The Open Network for Digital Commerce (ONDC) announced a significant incentive boost for buyer-side apps on September 17th. This development coincided with the final day of the Asia Cup 2023, during which India defeated Sri Lanka, as revealed in a notification sent to network participants by the government-backed ONDC.
The ONDC raised the incentive level for food and beverage purchases from INR 50 per order to INR 100 for those exceeding INR 200. In their letter to network participants, ONDC specified that this higher incentive rate would be applicable for only one day, allowing for A/B testing of customer responses.
In the world of business, A/B testing is a technique in which various app or website visitors are exposed to two or more different products or campaigns. This approach is used to evaluate which one of them performs more effectively.
“Any big cricket match day is a good time to test out various marketing campaigns and see what sticks better. Weekends are typically significantly higher volume affairs and the final game means there would be even more orders,” said a food aggregator executive who didn’t want to be named.
Nevertheless, it remains uncertain to what extent there was an increased demand for food orders on September 17. Since the cricket match concluded prematurely due to a subpar batting performance by Sri Lanka, it is possible that ONDC participants were unable to attract as many consumers as originally anticipated.
Earlier this month, ONDC made significant changes to its incentive scheme, introducing greater flexibility for buyer-side apps in distributing discounts to consumers. This included a reduction of the average subsidies for food orders by 50%, bringing them down to INR 50 per order. Additionally, ONDC implemented measures to increase the concentration of merchants on the network in 45 non-metro districts.
To be sure, that revised structure will once again take effect starting from September 18th. In this updated arrangement, the average incentive has been adjusted as follows: INR 50 per order for food and beverage orders exceeding INR 200, maintained at INR 100 per order for grocery, beauty, and personal care orders exceeding INR 200, and held at INR 100 per order for orders falling between INR 200 and INR 1,000 for electronics and other categories.
In the earlier version of the scheme, there was no categorization that determined the maximum incentive per order; instead, it remained a consistent flat rate of INR 100 for all orders.
Most significantly, the limit on the number of transactions a buyer can qualify for incentives per week has been reduced from five to just two.
In June, ONDC limited incentives per order to INR 100 in response to criticism for attempting to expand its market presence through aggressive discounts in the food and beverage category.
Presently, the government-supported e-commerce network has adopted a phased approach to offer incentives through the seller-side application as well. For instance, platforms will receive up to INR 6,000 for enlisting each seller in metropolitan areas, up to INR 7,500 in the targeted tier-2 and tier-3 cities, and INR 5,000 in all other cities if the grocery category has more than 5,000 stock-keeping units.
The incentive levels will also be adjusted according to the number of stock-keeping units a newly onboarded seller possesses and the category in which they operate.
With government backing, ONDC aims to curb the dominance of a handful of major platforms like Amazon, Flipkart, Swiggy, and Zomato in the e-commerce and food delivery industries.
The government aims to accelerate e-commerce adoption in the nation, targeting a 25 percent penetration rate within the next two years. This initiative aims to connect 900 million buyers and 1.2 million sellers through the network, with an anticipated gross merchandise value of $48 billion.
ONDC relies on three fundamental pillars to decrease business operational costs for all, including retailers: dynamic pricing, efficient inventory management, and optimized delivery expenses.