Will ONDC be the game changer in food delivery business?

When the government inaugurated the pilot phase of the Open Network for Digital Commerce (ONDC), there was much applause and appreciation from different quarters, with many calling it a game changer on the part of the government. This free-to-use internet solution for merchants and customers is expected to end the digital monopolies and duopolies of large IT businesses like Amazon, Flipkart, Zomato, Swiggy, and others, and empower smaller merchants. Some industry experts feel that it will be as revolutionary as the UPI itself.

When it comes to online meal delivery services in India, Zomato and Swiggy have a duopoly. While these platforms deliver food from restaurants to your home in a timely manner, they are also attacked for the "middleman cut," which is causing the increase in the price of food items.

“ONDC is a platform established and developed by the government, not an app or service. Currently, partners such as Paytm, Magicpin, PhonePe etc. serve as online shops, allowing consumers to order meals or other products from businesses listed on the ONDC platform. When you use an app like Paytm to order food or a product from the ONDC platform, the platform takes a tiny commission and then passes the order on to the business. Similarly, the hotel or business will handle the order, and Paytm will also share all user information with the business, which Zomato and Swiggy do not,” explained Girish Linganna, an aerospace and defence expert who has been keenly following the subject.

ONDC allows restaurants to sell food directly to consumers without the intervention of a third party (such as Zomato or Swiggy). In September 2022, Bengaluru became the first city to utilise ONDC. “When we order food through Zomato or Swiggy, these sites dispatch their own delivery personnel. When we order a product from ONDC, the restaurant must send its own runner, which presents certain difficulties. If a restaurant receives several orders at once, it may not be able to serve them all,” Linganna pointed out.

ONDC stated that deliveries are made through third-party last mile service companies such as Shadowfax, Dunzo, and Loadshare for a price paid by the restaurants, depending on which platform the apps such as Paytm and Magicpin have tie-ups with. Similarly, unlike Zomato or Swiggy, ONDC does not disclose information such as estimated delivery time. When it comes to meal delivery, ONDC appears to be less expensive than Swiggy and Zomato, according to posts on social media networks.

When contacted by THE WEEK, Swiggy declined to comment on the subject.

“When it comes to online meal delivery services in India, Zomato and Swiggy have a duopoly. While these platforms deliver food from restaurants to your home in a timely manner, they are also attacked for the "middleman cut," which raises the price even further,” pointed out Linganna.

Experts point out that the e-commerce revolution in India has put some wealthiest entities at the top. Some e-commerce platforms have been accused of copying vendors' items in their marketplace, manipulating search results, and using their massive data collection to push their products at the cost of other sellers.

According to market analysts, ONDC is anticipated to make e-commerce more accessible and inclusive to customers. Using any suitable application or platform, customers have the opportunity to find any vendor, product, or service, and thus expand their range of options. It will allow customers to match their demand to the closest accessible supply. This would also enable people to choose their favoured local companies. Thus, ONDC would standardise processes, encourage the involvement of local suppliers, improve logistical efficiency, and increase customer value.

“The deconstruction of the food delivery business will be emulated by new entrants but also by the incumbents. Besides the fact that the incumbents have high brand recall, which could lead to situations, where the more things change, the more they remain the same. Zomato has collected a large amount of data that reflects the quality of food experience because of which the uncertainty about restaurant quality is lower. New players will take a long time before they can confidently guide customer experience. Until then, the incumbent will continue to hold the advantage,” observed Alok Shende of Mumbai-based Ascentius Consulting.

Brand experts such as Harish Bijoor, the founder of Harish Bijoor Consults Inc, pointed out that ONDC is the new-leveller in the market. “Today it brings two benefits. It does not charge a delivery fee to the consumer. In addition, it is light on the restaurant as well, as it charges a lesser commission than a Swiggy or Zomato. In the bargain, ONDC is the friend of both the consumer and the restaurant.

"ONDC has several applications. It is a killer of greedy margins in business. Expect it to be the enemy of a Zomato, a Swiggy, an Uber an Ola and myriad other high commission guzzling businesses,” Bijoor told THE WEEK.