ONDC Implements Revised Incentive Structure, Sets Rs 100 Limit on Discounts
- ByStartupStory | May 31, 2023
ONDC has introduced revisions to its incentive scheme for network participants, aiming to decrease reliance on discounts for fostering adoption. This move addresses concerns regarding the network’s ability to challenge the duopoly of Zomato and Swiggy. However, the reduction in incentives has resulted in a significant decline in daily order values, dropping by approximately 64 percent to 9,000 from the peak.
In response to mounting analysis from internet experts, it has been emphasized that the initial food delivery volumes witnessed on ONDC are not viable in the long term. Following statements from Jefferies and Motilal Oswal Financial Services Ltd (MOFSL) asserting that ONDC would not disrupt the Zomato and Swiggy duopoly, analysts at JM Financial have now raised concerns that ONDC, in its present form, does not pose a threat to any player’s business, particularly in the absence of discounts.
Starting from June 1, 2023, the revised incentives will replace the program launched on January 30, 2023, with the current phase scheduled to run until June 28, 2023. As part of the updates on ONDC, there are several notable changes that might discourage buyers from utilizing the network. One significant change is that ONDC will only process orders if they meet the minimum threshold.
As per official communication between ONDC and network participants, there are specific minimum cart value requirements for orders. For food and beverage orders, the minimum cart value is set at Rs 200, while for all other categories, including shipping charges, the minimum cart value is higher at Rs 300, prior to any pricing intervention.
Under the revised scheme, a buyer can now qualify for incentives on a maximum of five transactions per month. Previously, buyers could avail discounts on up to three orders per day, but the total number of orders eligible for discounts was capped at 30.
The maximum incentives will now be limited to Rs 100 per order, a reduction from the previous amount of around Rs 125. It is crucial to note that when considering all prices, the total discounts offered should not exceed 50 percent of the overall order value.
“ONDC first conceived the incentive programme when the network was clocking less than 100 orders a day. With the stimulus, the volume of orders increased to over 13,000 per day, after which the incentives were tweaked and the impact was observed,” ONDC’s communication stated.
The average daily order volumes have declined by 64 percent, reaching approximately 9,000 orders, compared to the previous peak of 25,000 achieved earlier this month.
“Presently, ONDC is averaging over 9,000 orders a day proving that interoperable unbundled e-commerce is not just viable but can also continue momentum beyond the stimulus. Thus, given the current stage of growth, ONDC has decided to revamp the incentive programme,” the letter added.
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