ONDC can’t scale up using discounts: CEO Thampy Koshy

There has been a buzz around the government-backed open network for digital commerce (ONDC) waging a price war against Zomato and Swiggy. ONDC, which has spent a few crores of rupees on discounts, believes the network cannot scale up on doles and they will be discontinued after a few months. ONDC MD & CEO T Koshy speaks to TOI about the growth strategy, big e-commerce firms joining the network. Excerpts-

How has ONDC scaled up?

We are in over 240-odd cities today with 47 network participants. Out of which seven are logistics, 12 are buyers and remaining are seller apps. In first week of January, we saw about 50 daily transactions in the food and grocery space. Currently, that has scaled up to 10,000-20,000 daily transactions.What about other categories that have been added. How are the volumes?
We have started enabling other domains like fashion and electronics. Volumes in these categories should start picking up in the next few months as more merchants come onto the network. Many early adopters like Snapdeal, Boat and Sangeetha Mobiles are already on board. We expect more sellers to join in the coming days because they are seeing the benefits. In the existing platform-centric model, the platform dictates what kind ofschemes to run.
But in ONDC, control shifts to the end-points like merchants, who give them option to present their own terms and conditions. We plan to have financial products on the network in three to four months.

How long can discounts be sustained?

I do not think this network can scale up on discounts. The strategy used by any ecommerce player has been to build a captive user base with a variety of incentives,so that they can have a control on the market, on the sellers and their margins.

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On the other hand, ONDC’s approach is to use incentives as a trigger to jump-start the network with trial orders. While network participants may have their own offers and schemes, ONDC offers are being carefully curated to encourage wider participation and trials from a broad range of merchants. Specified upper caps have been put in place to prevent concentration of these offers among a few merchants and products. The discounts and incentives will continue only for a few months.What is the long-term growth strategy?
With ONDC, sellers need not be married to any one platform. Different kind of platforms will join the network, bringing different kind of sellers. This will pave way for specialisation and innovation, which will drive efficiencies and supply chains’ cost structures will eventually come down. Merchants are feeling a certain sense of liberation. They have access to their own consumer data. Most of the merchants and brands prefer this kind of
freedom and flexibility, possible in a democratic network like ONDC. Many international brands with India operations are showing interest to join ONDC. Many of the banks are at advanced stages of being integrated.

There have been complaints of poor user experience, slow deliveries…
If the seller platform is not behaving properly, the buyer platform can refuse to take orders. In food, majority of the deliveries happened in an hour’s time. In few cases, there have been delays. All participants are refining their processes. They have an incentive to do so.