Open can cut costs, allowing brands to invest more in accessing data: T Koshy

The e4m D2C Revolution Summit 2024 saw T Koshy, Managing Director and CEO of the Open Network for Digital Commerce (ONDC), address the potentials of an open digital commerce ecosystem in transforming Bharat's direct-to-consumer (D2C) landscape.

In his talk, titled “Unlocking the Potential of an Open Digital Commerce Ecosystem: The ONDC Revolution in Bharat's D2C Landscape”, Koshy shared key insights on how the ONDC framework was reshaping market access, logistics, and brand visibility for D2C brands. Highlighting impressive growth metrics and practical case studies, he emphasised the importance of community-driven commerce and the opportunities, which lie ahead for innovative D2C players in a rapidly evolving digital marketplace.

According to Koshy, in January 2023, ONDC made its presence known in Bangalore, starting with 500 merchants and recording about 1,200 transactions. Fast forward to this month, the projection is around 13.5 million transactions with about 700,000 merchants. “That’s significant growth—just last year, we were at 2 million. In some areas, we've even reached a 15-20% market share in certain segments, which is quite an achievement in just 12 to 18 months.”

He added, “D2C brands, in my view, are typically innovators offering unique products. They often don’t have the extensive resources of larger companies, making market access a primary concern. There are two ways to gain market access: building your own e-commerce site or rely on established platforms. However, individual sites can struggle with customer acquisition and retention, making them costly.”

Koshy pointed out that another major hurdle was logistics. Smaller players often can’t negotiate favourable logistics deals, resulting in high costs. This makes it hard to compete on price and efficiency, especially without robust warehousing solutions.

“This is where the idea of an open network becomes powerful. We started by focusing on difficult domains like groceries and food delivery. Initially, there was scepticism about entering the food sector due to its complexities. However, with community support and cooperation among early adopters, we managed to demonstrate the potential of the open network,” he said.

He cited an example where one early participant saw their market share drop from 99% to about 30%, but their overall volume increased eightfold. This community approach proved that collaboration can lead to success for all. “We’ve also integrated logistics as a service into the open network, providing access to competitive logistics solutions for smaller players.”

As a result, logistics costs have become comparable to those offered by larger platforms. This is crucial for hyperlocal delivery, which has grown significantly since the launch of the logistics service. Currently, there are about 70,000 transactions per day in hyperlocal logistics.

Furthermore, established players are now able to contribute surplus capacity to the network, similar to how electricity grids work. This flexibility allows small businesses to tap into logistics services without the need for extensive integrations or legal contracts, Koshy shared.

Looking ahead, Koshy spoke of the aim to expand these solutions into D2C brands. The cost structure for D2C businesses can be burdensome, with digital commerce costs often accounting for 30-50% of overall expenses. The open network can help reduce these costs, allowing brands to invest more in building their reputations and accessing customer data, he shared.