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ONDC limits discounts under new incentive structure

Sales on ONDC rapidly picked up last month and peaked thanks to the earlier incentive structure, which allowed network participants to give customers steep discounts

The Open Network for Digital Commerce (ONDC) revised its incentive structure on May 30, per a note sent to network participants, reviewed by MediaNama. Under the new structure, the incentive programs have more stringent eligibility criteria, and the maximum discount that can be offered to buyers has been reduced to Rs 100 from Rs 125. The number of incentive programs has also been reduced to two from three earlier and from the five that ONDC had when it first launched incentives.

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The new incentive structure goes into effect today (June 1, 2023), replacing the existing incentive structure, which we’ve covered in detail here. The new structure will run until June 28, 2023, unless ONDC decides to extend it later on, as it has done previously.

Sales on ONDC rapidly picked up last month and peaked thanks to the earlier incentive structure, which allowed network participants to give customers steep discounts and free delivery in most cases. Under the new structure, both the number of discounts and their value are expected to reduce. It will be interesting to see how ONDC performs under the new structure and when incentive programs are withdrawn altogether eventually, as ONDC CEO T Koshy has indicated will happen in the long run.

“The primary purpose (of the incentives) was for people to understand that unbundled commerce works. It was never about the price. At no point do we expect the floodgates to open for incentives–not now, not ever. We will maintain some stimulus, while at the same time, we don’t want to make it the reason for business to happen.” – ONDC Chief Business Officer Shireesh Joshi told YourStory

The following are the two incentive programs under the new structure:

1. Incentive for buyer apps to boost transactions 

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Under this program, buyer apps can claim a maximum incentive of Rs 25,00,000 per week for offering discounts or subsidized deliveries to buyers, subject to the following conditions:

  • The maximum discount that can be offered is Rs 100 per order (earlier, a discount of up to Rs 125 per order could be offered where up to Rs 50 could be offered for the order and up to Rs 75 as delivery subsidy).
  • The discount should not exceed 50% of the total order value (including shipping charges).
  • The minimum order value should be Rs 200 for the Food and Beverages (F&B) category and Rs 300 for all other categories, including shipping fees.
  • A buyer can only get discounts for up to 5 transactions per month.
  • The buyer app can only provide discounts for up to 20 transactions per seller/brand per day.
  • If the number of discounted orders exceeds 1000 in the week, the maximum number of orders for which the buyer app can claim incentive that week cannot exceed more than 50% of overall delivered orders in the week.
  • The order should be delivered and not returned.

2. Incentive for seller apps to onboard more sellers

Under this program, which remains largely similar to the earlier incentive program for seller onboarding, seller apps will get Rs 1000 per seller (up to Rs 5000 for the grocery segment) for onboarding sellers from the following categories, for a maximum of 1000 sellers per category.

  • Food and beverages (F&B),
  • Grocery (incentive varies between Rs 1000 to Rs 5000 depending on the number of stock-keeping units or SKUs the seller has),
  • Health and Wellness,
  • Farmer Producer Organisation,
  • Marginalized sellers (self-help groups, individual artisans, and off-farm producer organizations), and
  • All other categories.

Earlier, an additional incentive of Rs 3,00,000 was offered to the first two seller apps to touch 1000 sellers in F&B, grocery, and “other categories”. This has been removed under the new structure.

“ONDC first conceived the incentive program 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. 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 program.” — ONDC Note

This post is released under a CC-BY-SA 4.0 license. Please feel free to republish on your site, with attribution and a link. Adaptation and rewriting, though allowed, should be true to the original.

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