ONDC’s retail orders fell 50% to 12,000 last weekend as discounts delivered double whammy

    ONDC’s retail orders fell 50% to 12,000 last weekend as discounts delivered double whammy

    Retail orders on Open Network for Digital Commerce (ONDC) fell by more than 50 percent to around 12,000 last Sunday, compared to the previous weekend, after big discounts for users on logistics came down drastically due to a revision of incentives disbursed by the network last week, according to people in the know.

    The industry sources point out that this drop was also partly on account of challenges faced by some grocery-focussed seller-side apps being caught unawares with a sudden rise in volume for which they were not fully ready operationally.

    At present, retail orders on ONDC mostly consist of food delivery, a significant but a lot smaller number of grocery orders and low-single-digit percentage points of home decor.

    “Some sellers and seller-side apps selling grocery were not able to handle a sudden surge of orders during the day due to a Rs 100 discount coupon run by a large network participant. While a few grocery stores didn’t have the requisite inventory at their disposal, the seller side apps didn’t have automatic scaling on cloud servers,” said a person close to the developments.

    ONDC has not yet responded to Moneycontrol’s queries on the matter.

    A network participant who did not want to be quoted made the point that the incident on Sunday has made it pertinent for ONDC players to get into a huddle and plan out any large campaigns together.

    “Events like Flipkart Big Billion Days or Amazon Prime Days are always planned out months in advance. Even then, there are always customers who don’t get everything to their satisfaction. However, that kind of planning is required to be done in tandem with sellers and the seller side apps on ONDC,” he explained.

    “Being a network, the capacity challenges of individual network participants or sellers may not bring the entire network down. But in the early stages, this can lead to a frustrating experience for customers. With very broad participation of small players in the network, ONDC will have to have strategies to attend to this,” said a second network player.

    Also Read | More analysts point to ONDC not being a threat to Zomato and Swiggy duopoly

    Since March, the transaction volume on ONDC has been growing at a fast pace. The retail segment showed a peak daily volume of over 25,000 orders in addition to 34,000 rides per day in mobility during the first week of May. This was significantly aided by introductory incentives by ONDC, discounting schemes floated by network participants like Paytm, PhonePe, Magicpin and even by some of the sellers.

    With the flexibility available for the sellers and participants, many participants and sellers have taken to evolving individual discounting-led marketing campaigns. While this is one of the salient features of the network model, last weekend’s issues show that a close-coordination would be required between different players in the network at least in the initial stages to prevent breakdowns.

    The government-backed interoperable commerce network is seen to be emerging as a threat to the duopoly of Swiggy and Zomato in the Indian food delivery market. While the platform commissions charged to restaurants by the duo could range between 20 percent to 30 percent, the same on ONDC is around 8-9 percent as of now.

    According to ONDC, lower commissions on the network will translate to more affordable prices as sellers like restaurants, grocery shops, and electronics brands are expected to pass on the benefits to the consumers. When listing prices of food items on the network appeared to be substantially lower than Zomato and Swiggy earlier this month, many thought it to be the proof of the pudding.

    But, analysts of different brokerage firms and industry experts have pointed out that the lower prices on ONDC in the recent past have been on account of large discounts offered by network participants like seller-side apps, buyer-side apps and ONDC itself — which may not be sustainable in the long run.

    Namma Yatri in the fast lane

    Sources in the know said that Namma Yatri, a mobility app on the network, facilitated around 60,000 auto and cab rides in Bengaluru and Cochin, respectively, last weekend. To be sure, the Juspay-run app is currently being run free of cost for auto and cab drivers, unlike established ride-hailing platforms that may charge them 20-25 percent of the price paid by users as platform fees.

    Also Read | Domino’s is coming to ONDC: tech integration has already started, says Jubilant exec

    Last month, the network onboarded Namma Yatri which is open source. ONDC has said this open mobility foundation will allow customers to book rides from multiple apps, and will also become multi-modal down the line where various modes of transportation — such as cabs, metro and buses — will be integrated into the app.

    ONDC went live in some pin codes of Bengaluru on September 30, and has since expanded to several cities — two of which including Bengaluru are in the beta stage, and 181 in the alpha stage.

    With the network, the government hopes to increase e-commerce penetration in the country to 25 percent in the next two years, reaching 900 million buyers and 1.2 million sellers through the network and reaching a gross merchandise value of $48 billion.

    ONDC is banking on three key pillars to reduce the cost of doing business for everyone, including retailers: dynamic pricing, inventory management, and delivery cost optimisation.

    In April 2022, the network piloted a soft launch in five cities – Bengaluru, Delhi NCR, Shillong, Bhopal and Coimbatore. Since then, ONDC has also started a Beta pilot in Bengaluru and in some Tier-II cities.

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