Why ONDC hasn’t got very far and what it must do to win in India’s e-commerce market

Naturally, this success would inspire ambition beyond payments and identity. The Open Network for Digital Commerce (ONDC) was born from this confidence to do for e-commerce what UPI did for payments: break platform silos and create an open, interoperable network where buyers and sellers could transact freely. Big private platforms would not be the only options.

Nearly four years on, ONDC has not lived up to its promise. It remains niche, confusing to many users and largely invisible to the typical e-shopper. India’s online commerce market remains dominated by a few large integrated platforms. They control product discovery, listings, payments, logistics and data. They are efficient and convenient, but they are also closed systems.

ONDC’s proposition was to separate the network from the platform. It aimed to create a shared digital network where any buyer app could connect with any seller app. In theory, a small kirana store could be discovered just as easily as a large brand. In practice, that shift has proven harder than anticipated.

So, where did ONDC go wrong?

First, the consumer experience is weak. UPI is simple: scan, pay, and you’re done. ONDC, by contrast, feels fragmented. Search results vary. Returns, refunds and customer support are inconsistent. This can frustrate users. E-commerce today is not just about prices, but about trust, reliably speedy deliveries and easy returns. ONDC may have underestimated high market expectations.

Second, sellers don’t see clear value yet. Small sellers were supposed to be ONDC’s biggest beneficiaries. But onboarding can be complex. Managing catalogues, pricing, fulfilment and logistics across multiple participants demands digital capability many small businesses lack.

Sellers also find that demand on ONDC is still low. Estimates suggest ONDC accounted for less than 0.1% of India’s roughly $100-billion online retail market in 2025. Without customers, there is little incentive to invest time and effort.

Third, logistics and fulfilment remain weak links. UPI was built on existing bank infrastructure, but ONDC relies heavily on external logistics: delivery partners, warehousing and last-mile service. Private platforms invested in these. ONDC does not yet offer the same reliability or speed, which directly affects customer satisfaction.

Fourth, network effects favour incumbents. Marketplaces thrive on scale. More buyers attract more sellers and vice-versa. Large platforms already have this advantage. ONDC entered a mature market, not a greenfield one. Without strong incentives or differentiated value, getting switchovers was always going to be difficult.

Finally, its narrative is unclear. UPI had a clear message: free instant payments. ONDC’s value proposition is harder to explain. ‘Open network,’ ‘interoperability’ and being a ‘protocol’ rather than a platform constitute policy jargon, while consumers are focused on price, convenience and certainty.

However, ONDC can still be revived.

One, focus sharply on a few categories instead of trying to be everything to everyone. It should double down on areas where openness offers a clear advantage—hyperlocal commerce, ride hailing, groceries, medicines or select financial products.

Two, standardize the experience. Set minimum standards for search, returns, refunds and customer support across all buyer apps. Most e-com consumers have come to expect this as table stakes. Using ONDC must feel as smooth as any leading platform.

Three, support small sellers firmly. ONDC needs hands-on seller enablement, including easy on-boarding tools and catalogue support. It must become the go-to for smaller sellers who struggle to get discovered on big platforms, not an experimental add-on.

Four, use incentives strategically. Early UPI adoption was driven by incentives and strong bank participation. ONDC needs similar nudges—for buyers, sellers and logistics partners—to kick-start network effects.

Five, communicate in simple language. ONDC’s story must shift from protocol design to tangible benefits, be it better prices, more choice or local discovery.

The success of ONDC matters. This is because the future of India’s digital economy should not be owned by a few closed platforms alone. Open networks are harder to build, but they are essential for long-term competition, innovation and inclusion.

India has shown the world that it can build digital systems at scale. ONDC is a harder challenge than UPI, but not an impossible one. With a clearer focus, better execution and a consumer-first mindset, ONDC can still become what it was meant to be: a truly open marketplace for India’s next billion digital users.

The idea behind this open network was right. Now it’s for its execution to catch up.

The author is an investor and an Independent Director. He’s on X as @LloydMathias