Does the "government have any business doing business?" What will happen to the mounting of both losses and market monopolies of India's e-commerce giants? This week's TypeRight takes a look at the GoI's new plans for digital commerce and what it means for smaller scale retailers. Would Open Network For Digital Commerce - ONDC be the mass platform for doing business?
Speaking to the news agency ANI earlier this year, Prime Minister Narendra Modi had been heard saying that the "government has no business to be in business." This was in context of major disinvestment plans by the Finance Minister Nirmala Sitaraman this budget, a policy the BJP led NDA government had been following throughout their term, as seen with the likes of Air India, ONGC/HPCL and LIC and perhaps soon BSNL and even the Indian Railways. On the other hand, it has reached a state where the government cannot help turn a blind eye on the huge e-commerce sector in India, which is now mostly held by a few monopolies.
In this context, last month, the Indian government announced the launch of Open Network For Digital Commerce, an attempted alternative against the dominance of multinational giants like Amazon and Walmart (which owns a majority stake in Flipkart). The ONDC is a non-profit company where once the other giants integrate into it, would display products from all platforms on each other's apps.
Estimates from private entities and parliamentary standing committees report the e-commerce sector to boom to around $120-400 billion by 2025-30. This doesn't mean that these giants are rolling in profits, however. In fact, matters are far from it, as they have been facing continuous losses, as this graph shows:
The strategy is not unlike other platform players- aim long term, and capture the market. However, despite the size of these giant companies, there is an interesting statistic from the ONDC strategy paper from last year. Amazon and Flipkart may be controlling over 60% of the digital market, but in terms of Indians' retail needs as a whole, it is our local kirana stores that still account for 80% of overall retail sales. These stores are however not connected digitally. The pandemic saw how this was a huge problem, because when the lockdown forced many people to buy things online, the large online giants saw their sales skyrocket while smaller shops struggled to survive, and many even closed down.
While some managed to find means of staying afloat digitally, in a country where half the population still lacks internet access and digital literacy, this meant a harder hit for most small shops. On a previous TypeRight, we saw how the handloom sector going digital had helped their trade; in a recent conversation with them for one of DEF's research projects, our team was also informed of how people sell fake handlooms online that impacts the business of actual handloom sector. A cross-platform access seems like it would benefit most of these smaller scale traders.
From reports, this seems to be what ONDC attempts to do. As the Quint reports, there would be a shift from a "operator-driven monolithic, platform-centric model, to a facilitator-driven, interoperable decentralised network." The ONDC would be, as minister Piyush Goyal claims, the UPI for India's online retail.
While there are crores of small retail shops across the country, they are also facing threats from looming giants in retail, most notably Reliance (who had recently acquired another giant, FutureRetail), and also Birla and Tata. What would a large-scale digitisation mean for players other than these, who have only recently started to catch-up to the digital game with UPI?
The ONDC does not mean the government is launching its own e-commerce platform- it would be a network where participants would be offering a number of services in the e-commerce supply chain such as buying, selling and offering logistics services.
It remains to be seen how effective this would be for the small 'mom-and-pop' stores- will there be market concentration on the older and larger with more money, or will it trickle down? Either way, the digital network provide an opportunity to reorient policies such that it would connect and empower more small business owners- if done right.
This screenshot is from the official website of ONDC:
and this, from the strategy paper:
The Strategy paper mentions that the ONDC is not a government body or an application, but rather a network that is community-led. Interstingly, Nandan Nilekani, one of the creators of the Aadhaar is on the panel of ONDC. We have seen how what had started as a welfare enabling scheme quickly slid into a tool for surveillance, a noghtmare of data leaks, and denied basic services to many. There needs to be critical and community interventions to make sure that the network remains community-led as imagined, and not reconstructing the exact same structures that have led to the digital divide of the smaller sellers and entrepreneurs.
Updates from DEF:
This twentieth year of DEF, on the nation's seventy-fifth independence day, DEF along with the Telangana IT Secretary launched a DEF Digital Excellence Center in Hyderabad.
DEF's reminder on International Literacy Day- and the need to empower communities and connect education to the digital in the wake of the pandemic:
On September 6th, the book "Decentralising Benefits", co-edited by DEF Director Osama Manzar and Dr Syed Kazi was launched.
Photos from the book launch:
Also, DEF and our Director Osama Manzar is one of the finalists of this year's 13th Social Entrepreneur of the Year Award.
The third series of 2022's Community Network Exchange happened on 29th August. You can watch the discussion here, but we'll follow up in detail in an upcoming week's TypeRight.
And finally, a reminder that the mBillionth Awards 2022 deadline has been extended- there's still time to apply. The mBillionth Awards is an initiative by the Digital Empowerment Foundation; it is awarded to mobile practices that bridge the digital divide, empower people, and advance socio economic equality, the award recognizes and rewards best practices in mobile world. Check the link for more:
We'll be back next week on TypeRight with more updates, until then, ciao!