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India wants to build its own e-commerce business independent of Amazon

By Saima Siddiqui 
Updated Date

New Delhi: He became a billionaire after co-founding software behemoth Infosys Ltd. and leading a massive government effort to provide biometric identity for India’s almost 1.4 billion citizens.

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Nandan Nilekani, at 66, has one more audacious objective. The high-profile businessman is assisting Prime Minister Narendra Modi in the creation of an open technology network aimed at levelling the playing field for small businesses in India’s fragmented but rapidly rising $1 trillion retail industry.

Its claimed goal is to provide a free internet marketplace where merchants and consumers can buy and sell everything from 23-cent detergent bars to $1,800 plane tickets. But its implicit goal is to ultimately rein in Amazon.com Inc. and Walmart Inc.-owned Flipkart, whose online dominance has scared small businesses and the millions of kirana stores that make up the country’s retail backbone.

The kirana stores are terrified of an uncertain future as the two global giants invested a combined $24 billion into India and seized 80% of the online retail sector with aggressive discounts and marketing of favoured vendors. Despite the fact that internet shopping accounts for just around 6% of the entire retail industry, they are concerned that they will be suffocated in the future, comparable to many family-owned companies in the United States and abroad.

The non-profit system, known as the Open Network for Digital Commerce, or ONDC, aims to overcome these issues. It intends to allow small merchants and shops to hook in and get the reach and economies of scale of giants, something that has never been done before. In essence, the government would construct its own e-commerce ecosystem for everyone, with the goal of loosening Amazon’s control on which firms receive access to prime members and on what conditions.

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“It’s an idea whose time has come,” Nilekani said recently in a conversation at his private office in the Billionaire’s Row area of Koramangala in Bangalore, home to some of the nation’s top tech tycoons. “We owe it to the millions of small sellers to show an easy way to participate in the new high-growth area of digital commerce.”

Next month, a test of the non-profit, government-owned network will be pushed out to a select group of customers in five cities. Amazon’s representative said the business is attempting to better understand the concept in order to determine if it has a role to play. A request for response from Flipkart was not returned.

Some global retail behemoths have turned to India as a battleground after being kicked out of China or trying to compete with local rivals. With about 800 million smartphone users, the South Asian country has become a perfect testing ground for several corporations, including Google, Meta Platforms Inc., and homegrown heavyweights like billionaire Mukesh Ambani’s Reliance Industries Ltd.

In earlier lives, Nilekani aided the government in the development of the Aadhar biometric ID system, which is essentially a digitised version of the US social security system. It is the majority of Indians’ earliest proof of existence. Authorities claim it aids in the reduction of fraud and guarantees that assistance payments are delivered to the correct recipients. Nilekani also aided in the implementation of the United Payment Interface, or UPI, a payments backbone. Last month, it reached 5 billion transactions, thanks to companies like Google and WhatsApp.

The salt-and-pepper haired, moustachioed tech czar, who was hired as an adviser to ONDC last summer, wants to accomplish for e-commerce what UPI did for digital payments.

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His greatest problem, though, would be ensuring that the network met its objectives. Because their tested technology attracts merchants and shoppers to their platforms, Amazon and Flipkart have dominated the industry. If the government wants to compete with the main e-commerce platforms, it needs to construct something equivalent — or better, according to Anil Kumar, CEO of Redseer Management Consulting Pvt.

“Everything hinges on the network bringing on the widest set of buyers, sellers, payments logistics and warehousing providers, and so on,” said Bangalore-based Kumar. “The challenge is to standardize and smoothen the experience such as returns and refunds for buyers and sellers and to create an open network where everybody wins.”

Nilekani would also be under pressure to stay away from the issues that have marred his prior initiatives. Aadhar has been dogged by worries about data privacy, security, and identification. After a politician accused Amazon, Google, and Meta’s WhatsApp of engaging in the system without any examination and reportedly in breach of norms, India’s Supreme Court is presently looking into the situation.

If it succeeds, the e-commerce grid might enable millions of tiny firms get online while reducing their reliance on global behemoths. Kauser Cheruvanthody, 42, one of the proprietors of a five-store baby-products business in Bangalore, is one of many keen to check it out. He’d never sold anything online before, so a 30% drop in sales during the epidemic was unexpected.

“ONDC could change the game,” Cheruvanthody said. “I’m ready to fight Amazon and others, discount for discount.”

Despite the hurdles, Hemant Taneja, managing partner at Palo Alto-based venture capital company General Catalyst, believes Nilekani is the ideal man for the job.

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“Nandan is known for his long game, for setting up systems for enduring change with very intentional thinking on which parts of the economy should be digital public goods and which parts capitalism-driven,” Taneja said.

The promise of an open model excite entrepreneurs like Kumar Vembu. Over 30,000 small businesses and quick-service eateries use GoFrugal’s enterprise software. Hundreds of them are currently being assisted in integrating with the new network by him.

“Until now, small retailers were bringing a knife to the gunfight,” said Vembu. “Now, we can properly equip them to compete.”

According to CEO Thampy Koshy, a former senior partner of Ernst & Young, the open network will target 100 cities in the next months.

It took nine years for Aadhar to reach a billion users, whereas UPI took five years to reach 4 billion monthly transactions. Because India has gone down this route previously, Nilekani believes ONDC will be implemented much more quickly.

“We are charting a new course and the goal is to change the rules of the e-commerce game,” he said.

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