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Bye-Bye Swiggy, Zamato. ONDC delivers cheaper Pizza, Burger

ONDCs Government-Backed Open Network for Digital Commerce entered the food delivery market.




Discover the benefits of an open network for digital commerce and how it can revolutionize the way we buy and sell online.

Zomato shares slumped over 5% as the government-backed Open Network for Digital Commerce entered the food delivery market. ONDC is a new initiative that aims to create a common platform for online retailers and service providers and to promote fair competition and consumer choice. The move has sparked concerns among investors and analysts that Zomato, along with other food delivery players like Swiggy and Dunzo, will face increased pressure and lower margins in the future.

What is ONDC:

The Open Network for Digital Commerce (ONDC) is a government-backed project which is aimed at enabling small merchants and mom-and-pop stores in parts of the country to access processes and technologies that are typically deployed by large e-commerce platforms such as Amazon and Flipkart. The ONDC is based on open-sourced methodology, using open specifications and open network protocols independent of any specific platform. The ONDC is expected to make e-commerce more inclusive and accessible for consumers and sellers.

Bye-Bye Swiggy, Zamato. ONDC delivers cheaper Pizza, Burger

The ONDC has several merits, such as:

  1. It provides multiple options to small businesses to be discoverable over the network and conduct business, instead of being governed by specific platform-centric policies.
  2. It increases freedom of choice for consumers, who can potentially discover any seller, product, or service by using any compatible application or platform.
  3. It enables the consumers to match demand with the nearest available supply, thus supporting local businesses and reducing logistics costs.
  4. It promotes open protocols for all aspects of the entire chain of activities in the exchange of goods and services, similar to hypertext transfer protocol for information exchange over the internet, simple mail transfer protocol for the exchange of emails, and a unified payment interface for payments.
  5. It encourages easy adoption of digital means by those currently not on digital commerce networks.

The ONDC also has some demerits, such as:

  1. It may face resistance from existing e-commerce platforms, which may perceive it as a threat to its market dominance and profitability.
  2. It may pose challenges in terms of ensuring data security, privacy, and consumer protection, given the diversity and complexity of the digital commerce ecosystem.
  3. It may require significant investment and coordination from various stakeholders, such as government agencies, technology providers, network participants, and buyers and sellers.
  4. It may take time to achieve scale and interoperability across different domains and regions, given the nascent stage of the project.

However, the entry of ONDC could pose a serious threat to Zomato’s dominance and profitability. ONDC is backed by the Department of Promotion of Industry and Internal Trade (DPIIT), which is part of the Ministry of Commerce and Industry. The project is being developed by the Quality Council of India (QCI), a non-profit organization that works with the government and industry to ensure quality standards and best practices.

Also Read: Sanchar Saathi portal helps you track down a lost phone

Benefits of ONDC:

According to the DPIIT, ONDC will provide a “standardized protocol” for online transactions and will enable interoperability among different platforms and services. This means that consumers will be able to access multiple sellers and providers through a single app or website, without having to download or register on different platforms. For example, a customer could order food from any restaurant listed on ONDC, regardless of whether they have an account on Zomato or Swiggy or not.

The DPIIT also claims that ONDC will benefit small and medium enterprises (SMEs) and local vendors, who often face challenges in accessing online markets due to high commissions and fees charged by aggregators and intermediaries. ONDC will allow them to directly connect with customers and offer competitive prices and services, without having to depend on third-party platforms.

Market Disruption

Zomato, which went public in July 2021, has been one of the most successful startups in India’s booming digital economy. The company reported a 37% increase in revenue in the quarter ended September 2021, compared to the same period last year. It also claimed to have a 45% market share in the food delivery segment, with over 32 million monthly active users and 1.5 million restaurant partners.

The government has already launched pilot projects for ONDC in various sectors, such as e-pharmacy, e-grocery, e-furniture, and e-books. The government had rolled out ONDC for food delivery since March 2022 and has invited applications from interested parties to join the network.

The announcement of ONDC has sent jitters across the online retail and service industry, especially among the food delivery players. Zomato’s shares fell by 5.4% on Monday, closing at Rs 125.65 on the National Stock Exchange (NSE). Swiggy and Dunzo, which are privately held companies, also expressed their reservations about ONDC’s impact on their businesses.

Competitor’s reaction

Zomato’s co-founder and CEO Deepinder Goyal tweeted that he was “not sure” how ONDC would work for food delivery and that he hoped it would not create “unnecessary friction” for customers and restaurants. He also said that Zomato was open to collaborating with ONDC, but only if it was “fair” and “transparent”.

Swiggy’s CEO Sriharsha Majety wrote a blog post on Monday, stating that he was “surprised” by the government’s move to launch ONDC for food delivery. He argued that food delivery was a “complex” and “nuanced” sector, which required specialized skills and capabilities to ensure quality and safety standards. He also questioned the need for ONDC in a market that was already “highly competitive” and “customer-centric”.

Dunzo’s co-founder and CEO Kabeer Biswas also expressed his doubts about ONDC’s feasibility and viability for food delivery. He said that Dunzo was already working with thousands of local merchants and partners, who had their own preferences and requirements for online transactions. He added that Dunzo was willing to work with ONDC, but only if it was “optional” and “non-intrusive”.

The reactions from the food delivery players reflect their apprehensions about losing their market share and bargaining power to ONDC. They also indicate their reluctance to share their data and customer base with other platforms and providers, which could affect their brand loyalty and customer retention.

ONDC’s proponents, however, argue that it will create a more level playing field for online commerce, and will enhance consumer welfare and choice. They also claim that it will foster innovation and efficiency in the sector, by reducing entry barriers and operational costs for new entrants and existing players.

In conclusion, the ONDC is a government-backed project that aims to create a more inclusive and accessible digital commerce network for consumers and sellers. It has several merits, such as providing more options, freedom, and efficiency for both buyers and sellers. However, it also has some demerits, such as facing resistance from existing platforms, posing data security and privacy issues, requiring investment and coordination from stakeholders, and taking time to scale up and interoperate.

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