He co-founded the software company Infosys Ltd., became a billionaire, and spearheaded a colossal government program to create biometric identification for India’s nearly 1.4 billion people.
Now 66, Nandan Nilekani has a more ambitious goal. The high-profile tycoon is helping Prime Minister Narendra Modi build an open technology network that seeks to level the playing field for small merchants in the country’s fragmented but fast-growing $1 trillion retail market.
Its stated purpose is to create a freely accessible online system where merchants and consumers can buy and sell everything from 23-cent detergent bars to $1,800 plane tickets. But its unspoken goal is to eventually rein in the powers of Amazon.com Inc. and Walmart Inc.-owned Flipkart, whose online dominance has alarmed small merchants and the millions of local mom-and-pop stores, called kirana, that make up the national market. . retail backbone.
As the two global giants poured $24 billion into India and captured 80% of the online retail market with aggressive discounting and preferred seller promotion, kirana stores fear an uncertain future. Even though online commerce makes up only about 6% of the overall retail market, they are anxious that they will eventually die down, facing a similar fate as many family-owned businesses in the US and elsewhere.
The nonprofit system, which goes by the unwieldy name of the Open Network for Digital Commerce, or ONDC, seeks to address those concerns. Never tried anywhere else, it aims to enable small merchants and retailers to connect and get the reach and economies of scale of the giants. Essentially, the government would create its own e-commerce ecosystem for everyone, designed to loosen the grip of companies like Amazon that dictate which brands get access to mainstream consumers and on what terms.
“It’s an idea whose time has come,” Nilekani said recently in a conversation at his private office in the Billionaire’s Row area of Bangalore’s Koramangala, home to some of the country’s biggest tech moguls. “We owe it to the millions of small sellers to show them an easy way to participate in the new, high-growth area of digital commerce.”
A pilot of the government-run non-profit network will be rolled out next month to selected users in five cities. Lenders such as ICICI Bank Ltd. and state-owned Punjab National Bank and State Bank of India have bought stakes in the bank. An Amazon spokesman said they are trying to better understand the model to see if the Seattle-based company has a role to play. Flipkart did not respond to a request for comment.
India has become a battleground for some global retail giants that are locked out of China or struggling to compete with local rivals there. With nearly 800 million smartphone users, the sheer size and potential have made the South Asian country an ideal testing ground for many companies, including Google, Meta Platforms Inc. and local giants like billionaire Reliance Industries Ltd. Mukesh Ambani.
In his previous avatars, Nilekani helped the government develop the Aadhar biometric identification system, roughly a digital equivalent of the US social security program. For most Indians, it is their first proof of existence. Authorities say it helps reduce fraud and ensures welfare payments reach the right people. Nilekani also helped introduce a payment backbone called the United Payment Interface, or UPI. Used by companies like Google and WhatsApp, it surpassed 5 billion transactions last month.
Hired as an adviser to the ONDC last summer, the gray-haired, mustachioed tech czar wants to do for e-commerce what UPI did for digital payments.
But his biggest challenge would be ensuring the network achieves its goals. Amazon and Flipkart have dominated the market because their proven technology attracts merchants and buyers to their platforms. The government needs to build something comparable, or better, if it wants to overtake the dominant e-commerce platforms, said Anil Kumar, CEO of Redseer Management Consulting Pvt.
“It all depends on the network attracting the broader set of buyers, sellers, payment logistics and storage providers and so on,” said Bangalore-based Kumar. “The challenge is to standardize and smooth out the experience, such as returns and refunds for buyers and sellers, and create an open network where everyone wins.”
Nilekani will also be under pressure to avoid the kind of controversies that have dogged his previous projects. Aadhar has been under a cloud over data privacy, security, and identity-related concerns. India’s Supreme Court is examining a matter related to UPI, after a lawmaker accused Amazon, Google and Meta’s WhatsApp of participating in the system without much scrutiny and allegedly in violation of the rules.
If successful, the e-commerce network could help millions of small businesses connect and worry less about the global giants. Among those eager to try it is Kauser Cheruvanthody, 42, one of the owners of a chain of five baby products stores in Bangalore. He never sold online, but a 30% drop in sales during the pandemic was a shock.
“ONDC could be a game changer,” said Cheruvanthody. “I am ready to fight Amazon and others, discount for discount.”
Despite the challenges, Nilekani is the right man for the job, said Hemant Taneja, managing partner at the Palo Alto-based venture capital firm. overall catalyst.
“Nandan is known for his long game, for setting up systems for lasting change with very deliberate thinking about which parts of the economy should be digital public goods and which parts capitalism-driven,” Taneja said.
Entrepreneurs like Kumar Vembu are excited about the prospects for an open model. its start-up GoFrugal provides business software to over 30,000 small merchants and quick service restaurants. Now it is helping hundreds of them integrate with the new network.
“Until now, small retailers would bring a knife to the shooting,” Vembu said. “Now, we can properly equip them to compete.”
The open network targets 100 cities in the coming months, said CEO Thampy Koshy, a former senior partner at Ernst & Young.
It took Aadhar nine years to reach a billion people on the platform, while it took UPI five years to cross 4 billion monthly transactions. Nilekani said that he is optimistic that ONDC will be implemented much faster as India has been down this road before.
“We are charting a new course and the objective is to change the rules of the game of electronic commerce,” he said.