ONDC crosses 5 million transactions in a month for the first time in December

The government-backed network is aiming to up the ante over the next few months and exit FY24 at a monthly run rate of up to 8 million transactions

The government-backed Open Network for Digital Commerce (ONDC) crossed 5 million transactions in a month across ride-hailing and retail purchases for the first time in December, according to people close to the developments.

Of the 5.5 million transactions made via ONDC in December, 2.1 million were in the retail category, while 3.4 million were in the mobility category. Within the retail segment, food delivery and fashion purchases each accounted for a third of the 2.1 million orders, with the remaining transactions spread across newer categories like cosmetics and electronics.

The current share of retail purchases stands in stark contrast to the early 2023 transaction breakdown, where retail accounted for only 5-10 percent, while the mobility category dominated with 90-95 percent of all ONDC transactions.

Retail purchases on ONDC have grown by more than 1,700 times within a span of 11 months — from 1,281 in January to 2.1 million in December.

ONDC declined to comment on the transaction numbers.

While 2023 focused on laying the groundwork for ONDC by onboarding a substantial initial wave of buyers, sellers, and platforms, 2024 will be a crucial year in determining its scalability. To this end, sources said that the government-backed network plans to ramp up its efforts significantly over the coming months, aiming to achieve a monthly run rate of up to 8 million transactions by the end of FY24.

To be sure, ONDC has not been able to hit its earlier stated goal of 100,000 retail orders a day — which would mean 3 million orders in a month — in 2023. Although sources said that it has already seen a peak of over 95,000 retail orders in a day, hitting the 100,000-mark consistently seems to be somewhat distant.

People close to the developments said that this growth trajectory is based on feedback it has received from network participants — both new-age unicorns and legacy fast moving consumer goods (FMCG) players — who have become convinced about the scalability of sales on ONDC.

Over the past year and a half, multiple new-age companies such as Paytm, Ola, PhonePe, Meesho, Magicpin and Shiprocket, have taken a bet on the government-backed ONDC that is aimed at breaking the stranglehold of a few players like Amazon, Flipkart, Zomato and Swiggy on online retail in the country.

On the other hand, traditional FMCG majors like Unilever and ITC have also thrown their hats in the ring as ONDC presents them an opportunity to sell directly to consumers and save on significant distribution costs.

Last month, Paytm founder and chief executive officer Vijay Shekhar Sharma said that ONDC will open up the e-commerce opportunity for a lot of players as it breaks down different parts of a transaction such as seller, logistics, and payment into separate parts. In effect, a single player doesn’t need large amounts of funding to build all the parts to break into the ecosystem.

Sharma said that 11.8 million users had already shopped on ONDC through Paytm and promised to bring 10 million merchants to the network by the end of 2025.

With ONDC, the government hopes to increase e-commerce penetration in the country to 25 percent in the next two years, reaching a gross merchandise value of $48 billion.