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  • Writer's pictureSophia Satapathy

PhonePe's Pincode Exits Non-Food Categories on ONDC: A Detailed Analysis


a mobile phone showing Pincode app and thumbnail

As we browsed the latest news in the e-commerce industry, one development that caught our eye was PhonePe's Pincode, which is exiting non-food categories on the ONDC platform. PhonePe launched Pincode on ONDC last year to provide consumers access to multiple product categories. However, recent reports indicate the company is restructuring its ONDC strategy.

Upon closer examination, it appears PhonePe has decided to narrow Pincode's focus to food and grocery deliveries via the ONDC network. Sources familiar with the development have stated that PhonePe will discontinue other categories offered previously, like fashion, electronics, and home decor, through Pincode on ONDC. Meanwhile, the company will continue booking train and bus tickets through its main PhonePe app on the ONDC platform.

This strategic shift by PhonePe comes as it aims to optimize its approach to ONDC. Multiple reports indicate that the consumer experience needs to reach parity with other dedicated ecommerce apps, especially for categories beyond food. It will be interesting to see how PhonePe intends to enhance its ONDC offerings while focusing solely on grocery and food deliveries through Pincode. The following analysis examines the key factors behind this strategic move and its implications...

PhonePe's Pincode to Focus Only on Food Delivery on ONDC

phonepe ONDC pincode icon. Cardboard boxes

PhonePe launched its e-commerce application Pincode on the government-backed Open Network for Digital Commerce (ONDC) platform last year. Pincode allowed customers to buy items like groceries, clothes, and electronics through the application on the ONDC network.

However, PhonePe has decided that Pincode will only focus on delivering food items, not other categories. Reports say Pincode will exit categories like fashion, grocery, and electronics and only sell and deliver food through the ONDC network.

PhonePe felt that the customer experience on Pincode could have been better for categories other than food. There were issues with standardization, and customers needed to find Pincode more practical for shopping for clothes, groceries, or electronics on ONDC.

That's why PhonePe has decided to avoid other categories and focus only on delivering food items using Pincode on ONDC. This will allow them to improve the customer experience for food deliveries through the application.

Why is PhonePe Exiting Other Categories?

PhonePe's marketplace Pincode offered different categories, such as fashion, electronics, grocery, etc., on the ONDC platform. However, it found that the customer experience on ONDC for these categories could have been better than using dedicated apps.

There were issues with standardizing orders and fulfilling grocery deliveries through small merchants on ONDC. It was challenging to manage inventory and packaging and ensure on-time delivery.

Also, Pincode has yet to have significant scale and volumes in categories like fashion and electronics on the ONDC network compared to food delivery.

So, for now, PhonePe has focused only on food delivery and tickets through ONDC, where processes are more streamlined. It wants to exit other categories until the ONDC platform improves and provides a better experience for customers and merchants. PhonePe may re-enter these categories at a later stage once issues are resolved.

PhonePe's Ecommerce Ambitions with Pincode

  • PhonePe launched Pincode to strengthen its vision of becoming a super app that provides multiple services to users on a single platform.

  • Initially, Pincode aimed to sell various products in categories such as fashion, electronics, grocery, etc., on the ONDC marketplace.

  • PhonePe invested around 90 crore rupees in Pincode over the last year to expand its offerings and launch services in 10 major cities.

  • However, Pincode faced challenges in providing consistent customer experience across categories other than food deliveries on ONDC.

  • This led PhonePe to shift Pincode's focus only to food deliveries and exit categories like fashion and grocery.

Categories Pincode was Operating in


categories pincode operates in

PhonePe's ecommerce venture, Pincode, operated in multiple categories when it was first launched on the Open Network for Digital Commerce (ONDC) in 2023.

According to media reports, Pincode initially offered services in six key categories: fashion, home decor, electronics, pharmacy, food, and grocery. It provided consumers with access to locally manufactured products across these categories on the ONDC platform.

Pincode's services were initially rolled out in 10 major Indian cities: Bengaluru, Mumbai, Delhi, Noida, Gurugram, Chennai, Hyderabad, Ahmedabad, Pune, and Kolkata. This allowed consumers in these metros to order online from Pincode's network of merchants on ONDC.

However, PhonePe has now decided to restrict Pincode's offerings on ONDC. As reported, it will only offer food delivery services through the platform while discontinuing categories like fashion, grocery, and electronics. The company has stated that this step is being taken to realign its e-commerce strategy on ONDC and focus only on segments that provide an optimal customer experience.

How Other Players are Faring in these Categories

Here is how other players are faring in these categories:

  • Electronics and fashion: Amazon and Flipkart have long dominated these categories. They offer large selections and fast delivery options, making it difficult for new players to compete.

  • Grocery - This is still an evolving category. Players like BigBasket, JioMart and Zepto are focusing on it. They are working on improving selection, quality, and delivery. It's a challenge to deliver fresh items on time. Standards need to be more consistent across grocery shops.

  • Food delivery: Swiggy and Zomato have established themselves well after years of experience. They have trained restaurants and standardized processes, which helps provide a good customer experience.

  • Other categories, like medicines and home products, also need work on standards and experience. For smaller shops, it can be difficult to manage inventory, deliver safely, and resolve issues.

So, established players have an edge in electronics/fashion. Grocery needs more work on infrastructure. Food delivery works better due to experience. Other categories are still developing on ONDC. Providing a smooth experience across India will take more time.

Challenges to ONDC's Grocery and Inventory Model

Here are some of the key challenges faced in ONDC's grocery and inventory model:

  • Fulfilling grocery orders correctly: Many local grocery stores on ONDC need systems to manage online orders properly. Items are often packed wrongly or damaged during delivery. This gives customers a bad experience.

  • Lack of standard processes: Each grocery store has different ways of taking orders, packing items, and delivering. This causes confusion and delays. ONDC needs to train stores to follow standard procedures like other apps.

  • Inventory management issues: Small stores don't keep accurate digital records of what's in stock, so sometimes the item a customer orders is not available. They need systems to update inventory in real-time.

  • Absence of large organized retailers: Most groceries on ONDC come from small local stores that need more infrastructure for online shopping. Big supermarkets with better systems are off the network. This affects service quality.

  • Difficulty in order sorting/packing: Small volumes of individual orders are complex for local stores. They need help sorting and packing orders efficiently and within promised delivery timelines.

  • Last-mile delivery challenges: Reaching customers in remote areas and complex locations is a problem. ONDC must also work with stores and logistics firms to improve last-mile delivery infrastructure.

So, the lack of standard processes, inventory management, and organized big retailers makes fulfilling grocery orders consistently challenging for ONDC. Addressing these issues is important to enhance customer experience.


a mobile phone with phonepe on it

Future of Pincode and PhonePe's Ecommerce Strategy

PhonePe is changing how its ecommerce app Pincode works on the ONDC platform. Pincode will now only sell food items like meals and groceries. It will no longer sell clothing, electronics, or other goods.

PhonePe has done this because selling different types of products on ONDC has been difficult. Things like delivering the right grocery order or properly packaging items have been challenging. This made customers unhappy with Pincode.

Food delivery is easier to manage well on ONDC now. As the ONDC system improves, PhonePe wants to offer more categories again. But they will start with just food to give customers a good experience.

PhonePe still believes in ONDC and wants Pincode to be successful. By focusing on food first and adding other items later, PhonePe hopes Pincode can better utilize its funding and large user base. They aim to make selling on ONDC easy for buyers and sellers over time.

FAQs

Why has PhonePe decided to exit categories like fashion and grocery from Pincode on ONDC?

The primary reason behind PhonePe's decision is the subpar customer experience on ONDC for categories beyond food delivery. Factors like issues in order fulfillment, standardization, and achieving the necessary scale posed challenges.

What categories will Pincode now focus on via ONDC?

Going forward, Pincode will only focus on food delivery and unreserved ticket booking categories via ONDC. It will discontinue offering services in fashion, electronics, grocery, and other categories on the platform.

Is PhonePe exiting these categories completely?

No, PhonePe is only restricting Pincode's offerings on ONDC to food delivery for now. It may re-enter exited categories later once ONDC's experience improves for non-food segments.

How will this impact PhonePe's ecommerce ambitions?

While it's a setback, PhonePe sees ONDC as a long-term opportunity. Exiting non-food categories allows for better resource focus while testing strategies. Once ONDC scales in Pincode's target categories, PhonePe can leverage the user base.

What are the key challenges on ONDC currently?

Lack of standardization, issues in order fulfillment across regions, and the absence of organized retail infrastructure in some categories, like grocery, pose challenges. ONDC also needs more scale for an optimal consumer experience.

How are other players faring on ONDC in these categories?

While most players are still experimenting, companies like Dunzo and BigBasket are focusing on groceries. Magicpin is expanding teams to strengthen its presence in identified categories like fashion on ONDC. Scale remains a challenge for all.


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