Editorial Board

A Refereed Monthly International Journal of Management

Empowering Indian E-Commerce through ONDC: A Study on Competitive Dynamics and Sustainable Development Goals

Prof. Ashwani Mahajan

Professor,

P.G.D.A.V College,

University of Delhi, Nehru Nagar,

New Delhi-110065.

Email id:ashwanimahajan@rediffmail.com;

ashwani.mahajan@pgdav.du.ac.in

Prof. Phool Chand

Professor
P.G.D.A.V College,

University of Delhi, Nehru Nagar,

New Delhi-110065.

Email id:phool.chand@pgdav.du.ac.in;

pawan_pc123@rediffmail.com
ORCID id:https://orcid.org/0000-0002-6687-1226

Annu Kumari

Doctoral Scholar
Guru Gobind Singh Indraprastha University;

Sector-16C, Dwarka, New Delhi-110078
Email id: channukumari06@gmail.com;

annu.8116690021@ipu.ac.in
ORCID id:https://orcid.org/0000-0003-4946-6904

Abstract

Purpose-Open Network for Digital Commerce (ONDC) has pavedthe wayfor an inclusive ecosystem that amplifies choices for consumers and facilitates collaboration among sellers, dealers, and delivery partners.Thus, this paper scrutinizes ONDC's impact on e-commerce competition in India and examines its alignment with the Sustainable Development Goals (SDGs) outlined by the United Nations.

Design/methodology/approach-To fulfill the objectives of this study, the SWOT (strengths, weaknesses, opportunities, and threats) analysis framework and Porter’s five forces model were applied.

Findings-The findings from both analysesprovide valuable insights into market entry and expansion strategies for ONDC andunderscore ONDC's potential to disrupt the Indian e-commerce landscape by empowering small and medium enterprises (SMEs) and enriching consumer choices. Furthermore, the discussion elucidates how ONDC intersects with several SDGs, particularly those related to economic growth, industry innovation, and inclusive access to digital technologies.

Originality-To the best of my knowledge, none of the previous studies has employed SWOT framework and Porters five forces model for understanding the implications of open network for digital commerce (ONDC) on the competition in e-commerce sector in India. Furthermore, its sustainability implications have not been explored yet. So, this study adds a new finding to the existing body of knowledge.

Policy Implications-Establish mechanisms for monitoring compliance with ONDC regulations and guidelines, as well as mechanisms for addressing complaints and enforcing penalties for non-compliance. This will help maintain the integrity and credibility of the platform.

Limitations-This study is restricted to impact of ONDC on the competition and SDGs only. Thus, further analysis is required on how ONDC can tailor its expansion effort to target the untapped opportunities in rural markets, cross-border trade, and MSME development effectively.

Keywords: ONDC, E-Commerce, SWOT, Porter’s Five Forces Model

JEL Classification Codes: L81, L25, Q01

Introduction

The significant growth has been witnessed in the Indian e-commerce industry, driven largely by the widespread adoption of mobile phones. With over 1143 million mobile connections as of October 31, 2022, including 625 million in urban areas and 518 million in rural regions, mobile commerce has become a dominant force in shaping the trajectory of e-commerce in India.The online retail market is expected to reach 37 percent by 2030 and constitutes 25 percent of the total organized retail market. Additionally, social commerce GMV is anticipated to reach $20 billion by 2026 and potentially $70 billion by 2030 (Indian Retailer Bureau, 2023).However, the sector initially faced challenges such as low internet penetration and limited online payment options. The turning point came with the proliferation of the internet and the surge in online users. While Amazon and Flipkart have historically dominated the market, new entrants like Meesho, Nykaa, and Indian conglomerates like Tata Group and Reliance Industries are intensifying competition. Flipkart, founded in 2007, emerged as a key player, initially focusing on online book sales before expanding into various product categories.One noteworthy initiative in this space is the Open Network for Digital Commerce (ONDC) which is aimed at decentralizing the e-commerce marketplace, ONDC strives to create a level playing field for all sellers, irrespective of their size.

Figure 1.How ONDC will democratize the E-Commerce landscape in India?

Source: Own compilation

ONDC's vision constitutes bringing together the diverse e-commerce platforms through interoperability and standardization which goes beyond mere inclusion and aims to democratize digital commerce in India. This provides consumers with a wider range of choices and enables sellers, dealers, and delivery partners to collaborate and thrive (Mahajan, 2023).McKinsey expects India’s digital commerce with ONDC to surge five times to around $340 billion by 2030 (Bhatt, 2024).With its utilization of blockchain and artificial intelligence, ONDC not only empowering the small businesses but also sets the stage for a technological revolution that offers enhanced customer protection and streamlined dispute resolution mechanisms. Such technological advancementsboost trust and confidence in the digital marketplace and pave the way for future innovations in e-commerce.Therefore, this paper delves deeper into how ONDC impacts the competition in the e-commerce industryin India and also discusses theimplications of this initiative in achieving the SDGs. The rest of this paper is organised as follows: section 2 reviews the extent literature, section 3 discusses the data and methodology, section 4 represents the findings of the study and section 5 concludes the paper.

Literature Review

E-commerce has altered how India shops, particularly with the rapid rise in digital public infrastructure. Additionally, the pandemic-induced change in consumer buying behavior and the rise of organized retail sectors laid the groundwork for e-commerce's success in the market. There are over 1.4 billion people and a fast-growing economy, thus online consumers are expected to reach 427 million by 2027. Thus, by 2030, the burgeoning e-commerce business might be valued at over 350 billion U.S. dollars (Statista, 2023). Additionally, as ONDC (2022) stated that open network for digital commerce presents a lucrative potential to stimulate the growth of the digital commerce industry and provide substantial economic benefits, particularly in terms of employment, livelihood generation, supply chain optimization, and other related areas. From a data perspective, only the individuals involved in the transaction (buyer and seller app) can access it. Furthermore, ONDC will not store or see any transaction data, creating a network that is genuinely democratized, allowing users to have ownership over their data and the insights derived from it (ONDC, 2022).

Saha et al. (2023) examination of secondary data about ONDC revealed that it facilitates the democratization and promotion of inclusive development by assisting smaller local companies, applications, social media platforms, payment systems, logistical services, large-scale technology-driven e-commerce, and small and medium-sized enterprises (SMEs). The data indicates that E-commerce start-ups have secured venture capital and private equity investment. Further, this study stated that BNLP, B2B, and open network technologies provide significant opportunities for technology adoption, supported by the Digital India movement.

Meanwhile, the mechanics of an open digital commerce network and its potential to foster a more inclusive digital commerce system across many sectors and countries were elucidated by George & George (2022). The authors emphasized the significant growth of digital commerce, mostly fuelled by the COVID-19 pandemic, and stated ONDC's strategic approach to cultivating a more inclusive and participatory economic environment. Furthermore, this study examined the concept of Business-to-Consumer (B2C) e-commerce, the digital commerce landscape, the ONDC network as a medium for economic transactions between businesses and consumers, and the significance of open networks in promoting equity and preventing monopolistic practices.Singh & Kumar (2023) examined the ONDC and its potential advantages for consumers, sellers, and technology platforms. They described how ONDC, a government-mandated platform, wants to alter India's e-commerce market by allowing interaction between consumers and sellers regardless of whatever app or platform they use.

Dash et al. (2022) stated the evolution of e-commerce and how the market grew opaque as a result of the monopolistic actions of some of the world's top e-commerce corporations. It explains how ONDC, a novel idea devised by the Indian government, intends to safeguard merchants and purchasers. While Kumari & Sharma (2022) found through a meta-analysis that small and medium-sized businesses are likely to increase their market presence, currently, the open digital commerce initiative is still in its early stages. Girdhar (2023) offered a critical examination of India’s open digital commerce network, suggesting that it could be a boon for local economic growth in the coming years.

Perumal (2021) argued that an open network marketplace has the potential to break down the dominance of established corporations by offering a diverse range of products and services, thereby enhancing the competitive edge of MSMEs in the digital market.  As Mahajan (2023) also noted this model is beneficial for small and medium businesses and supports user-friendly business models similar to UPI (Unified Payment Interface).Walia et al. (2023) conducted an exploratory study that indicated that consumers prioritize security when purchasing through ONDC.

Evaluation of Literature

After going through this extant literature, it was found that none of the previous studies have conducted the SWOT analysis of ONDC and utilised porters five forces analysis for analysing the impact of ONDC on the competition in the e-commerce sector in India. Therefore, this paper illuminates ONDC's pivotal role in reshaping e-commerce dynamics in India while elucidating its contributions to advancing sustainable development objectives on both economic and social fronts.

Data & Methodology

Data

This paper utilizes ancillary data and insights about ONDC, as documented in scholarly publications, media reports, and the official website of ONDC.

Methodology

SWOT Analysis

With the help of SWOT (strengths, weaknesses, opportunities, and threats) framework,strategic managers have systematically understood a situation since the 1960s (Kolter, 1988; Wheelen & Hunger, 1995). Benzaghta et al. (2021) note that SWOT analysis has become an essential tool for strategic company planning, in addition to its widespread acceptance by industry, commerce, and philanthropic and volunteer organizations (Sarsby, 2016). Planners may get a better understanding of how to realize new possibilities by identifying internal and external favorable and unfavourable situations in the four quadrants of a SWOT analysis grid. They can also see how weaknesses might hinder development or increase organizational dangers.

Porter’s Five Forces analysis

Porter (1980, 1985) and Porter & Millar (1985) state that a company creates business strategies to get a financial edge over its rivals. The five main factors it responds to are new entrants, competition among existing enterprises in an industry, alternative products/services, supplier negotiating strength, and buyer bargaining power. After assessing these five competitive factors in an industry, a corporation develops the market where they are weak (Porter, 1979).Porter (2001) reemphasized the necessity of understanding the five competing factors in designing competitive advantage strategies.

Findings

SWOT Analysis of existing E-commerce giants (Amazon and Flipkart) and ONDC

With its roots in the early 1950s, SWOT analysis has stood the test of time and is now considered the gold standard of current strategy tools. According to MEID (2011) and Management Study Guide (2012), the primary goal of a SWOT analysis is to identify the strategies that would allow a company to best use its resources while also meeting the challenges posed by its operational environment. The method of mapping and determining the essential aspects that a corporation must take into consideration is the SWOT analysis (Christensen, 1997). Thus, to better understand the business environment of Indian e-commerce sector, the table 1 analyses the duopoly of Amazon and Flipkart, and ONDC using the SWOT analysis framework:

Table 1. SWOT Analysis

Source: Own compilation, 2024

In summary, each e-commerce model has its strengths, weaknesses, opportunities, and threats. Amazon and Flipkart operate as traditional e-commerce platforms with global and local focuses, respectively, while ONDC represents a government-led initiative aimed at fostering a more inclusive and transparent digital commerce ecosystem in India.

Analysing the Impact of ONDCon the Competition in the Indian E-Commerce

ONDC leads to increased competition, market fragmentation, innovation pressure, and strategies adaptation and collaboration opportunities with SMEs which will reduce the dominance of big players in the Indian e-commerce industry. Consequently, this will push democratization of the digital commerce in India.

Figure 2.Impact of ONDC on existing e-commerce giants

Source: Own compilation, 2024

Force analysis reveals an industry's intrinsic appeal, the determinants of average industry profitability, and how profitability will change in the future (Porter, 2001).This section analyses its impact on competition in the e-commerce industry using Porter's Five Forces framework:

Table 2. ONDC impact on competition using Porter's five forces model

Source: Own compilation, 2024

Overall, the ONDC initiative has the potential to disrupt the e-commerce landscape in India by fostering competition, empowering SMEs, and providing consumers with more choices. However, the effective implementation, regulatory support, and adaptation by existing players to the changing dynamics of the industry will determine its success.

How ONDC can help in achieving the Sustainable Development Goals (SDGs)?

ONDC (Open Network for Digital Commerce) has the potential to contribute significantly to the achievement of several Sustainable Development Goals (SDGs) set forth by the United Nations (United Nations, 2015).This Table 3 discusses how ONDC can lead to the attainment of these goals:

Table 3. Role of ONDC in achieving SDGs

Source: Own compilation, 2024

Conclusion

This study analysed the implications of ONDC for the competition in the e-commerce sector and achieving SDGs. For this purpose, the secondary resources are utilised and analysed with the help of SWOT framework and Porter’s five forces model. The SWOT framework analysis revealed that although ONDC holds significant potential to transform the Indian e-commerce landscape, its success will depend on addressing weaknesses, capitalizing on opportunities, and effectively managing threats through strategic planning and collaboration among stakeholders.In summary, Amazon and Flipkart operate in highly competitive markets with established players and face threats from new entrants, substitutes, and bargaining power from buyers and suppliers. ONDC, on the other hand, aims to disrupt the e-commerce landscape by increasing competition and choice, potentially impacting the competitive dynamics within the ecosystem.Additionally, Porter's Five Forces analysis identified the competitive dynamics within the e-commerce industry and the factors influencing ONDC's competitive positioning. This analysis revealed that understanding the bargaining power of buyers, suppliers, and competitors helps ONDC determine its market position and develop strategies to differentiate itself from competitors.

In a nutshell, while Amazon and Flipkart operate as traditional e-commerce platforms with a focus on driving sales and revenue, ONDC represents a government-led initiative aimed at fostering a more open and inclusive digital commerce ecosystem in India.The implications of the SWOT and Porter's Five Forces analyses for ONDC are significant and can inform strategic decision-making and implementation strategies.

Furthermore,the analysis confirmed thatONDC’s inclusive and innovative approach to e-commerce aligns with the principles and objectives of the Sustainable Development Goals by promoting economic empowerment, inclusivity, innovation, and sustainability. Thus, it can be concluded that ONDC plays a crucial role in advancing the SDGs and creating a more prosperous and equitable world for all.

Recommendations:

• For ONDC
• Engage with a diverse range of stakeholders, including government agencies, industry associations, consumer groups, and technology providers, to build consensus, address concerns, and foster collaboration in the implementation of ONDC.
• Establish mechanisms for monitoring compliance with ONDC regulations and guidelines, as well as mechanisms for addressing complaints and enforcing penalties for non-compliance. This will help maintain the integrity and credibility of the platform.
• Foster innovation and entrepreneurship within the ONDC ecosystem by supporting the development of new business models, technologies, and solutions that drive inclusive growth and address emerging challenges in the e-commerce sector.
• For Policymakers
• Develop and implement a robust regulatory framework that ensures transparency, fairness, and accountability in e-commerce operations. This framework should address issues such as data privacy, consumer protection, competition, and intellectual property rights.
• Invest in upgrading digital infrastructure, expanding internet connectivity, and enhancing technological capabilities, particularly in rural and underserved areas.

Limitations of the study

Although this study provides valuable insights into market entry and expansion strategies for ONDC. However, further analysis is required on how ONDC can tailor its expansion effort to target the untapped opportunities in rural markets, cross-border trade, and MSME developmenteffectively.

Authors Contribution

Annu Kumari was involved in conceptualizing and designing this manuscript. She collected the data and contributed to the analysis and interpretation of the data. Prof. Ashwani Mahajanand Prof. Phool Chand contributed significantly todrafting the manuscript and revising it critically for important intellectual content. All authors read and approved the final manuscript. 

Conflict of Interest

The authors declare no competing interest. They certify no affiliations or involvement in any entity with any kind of interest in this manuscript.

Funding Acknowledgements

The authors received no funding for conducting this research.

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