New Delhi: The retail segment of the Open Network for Digital Commerce (ONDC) experienced a significant decline in orders, dropping by over 50% to approximately 12,000 orders last Sunday compared to the previous weekend. This decline was attributed to a substantial reduction in logistics discounts offered by the network, resulting from a revision of incentives disbursed by ONDC. Additionally, some grocery-focused seller-side apps faced operational challenges as they were unprepared for the sudden increase in order volume.
The decrease in retail orders primarily affected food delivery, with a smaller number of grocery orders and a low single-digit percentage of home decor orders. The sudden surge in orders, coupled with inadequate inventory and a lack of automatic scaling on cloud servers for seller-side apps, contributed to the operational difficulties experienced.
This incident has highlighted the importance of coordinated planning among ONDC players, particularly during large-scale campaigns. The need for synchronized efforts between sellers and seller-side apps is crucial to avoid frustrating customer experiences. While individual capacity challenges may not bring down the entire network, such incidents can impact customers during the early stages of development. As ONDC involves a broad participation of small players, strategies must be in place to address these challenges effectively.
Since March, the transaction volume on ONDC has been growing rapidly. During the first week of May, the retail segment witnessed a peak daily volume of over 25,000 orders and 34,000 rides in the mobility sector. The initial success was propelled by introductory incentives from ONDC and discounting schemes offered by network participants like Paytm, PhonePe, and Magicpin, as well as sellers themselves.
However, the sustainability of lower prices on ONDC has been questioned by analysts and industry experts. The current lower commissions on ONDC, around 8-9%, compared to the 20-30% charged by established players like Swiggy and Zomato, have been made possible due to significant discounts offered by various network participants. The long-term viability of such discounts remains uncertain.
Furthermore, Namma Yatri, a mobility app on ONDC, facilitated around 60,000 auto and cab rides in Bengaluru and Cochin over the weekend. Unlike traditional ride-hailing platforms, Namma Yatri is currently operating without charging platform fees to drivers. It is an open-source mobility app that aims to provide customers with the ability to book rides from multiple apps and integrate various modes of transportation in the future.
ONDC, which aims to increase e-commerce penetration in India to 25% within the next two years, is based on three key pillars: dynamic pricing, inventory management, and delivery cost optimization. The network is in the beta stage in two cities, including Bengaluru, and in the alpha stage in 181 other cities.
Overall, the recent challenges faced by ONDC in terms of logistics discounts and operational readiness highlight the need for coordinated efforts among network participants to ensure a smooth experience for customers and sustainable growth in the long run.
