Saturday, 24 August 2024

Is the Theory of Market Structure Setting the New Norm and Inviting a New Model? Will it Impact Teaching in B-Schools or Tech-Schools? ONDC leads to ONDE?

Dear Friends,

Last week, I attended an important and intriguing discussion with the ONDC (Open Network for Digital Commerce) team, which I believe will be a revolutionary change in how we buy, sell, and deliver products or services in India! This innovation will not only influence commerce but also compel educators to rethink and possibly change how they teach in B-Schools or Tech-Schools.

Let us first understand the evolution of market structures. In early civilizations, trade operated through a simple barter system without formal market structures. Transactions were local and based on the direct exchange of goods and services. Later, formal markets emerged in towns and cities, often characterized by guilds and monopolistic trade practices.

During the 16th to 18th centuries, monopolies (where a single entity controls the supply) and oligopolies (where a small number of firms dominate an industry) were prevalent, particularly in colonial trade. The 18th to 19th centuries, especially during the Industrial Revolution, saw the rise of competitive markets, though certain capital-intensive industries exhibited oligopolistic characteristics. By the late 20th century, globalization and technological advancements led to the formation of global oligopolies.

In the 21st century, the rise of digital platforms and network effects created new forms of monopoly and oligopoly, along with instances of perfect competition in some areas, often regulated by antitrust actions and government policies. However, the maturity of technology has led to a mix of highly concentrated digital markets and fragmented niche markets driven by new technologies and consumer demands.

In this context, India is introducing the concept of the Open Network for Digital Commerce (ONDC), which is comparable to UPI but in the realm of commerce. Today, if you want to book a flight, you use one app; if you're going to order food, you use another; if you want to buy a suitcase, you use yet another app. However, ONDC will allow you to do all this on a single platform, enabling you to compare prices across all sellers and choose the best delivery agent, all within a single app!

This platform isn’t just beneficial for buyers; it also provides sellers the opportunity to reach a global customer base with significantly reduced marketing or customer acquisition costs. In India, more than 12 million sellers earn their livelihood by selling or reselling products and services, but only 15,000 sellers (0.125%) have enabled e-commerce. With around 936.16 million internet subscribers in India, including 350 million mature online users, it is nearly impossible for a small roadside seller to tap into such a vast e-commerce market. However, ONDC offers them equal opportunity.

ONDC recognizes the unique potential to increase e-retail penetration from the existing 4.3% to its maximum potential in India. With 26 banks, BSE, and NSE investing in this platform and ONDC being established as a Section 8 not-for-profit company, the initiative is poised to make a significant impact.

ONDC’s architecture allows Buyer Apps and Seller Apps to manage order fulfillment as they see fit. This is good. Moreover, ONDC, as the orchestrator, has no direct role in—or even visibility into—any transaction. This is better. The introduction of scoring, badging, and a user-driven system to evaluate the quality of products and the performance of sellers and logistics service providers is the best approach to preventing online malpractice.

However, I have one lingering question. What if a large player takes advantage of a small seller, especially one in a remote part of the country or an early-stage startup doing local business? With the advancement in AI, this large player could gain global access to all sellers displayed on the platform, including their pricing, margins, delivery methods, customer psychology, and more.

Do you think teaching in the classroom is set to change with the introduction of this platform? It’s no wonder that when teaching becomes a commodity and an “Open Network for Digital Education (ONDE)” is introduced, every course, certificate, and student will operate similarly! That day might not be far off!

ONDC leads to ONDE?

Ravi Saripalle

No comments:

Post a Comment