


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