The Open Network for Digital Commerce (ONDC) achieved a 12% month-on-month growth in transactions in June, reaching 9.95 million, up from 8.9 million in May. This surge was driven by a significant increase in retail category purchases, according to MoneyControl.
Of the total transactions, 3.94 million were in the mobility category via the Namma Yatri platform. The remaining 6.01 million transactions were retail purchases made by consumers on the government-backed network.
The retail category has experienced rapid growth in the first half of 2024, fueled by increased activity from players like Ola, Paytm, and Magicpin. In December 2023, retail orders on ONDC were 2.1 million, indicating that monthly purchases have nearly tripled over the past six months.
In June, food orders grew by 40% month-on-month, reaching 1.4 million. Grocery orders, however, decreased from 1.02 million to 870,000, and fashion orders fell from 630,000 to 580,000. The remaining orders were from smaller segments such as beauty and personal care, electronics, and gift cards.
Overall, the retail category grew by 20% month-on-month from 5 million in May. The food segment’s contribution to the retail category increased slightly from 20% in May to 23% in June.
The mobility category’s growth has somewhat stagnated in the first six months of 2024, as established players like Ola and Uber began experimenting with a subscription model for drivers, similar to Namma Yatri. In the last months of 2023, the mobility category on ONDC recorded 3.5 million transactions.
Over the past year and a half, several new-age companies, including Paytm, Ola, PhonePe, Meesho, Magicpin, and Shiprocket, have joined ONDC. The initiative aims to break the dominance of major players such as Amazon, Flipkart, Zomato, and Swiggy in India’s online retail sector. The government hopes to increase e-commerce penetration in the country to 25% in the next few years, targeting a gross merchandise value of $48 billion.
In light of the retail category’s rapid growth, ONDC has announced a phased reduction of up to 75% in financial incentives for network participants by the September quarter. Participants have been advised not to adjust incentive payouts against their goods and services tax calculations.
Previously, financial incentives were provided based on order volumes and categories, with funds used to support discounts and offers for customers, promoting rapid adoption of the network. The new incentive structure reduces the maximum monthly limit of incentives from Rs 3 crore to Rs 2.5 crore and introduces a quarterly limit of Rs 6 crore.
The most significant drop in incentives will affect the food & beverages (F&B) and grocery categories, which together constitute about 40% of the network’s monthly retail order volumes. For instance, a buyer app that processed 10,000 monthly orders in the F&B category in the June quarter received an incentive of Rs 70 per order. This amount will decrease to Rs 42 in July, Rs 32 in August, and Rs 21 in September, marking a 70% reduction by the end of the quarter.
Similarly, for the grocery category, a buyer app processing 10,000 monthly orders in the June quarter received a subsidy of Rs 65 per order. This will reduce to Rs 39 in July, Rs 29 in August, and Rs 20 in September, representing a 75% reduction by the end of the quarter.
ONDC’s significant transaction growth in June underscores its expanding influence in India’s digital commerce landscape. As the network continues to evolve, the adjustments in financial incentives aim to balance rapid growth with sustainable market practices.
