ONDC sees 12% rise in transactions in June, driven by retail surge

Government-backed network experiences strong growth in retail orders

July 9, 2024

Of the total transactions, 3.94 million were in the mobility category via the Namma Yatri platform, while 6.01 million were retail purchases

The retail category has rapidly expanded, with monthly retail orders nearly tripling from 2.1 million in December 2023 to 6.01 million in June 2024

The mobility category’s growth has stagnated in the first half of 2024, partly due to established players like Ola and Uber experimenting with new subscription models.

ONDC has announced a phased reduction of up to 75% in financial incentives for network participants by the September quarter, with significant cuts for the food and grocery categories

The Open Network for Digital Commerce (ONDC) saw a 12% month-on-month growth in transactions in June, totalling 9.95 million compared to 8.9 million in the previous month, spurred by a surge in retail category purchases, according to sources familiar with the developments. Of these, 3.94 million transactions were in the mobility category via the Namma Yatri platform, while the remaining 6.01 million were retail purchases made by consumers on the government-backed network.

The retail category has expanded rapidly in the first half of 2024, with significant contributions from players like Ola, Paytm, and Magicpin. For context, retail orders on ONDC were 2.1 million in December 2023, meaning monthly purchases have nearly tripled in six months. In June, food orders saw a 40% month-on-month increase to 1.4 million, while grocery orders dropped to 870,000 and fashion orders decreased to 580,000. The remaining orders comprised other segments like beauty, personal care, electronics, and gift cards.

The retail category grew 20% month-on-month from 5 million in May, with the food segment’s contribution rising slightly from 20% to 23% in June. Meanwhile, the mobility category’s growth has stagnated in 2024 as established players like Ola and Uber experimented with a subscription model similar to Namma Yatri’s. The mobility category had 3.5 million transactions in late 2023.

In the past 18 months, several new-age companies such as Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket have joined ONDC, aiming to disrupt the dominance of players like Amazon, Flipkart, Zomato, and Swiggy in India’s online retail sector. The government hopes to increase e-commerce penetration to 25% within the next few years, targeting a gross merchandise value of $48 billion.

Despite the rapid growth in the retail category, ONDC has announced a phased reduction of up to 75% in financial incentives for network participants by the September quarter. This reduction is a strategic move to ensure the network’s long-term sustainability and align with the government’s fiscal policies. Participants have been advised not to adjust incentive payouts against their goods and services tax calculations. Financial incentives are awarded based on order volumes and categories, and this funding supports discounts and offers to promote the network’s adoption.

The new incentive structure reduces the maximum monthly incentive limit to Rs 2.5 crore from Rs 3 crore, with a quarterly limit set at Rs 6 crore. The highest cuts are in the food and grocery categories, constituting about 40% of the network’s monthly retail order volumes. For example, a buyer app with 10,000 monthly orders in the F&B category in the June quarter would see its incentive drop from Rs 70 per order to Rs 21 by September. Similarly, the grocery category’s subsidy would decrease from Rs 65 to Rs 20 per order by the end of the quarter. Non-food and grocery categories like fashion, home decor, and electronics will see 40-60% incentive reductions under different scenarios.

Source: Moneycontrol

Recent Articles

India-Spain strengthen aerospace ties with Tata-Airbus C-295 facility inauguration

October 28, 2024

Prime Minister Narendra Modi and Spanish Prime Minister Pedro Sanchez …

Read More

India pushes for deeper EU trade ties, highlights synergy with Germany

October 25, 2024

Commerce Minister Piyush Goyal underscored the potential for a strategic …

Read More

India advocates for greater financial integration at BRICS summit

October 24, 2024

India reinforced its commitment to financial integration within BRICS, with …

Read More