Impact and benefits of ONDC network on MSME in India

 Every local business—no matter how small, dreams of shining right alongside the big names. For India’s micro, small, and medium enterprises (MSMEs), this dream is finally within reach, thanks to the Open Network for Digital Commerce (ONDC). It is designed to open doors for businesses that have long struggled to compete online. ONDC levels the playing field, offering small enterprises a way to reach customers on their terms.

So, what exactly is ONDC, and how can it reshape the future of MSMEs in India? Let us understand the unique advantages it brings to small businesses and the digital commerce landscape as a whole.

Open Network for Digital Commerce (ONDC)

The Open Network for Digital Commerce is a government-backed initiative to democratise e-commerce across India. It's totally different from the conventional, where just a few dominant companies own the space for e-commerce. ONDC will work as an open network that allows both buyers and sellers to operate and ensures interoperability between different forms of e-commerce platforms. Think of it as something more inclusive and decentralised version of e-commerce where businesses of all scales may engage in digital trade.

For MSMEs, for whom many are at an advantage to compete with some of the big e-commerce portals, ONDC becomes that level playing field by providing them with a larger marketplace in which they can thrive while not losing their own identities and not paying such expensive commission fees.

Key Benefits of ONDC for MSMEs

With the integration with ONDC, tangible benefits for MSMEs will go beyond cost savings. Some of the ways through which the platform is likely to enhance both the operations and the bottom line of small businesses in India include increased market coverage.

ONDC enables the MSME to sell at the national level because it gives them access to an enormous network of buyers. ONDC, thereby, actively encourages local goods and enterprises; this helps in creating equal opportunities for the MSMEs in terms of market competition while offering scope for increasing market penetration by breaking away from one's platforms.

Freedom from Platform Lock-in

With the open network of ONDC, businesses need not rely on a single giant of e-commerce to sell through because listing on all platforms would require minimal extra effort, thus making less dependence on one company.

More choices for customers

Since ONDC provides interoperability across various platforms, a customer has more options while shopping online. An MSME, therefore, gains entry into customers whom it may have yet to reach through a single platform, thereby increasing its chances of making sales.

Cost Efficiency and Control

ONDC reduces intermediary costs, thus enabling MSMEs to price at a competitive edge without sacrificing margins. In the case of small businesses, it is imperative to invest as savings are reinvested in business expansions.

Innovation and Flexibility

ONDC allows businesses to innovate according to their preference without the confinement of rules applicable to platforms. MSMEs can create personalised offerings, flexible pricing, and customised promotions that customers would love.

How ONDC Can Overcome Common MSME Challenges

For a large segment of India’s MSMEs, especially those in remote areas, entering the digital economy can seem daunting. High costs, lack of technical know-how, and limited resources have kept many from fully embracing online sales. Here’s how ONDC helps address these common challenges:

Technical Assistance and Training

ONDC collaborates with government agencies and industry bodies to provide technical training and support. MSMEs that may lack the technological skills to set up and manage digital storefronts can access resources that help them transition smoothly into online selling.

Local Language and Regional Support

Language remains one of the barriers that face the regional businesses that intend to sell their products across the country. The interface is user-friendly and supports local languages, which enable MSMEs to onboard and interact with customers rapidly.

Access to Credit and Financial Services

Financial issues are one of the reasons that hinder MSMEs from scaling up their businesses. Credit and services provided by its network of financial institutions on ONDC provide MSMEs with better access to credit facilities and services customised to their needs.

Effective Logistics Solutions

The logistics infrastructure under ONDC connects small businesses to local delivery partners so that they can serve customers effectively without having to manage complicated logistics themselves. This is particularly helpful for MSMEs in rural areas, where logistics support can be sparse.

Data-Driven Decision Making

ONDC will offer MSMEs insight into data, where they can make decisions related to customer preferences, patterns of demand, and many more. With these insights, MSMEs can optimise their inventory, pricing, and marketing strategies, which will have better business operations.

How MSMEs Are Benefiting from ONDC

Many MSMEs have already started noticing the positive effects of the integration of ONDC. Let's take a look at some of the early successes.

Local Handicraft Sellers

This vast reach of the platform has brought more prominence and sales to local handicrafts-specific small businesses. They don't need big budgets for advertisements to sell to customers seeking authentic and unique products.

Farm-to-Table Produce Vendors

Now that small farmers and organic produce vendors can sell their produce directly to customers, intermediaries are minimised, and fair prices are ensured. This benefits the farmers but also gives consumers fresh and sometimes cheaper goods.

Local Niche Producers

Many local niche manufacturers engaged in low-demand goods are finding increasing demand. The ONDC transparent network will allow the customer to see the quality and the locality but not the brand names.

Recent Developments and Milestones of ONDC

The recent developments and successes of the Open Network for Digital Commerce (ONDC) speak of an increasing influence of this system and the momentum building up across sectors that bode well for its ability to reach more expansive parts of India in enhancing e-commerce participation.

To give impetus to e-commerce integration across Uttar Pradesh, the state government has integrated the One District One Product (ODOP) programme with the ONDC. In this scheme, local products and local artisans will be promoted and presented before the larger audiences. The ONDC network will make specific regional goods national and international entities as well, thus supporting local economies and protecting traditional crafts. The other strategic steps taken by ONDC have been to integrate the agricultural and non-agricultural platforms with NABARD. The partnership would enable stronger market links for FPOs so that smaller farmers and rural entrepreneurs get an opportunity to access a broader market and higher-income-generating opportunities. This will also address the need for market access and the logistical costs associated with high transport that have hindered the involvement of rural producers.

SIDBI encourages small businesses to use ONDC. In this light, SIDBI is providing small businesses with financial and technological support. This kind of support is vital for MSMEs as they can grow and compete through a digital platform in a competitive digital marketplace.

As of May 2024, ONDC has witnessed several landmark achievements. It registered a record 8.9 million transactions across retail and ride-hailing sectors, growing 23% month-over-month. Retail alone accounted for 5 million orders, with grocery and food delivery crossing over 1 million orders each. ONDC now has approximately 535,000 sellers in 1,200 cities, with small businesses accounting for 84% of sellers and contributing to 56% of total orders. This growth shows how ONDC is working toward increasing the visibility and access to markets for MSMEs across India.

(Reference Source:
https://easypay.in/blog1.html#:~:text=ONDC%20promotes%20transparency%20and%20fair,search%20results%2C%20and%20equitable%20treatment.)

Final Thoughts

The benefits that will accrue from the development of ONDC are more than mere business growth. Hence, ONDC can really help significantly in building resilience to the Indian economy, help create jobs and catalyse regional economies, something that is particularly well-required for India, the economy of which happens to have MSME as the backbone, producing vast amounts of employment and incubating grass-roots innovation also.

Long-term success in ONDC would perhaps motivate other sectors to initiate similar models, thus guaranteeing Indian MSMEs to continue receiving opportunities to scale up and never be stunted by significant players. It is a model of inclusive growth aligned with India's ambitions to become a powerhouse in a digital economy.

If you’re an MSME in India looking to reach more customers, increase sales, and operate without the high costs and restrictions of traditional e-commerce, now’s the time to explore ONDC. Get started today, and let the open network help you connect with a world of new customers.

Additional Read:

MSME Loans for Small Businesses

Everything to know about MSME Innovative Schemes

How Digital MSME Schemes are Transforming Small Businesses in India

The Growth of MSME: Key Objectives & Benefits of the RAMP Scheme

MSME Samadhaan: A portal for resolving delayed payments to MSMEs

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