How ONDC and AI Technology are Enabling MSMEs to compete from Local to Global Markets

In 2024, India's Micro, Small, and Medium Enterprises (MSMEs) contributed to approximately 30% to the nation's GDP, playing a crucial role in driving economic growth. Despite their significance, many of them have faced challenges in scaling operations and accessing broader markets.

However, the advent of the ‘Open Network for Digital Commerce’ (ONDC) and advancements in ‘Artificial Intelligence’ (AI) are revolutionizing this structure, encouraging these small businesses to transition from local players to global contenders.

ONDC Overview: Leveling the Playing Field for MSMEs

Launched in April 2022 by the Department for Promotion of Industry and Internal Trade (DPIIT), Ministry of Commerce, ONDC is a transformative initiative aimed at democratizing digital commerce in India. By adopting an open and inclusive digital ecosystem, this network enables corporations of all sizes to participate in e-commerce, reducing the dominance of large platforms and promoting a more equitable market environment.

For MSMEs, ONDC offers several advantages:

· Market Democratization: It ensures that establishments of all sizes can thrive, providing a level playing field for companies to compete with larger enterprises.

· Economic Growth: Increased digital commerce activity contributes to GDP, benefiting small companies by expanding their market reach and customer base.

· Enhanced Visibility: By joining the network, these firms can access a wider market reach, tapping into a national customer base beyond their local confines, which can exponentially increase their sales and revenue potential.

· Interoperability: The network’s construction facilitates seamless transactions across various digital platforms, allowing these small organizations to reach customers on multiple channels without the need for platform-specific integrations.

· Improved Customer Experience: This offers various payment methods, real-time order tracking, and customer support, enhancing the overall experience and encouraging repeat transaction.

AI Opportunities for MSMEs

India's digital commerce sector is experiencing rapid growth, with projections indicating a CAGR of 19% by 2030. In this dynamic environment, the sector is prepared to benefit significantly from integrating artificial intelligence technologies. A recent whitepaper by Nasscom highlights that 94% of surveyed tech-enabled MSMEs recognize AI's potential to drive business growth, with 87% confident in its capacity to enhance overall productivity. This technological transformation positions these firms to capitalize on the expanding digital commerce landscape.

AI Based Tools for ONDC Buyer and Seller App

1. Chatbots for Customer Queries

AI-powered chatbots have become incredibly valuable tools for buyer apps built in integration with ONDC, offering a range of benefits that enhance the customer experience and boost business efficiency. These chatbots can provide instant customer support, answering frequently asked questions, resolving issues, and guiding users through the purchasing process. This 24/7 availability ensures that customers can get help whenever they need it, leading to increased satisfaction and loyalty.

Beyond customer support, AI chatbots can also personalize the shopping experience by offering product recommendations based on individual preferences and browsing history. They can also assist with tasks like order tracking, returns, and even upselling or cross-selling, all within the convenience of the app. By automating these interactions, e-commerce businesses can free up human agents to focus on more complex issues, reduce costs, and ultimately drive sales growth.

2. Predictive Analytics helping SNP to maximize sale

Predictive analytics, powered by AI, is revolutionizing e-commerce by enabling businesses to anticipate future trends and customer behavior. By analyzing vast amounts of data, including past purchases, browsing history, demographics, and even social media activity, AI algorithms can identify patterns and predict what customers are likely to buy, how they will interact with the platform, and even when they might churn. This allows e-commerce companies to personalize recommendations, optimize pricing strategies, and fine-tune marketing campaigns for maximum impact.

Moreover, predictive analytics is crucial for efficient inventory management and supply chain optimization which helps Seller Network Participants(SNP) to guide their sellers on fast and slow moving inventory items. By accurately forecasting demand, SNP helps sellers to ensure they have the right products in stock at the right time, minimizing the risk of stockouts or overstocking. This leads to improved customer satisfaction, reduced costs, and increased profitability. In essence, AI-driven predictive analytics empowers e-commerce businesses to make data-driven decisions, stay ahead of the competition, and deliver a superior customer experience.

3. Personalized Marketing for promoting the brands by Seller apps

AI is revolutionizing how Buyer and Seller platforms approach marketing for their sellers. By leveraging the power of machine learning, these platforms can gather and analyze vast amounts of data about seller performance, product trends, and customer behavior. This data can then be used to create highly personalized marketing campaigns that are tailored to the specific needs and goals of each individual seller. For example, AI can identify sellers who are struggling to gain traction and suggest targeted promotions or advertising strategies to boost their visibility.

Furthermore, AI can help sellers optimize their product listings, pricing, and inventory management based on real-time market insights. By analyzing customer search patterns and purchase history, AI can recommend relevant keywords, suggest competitive pricing strategies, and even predict demand for specific products. This level of personalization empowers sellers to make data-driven decisions, improve their overall performance, and ultimately drive more sales on the e-commerce platform.

Final Thought

ONDC and AI-driven digital transformation represent a major shift in India’s economic landscape. The success of these initiatives will depend on widespread adoption, strong government support, and robust infrastructure. If executed effectively, ONDC has the potential to redefine e-commerce in India and create a more inclusive and competitive digital marketplace.

By Nilay Patel, Founder & Managing Director, EasyPay