A Complete Breakdown of ONDC and How It Empowers Small Sellers

As Indian e-commerce is dominated by giant players like Amazon and Flipkart, is it possible for a government initiative like ONDC to lead a UPI-like revolution that can provide Kirana stores and small manufacturers a digital voice? The Open Network for Digital Commerce (ONDC) is a vision to transform India's digital retail landscape–not by inventing another application, but by constructing an open network, like the UPI  that revolutionised the digital payments nexus. ONDC enables smooth transactions between buyers and sellers across multiple platforms, which breaks down the monopolistic obstacles created by big e-commerce giants. The core mission of this initiative is to democratise digital commerce by making it more accessible and inclusive for small retailers, micro-businesses, and local vendors who were previously overshadowed by deep-pocketed platforms. By shifting control from a few dominant conglomerates to a decentralised system, ONDC aims to provide a fairer ecosystem where a small grocery shop has the same digital reach as a big brand. But here comes the question: can this ambitious foresight survive the market's complex realities?

Why was ONDC Launched?

It is expected that India's e-commerce would reach to $350 billion by 2030. But still over 85% of Micro, Small, and Medium Enterprises (MSMEs) remain offline, which exhibits a significant digital divide across the country.

The overwhelming control of giant e-commerce platforms like Amazon and Flipkart has resulted in high commission fees, often stretching from 18% to 40%. Beyond hefty commissions, small sellers also face major obstacles in the form of listing fees, promotional expenses, and algorithm-driven disadvantages.

The Indian government launched the Open Network for Digital Commerce (ONDC) in April 2022 to address challenges, aiming to democratise digital commerce by creating an open, inclusive, and interoperable platform. This initiative's vision is to break down walls created by the giant players dominating the e-commerce market, empower small businesses, and promote healthy competition in the digital marketplace.

How does ONDC work?

A purchaser in Kolkata can use a buyer app like Paytm to search for products. This request is routed through the ONDC network to multiple seller applications like GoFrugal or Mystore, which respond with product listings from sellers across the country. For instance, through GoFrugal, a fruit vendor in Lucknow can make their offerings visible to buyers in Kolkata. After the buyer makes a selection, they can pick from multiple logistics partners on the network to manage the delivery. This is how payments are processed through integrated payment systems within the network.

Lower commission structure is a significant advantage of ONDC. Where traditional e-commerce platforms charge sellers commissions ranging from 18% to 40%. In contrast, ONDC reduce this burden, aiming for buyer-side commission at around 3% and allowing seller-side commissions to be determined by market forces, often resulting in lower rates.

ONDC as of Today's Context

As of 2025, ONDC has successfully onboarded over 7 lakh sellers and service providers, the majority of whom are MSMEs. The platform has processed over 20.4 crore cumulative transactions by March 2025, with 1.6 crore orders in that month alone, which indicates a rapid spike in daily transactions and showcases the network's growing momentum.

Integration of prominent digital platforms with ONDC, like PhonePe, Paytm, and Meesho, either as buyer or seller applications, enhances the network's reach and utility.

SBI, the country’s largest lender, has invested ₹10 crore to acquire a 7.84% equity stake in ONDC. Punjab National Bank (PNB) has also proposed to invest by 9.5% stake as a promoter in the company. These banks are actively encouraging their MSME clients to join the network, aiming to facilitate digital sales and broaden market access for small businesses.

Challenges & Criticisms

Though ONDC aspires to democratize India's e-commerce landscape but there lie several challenges and criticisms. India is a country that has the third-largest shopper base in the world. As per Blueme's report, 850 million people use the internet, and out of this, only 185 million shop online. And among these, only 51 million shoppers are from rural India.

According to an ET Now Report, out of 100 million Indian MSMEs, only 5 million are registered to sell digitally. Still, a significant portion of our country's micro and small businesses lack the digital literacy required to effectively engage with ONDC. This digital divide among citizen hampers their ability to influence the initiative's benefits.

• Logistics Integration Challenges: The platform doesn't provide its own logistics solution. So the seller needs to independently select and coordinate with logistics partners, which can be intimidating for small vendors unfamiliar with digital operations.

• User Experience Concerns: Many ONDC users find its interface difficult to use. A survey indicated that 54% of users perceive the platform as challenging to navigate, and 35% reported subpar customer service.

There are concerns that large conglomerates like Tata and Reliance may dominate ONDC, hampering the initiative's aims to empower small businesses. 

The Road Ahead

The Indian government aims to onboard 10 million sellers onto the ONDC platform by 2027, striving to create a more inclusive digital marketplace.

Institutions likeSmall Industries Development Bank of India (SIDBI) and the National Small Industries Corporation (NSIC) are offering support and incentives to MSMEs for digital adoption. For instance, SIDBI has signed an MoU with ONDC to assist artisans, MSMEs, and NGO in establishing their digital presence and promoting their products online.

The Department for Promotion of Industry and Internal Trade (DPIIT), which comes under the Ministry of Commerce and Industry, is actively promoting ONDC by bringing together the state and central government sellers, including handicraft emporiums, and encouraging public sector banks to enable MSMEs to take part.

There are ongoing discussions about the integration of ONDC with the Government e-Marketplace (GeM), which could potentially simplify procurement and broaden market access for sellers.

So, these are the few efforts that highlight the government's commitment to democratising digital commerce. That could ensure MSMEs compete on a level playing field in the evolving e-commerce ecosystem.