27 March 2025, New Delhi: The government-backed Open Network for Digital Commerce (ONDC) has achieved a significant milestone by surpassing 200 million total orders across retail, logistics, and mobility services. However, despite this achievement, retail orders have shown a concerning downward trend, slipping from 6.5 million in October 2023 to 4.6 million in February 2024, according to ONDC’s latest dashboard data.
This decline in retail orders coincides with a gradual reduction in incentive payouts by ONDC to its participating platforms. Initially, ONDC had provided financial incentives to onboard sellers, drive transactions, and offer customer discounts. These incentives played a crucial role in attracting smaller players, such as Magicpin, Paytm, and Ola Consumer Apps, which relied on them to offer discounts and expand their reach.
However, over the past few months, ONDC has significantly reduced these incentives, with the monthly payout dropping from ₹60 crore in its initial phases to an undisclosed lower amount. This strategic shift follows the entry of larger players such as Flipkart and Walmart-backed PhonePe, which launched their own ONDC-backed platforms, bringing in a broader user base. With their presence, ONDC aims to build a more sustainable business model, moving away from an incentive-driven growth strategy.
Retail Slump Amidst Incentive Cuts
Retail orders, which had seen an initial surge due to deep discounts and financial benefits provided by ONDC, have started to decline as incentives wane. Industry experts believe that smaller businesses, which relied heavily on these subsidies, are now struggling to attract customers without significant discounts.
In response to the decline, T Koshy, CEO of ONDC, acknowledged the fluctuations but stated that overall trajectory remains strong. He emphasized that ONDC’s primary focus is on long-term growth and sustainability, rather than short-term volume gains. Koshy added that the platform is now seeing greater momentum in logistics services, with 1 lakh orders recorded daily.
Mobility Sector Outperforms Retail
While retail transactions have taken a hit, ONDC’s mobility category has shown impressive growth, logging 8.1 million transactions in February—an increase of 47% from January. The rapid expansion in this sector highlights a shift in consumer behavior, with more users opting for ONDC’s platform for transportation services.
The rise in mobility services has been attributed to ONDC’s partnerships with major players in the ride-hailing industry. These platforms offer competitive pricing and reliability, making them a preferred choice for users looking for affordable travel options. Meanwhile, logistics services on ONDC have also gained momentum, with major logistics partners facilitating faster and more efficient deliveries.
The Road Ahead for ONDC
Despite the dip in retail transactions, ONDC remains optimistic about its long-term prospects. The platform is now focusing on strategic partnerships with large-scale retailers and logistics providers to create a more robust and competitive marketplace.
Industry analysts suggest that ONDC’s next big challenge will be maintaining growth momentum while ensuring profitability. The shift away from heavy discounting and incentives may initially slow down order volumes, but it is expected to result in a more stable and self-sustaining ecosystem in the long run.
ONDC’s ability to attract major retail players, improve platform efficiency, and offer competitive prices without heavy subsidies will determine its success. As the platform continues to evolve, all eyes will be on how it navigates this transition phase while sustaining consumer interest and seller participation.
For now, ONDC’s milestone of 200 million total orders is a testament to its potential, but the road ahead will require strategic adjustments to maintain its growth trajectory in the highly competitive e-commerce landscape.
Source: Jessica Rajan & Pranav Mukul, The Economic Times
