ONDC at the awkward middle: order volumes climb but the unit economics are still a puzzle

The Open Network for Digital Commerce has crossed several order-volume milestones through 2024 and into 2025, driven primarily by its mobility vertical - where ride-hailing integrations with Namma Yatri and other city-level apps have generated transaction volumes that look impressive on network-level charts - and by grocery and food delivery use-cases where the network's seller-app infrastructure has been adopted by traditional kirana-store aggregators looking for an alternative to the commission structures of Swiggy and Zomato. The fundamental design of ONDC - an open protocol that separates buyer apps from seller apps and allows any certified network participant to transact with any other, without any single platform controlling the entire experience - creates genuine theoretical benefits for competition and seller economics. Sellers who list on ONDC's network gain access to every buyer app simultaneously, rather than needing to maintain separate integrations with multiple platforms. Buyers using any ONDC-compatible app gain access to every registered seller. This is structurally analogous to the way email protocols work across providers, and the government's aspiration is to create the same kind of interoperability for commerce. The practical challenges are significant. The quality of the buyer experience on ONDC is highly variable, depending on which buyer app the customer uses - some buyer apps have invested heavily in UX and reliability, others less so. Seller on-boarding has been complicated by inconsistent technology standards for catalogue management, order handling and returns processing across different seller-app providers. Dispute resolution between parties who interact through multiple intermediary apps is more complex than on a vertically integrated platform where a single company controls both sides of the transaction. The subsidy question is particularly unresolved. Many ONDC buyer apps have been offering incentives to attract customers that are partially funded by the network's promotional budget and partially absorbed by the apps themselves as customer-acquisition investment. The sustainability of these incentives as network promotional funding winds down is an open question, and the order volumes driven by subsidised transactions are not a reliable indicator of organic network economics. What to watch: what fraction of ONDC's order volumes are driven by subsidised or incentivised transactions versus genuine organic demand, whether any of the leading buyer-app players on ONDC reach the scale and retention metrics needed to build a self-sustaining business model, and whether the government's policy commitment to ONDC translates into regulatory steps that create structural incentives for platform incumbents to integrate with the network.

Original source: Moneycontrol