Government’s ONDC challenges Zomato and Swiggy in fierce price war for food delivery supremacy

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Over the past week, social media has been abuzz with numerous posts that compare the prices of food orders on ONDC with those on popular food delivery apps like Zomato and Swiggy. These posts reveal that, in most cases, customers can save more money on similar orders by using ONDC instead of Zomato or Swiggy. In fact, in some instances, the cost to the customer is almost 50% lower, making ONDC a more economical option.

How is ONDC able to offer lower costs?

The non-profit platform developed by the Indian government called the Open Network for Digital Commerce (ONDC) is attracting attention for its lower costs to customers when compared to popular food delivery apps like Zomato and Swiggy. As of March 2023, the platform claims to be operational in 180 cities. The absence of a middleman, meaning no platform fee or commission, is one of ONDC’s strengths. Nandan Nilekani, co-founder of Infosys and an ONDC advisory council member, believes that the platform has the potential to create a level playing field for both big and small e-commerce players. Nilekani expressed his views on ONDC and stated that the platform’s architecture has a significant impact on hyperlocal commerce and mobility. As customers begin to notice the cost benefits of ONDC, Nilekani’s vision of an e-commerce platform that creates equal opportunities for all players seems to be coming to fruition.[i]

The reason for the lower costs on ONDC is that the platform charges a mere 3% commission fee, which is much lower than the food delivery apps like Zomato and Swiggy that can charge up to 25% commission. ONDC is a digital commerce platform that connects buyers and sellers, and thus, it does not have in-house delivery partners. Instead, delivery is outsourced through third-party companies like eKart, Dunzo, and Delhivery. The process of ordering food through ONDC is relatively straightforward. Customers can access ONDC via their Paytm app, which acts as an online storefront. After selecting a restaurant, customers can place their food order and ONDC deducts a small commission before forwarding the order to the chosen establishment. After the restaurant prepares the order, a third-party delivery partner picks it up and delivers it to the customer’s address.

Struggles with Low Adoption and Limited Choices

Vendors may not be fully satisfied with the pace at which the ONDC is gaining popularity. A restaurant owner in Noida Extension, who has joined the ONDC network, shared with Business Today that although the concept is appealing, the current level of awareness about ONDC is low. As a result, the number of orders they receive via the platform is minimal, averaging just one every 15 days. This lack of popularity is impacting vendor sales via the platform. In addition, ONDC is facing another hurdle – limited choices for customers. When one checks ONDC via Paytm, the most popular online storefront for ONDC in Noida Extension, only a small number of vendors appear with a limited selection of products.

According to Girish Linganna, an aerospace and defense expert who has been closely monitoring the ONDC platform, it is not an app or service, but a platform established and developed by the Indian government. Currently, popular online storefronts such as Paytm, Magicpin, and PhonePe serve as partners for ONDC, enabling consumers to place orders for food and other products from businesses listed on the platform. When customers use these apps to order from ONDC, a small commission is charged by the platform and the order is then forwarded to the business. The business then takes care of fulfilling the order, with Paytm sharing all user information with the business, unlike Zomato and Swiggy.

Is ONDC capable of disrupting the e-commerce industry?

As ONDC grapples with issues of low vendor sales and limited customer options, the question arises – can it bring about a disruption in the e-commerce industry? While these challenges need to be addressed, ONDC’s low commission rates make it an attractive option for customers. If ONDC is able to expand its customer and vendor base, it could potentially disrupt not only the food delivery sector but also other areas of e-commerce throughout India.

Written by – Sohini Chakraborty intern under Legal Vidhiya