ONDC is fast emerging as a competitor of Swiggy & Zomato. Here's how

New Delhi: Did you know that a government-backed not-for-profit e-commerce open source platform is fast emerging as a formidable opponent to established food delivery platforms like Zomato and Swiggy? If you were to do a search for ONDC on Twitter, your screen will be flooded with tweets in which netizens are beaming over the big price differences that they have been spotting for the same items at the same restaurants on ONDC in comparison to Zomato and Swiggy.

When compared to Swiggy and Zomato, brands like McDonald's, Taco Bell, Behrouz Biryani, Wow Momo, Pizza Hut, and Cafe Coffee Day are available at discounted rates of 30-80 percent on ONDC ordering platforms like Magicpin, Paytm, and Phonpe.

Differential pricing, low commission charges leading ONDC's success story

According to Sagar Daryani, Vice President of National Restaurants Association of India (NRAI), "ONDC is a journey towards profitability but what is happening now is a short-term discount war." Unlike, Swiggy and Zomoto, ONDC is not charging any delivery fees and is charging lower commissions from the restaurants, which is helping them in increasing their profit margins and offering deep discounts. While the commissions charged by Swiggy and Zomato from restaurants hosted on their platforms range between 18 percent and 25 percent, the commission charges of ONDC are in the range of 8-10 percent.

"All this differential pricing is due to heavy discounts funded by the ONDC system or other players and platforms powered by ONDC," said Daryani.

T Koshy, Chief Executive Officer (CEO), ONDC, said that the platform is leading to a paradigm shift that is empowering sellers to customise their strategies on discounts and other parameters. Koshy added that the ONDC platform is also offering several choices to the end users.

How does food delivery work on ONDC?

ONDC stands for Open Network for Digital Commerce. It is not an app or a platform. It is an open-spurce network that connects sellers, buyers and logistic players. Currently, apps like Paytm, Magicpin, PhonePe etc, are hosting ONDC on their platforms, meaning they serve as the storefront from where consumers can place an order for food or groceries. The orders, once placed, are passed on to the businesses, which can then choose to deliver the order themselves or through third-party logistics partners like Shadowfax, Shiprocket or Dunzo. This allows businesses more choice as compared to Zomato or Swiggy.

The businesses on the network need to pay a commission to the apps hosting ONDC and the logistics partner, if they choose to avail their service. Since ONDC is a not-for-profit company set up by the Ministry of Commerce and Industry's Department for Promotion of Industry and Internal Trade (DPIIT), it does not charge any fee from the businesses operating on its network.

ONDC can revolutionise India's e-commerce landscape: McKinsey

"ONDC presents a unique avenue for India to revolutionise its digital commerce landscape and set an example for the world, much as India did with the UPI. With vast potential for a robust buyer and seller ecosystem, ONDC is a rare opportunity that arises once in a decade. Stakeholders—the government, industry players, and consumers—can determine how they seize this ‘tech-ade’, putting their best, most innovative selves forward to democratise digital commerce for all," said a report by McKinsey on ONDC.

"By 2030, ONDC could further accelerate the expected 5x growth in digital consumption of products and services," the report added.

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