The Open Network for Digital Commerce (ONDC) may have hit a record high in total transactions in May 2025, but signs of fatigue are setting in across retail and logistics – two categories that posted back-to-back monthly declines.

ONDC categorises its transactions into three buckets: retail, logistics, and mobility. While retail includes food, fashion, and electronics orders placed via buyer apps, logistics refers largely to delivery fulfillment, and mobility includes ride-hailing and public transit ticketing.

Given that retail was once ONDC’s primary growth engine, its steady decline marks a sharp reversal. Once the poster child of ONDC’s rise, retail orders dipped to a twelve-month low of 4 million in May, down 6.2 percent from April’s 4.3 million. Other than a marginal uptick in March, the category has been sliding steadily since October 2024. Its contribution to ONDC’s total transactions has nearly halved in that time, from 47 percent in October to just 25 percent in May.

“One of the biggest tailwinds for ONDC’s early retail growth was heavy incentives for both buyer apps and sellers. As ONDC moves towards sustainable, market-driven growth, the pullback or rationalisation of these subsidies is leading to a natural correction in order volumes,” said a network participant familiar with ONDC’s strategy.

The shift away from deep discounts and cashback offers has hurt buyer retention, especially as user experience gaps persist. “Many ONDC buyer apps still have fragmented product listings, inconsistent service levels across cities, and a checkout flow that’s not as seamless as large incumbents,” the person added. “This affects repeat usage.”

ONDC did not respond to detailed queries sent by Moneycontrol.

The knock-on effects of retail’s decline are now being felt in logistics, a category closely linked to order fulfilment. After months of healthy growth, logistics saw its second straight monthly dip, falling 3.9 percent in May to 2.3 million transactions from 2.4 million in April.

According to network participants, since a significant portion of logistics transactions are directly tied to retail deliveries, the slowdown in retail is naturally dragging down logistics volumes on the network.

“ONDC’s initial logistics boom was partly driven by incentive-led adoption by third-party logistics (3PL) players. The tapering of these incentives, coupled with a potential off-season slump post-festive months, is impacting the volume,” the person quoted above said.

Still, there’s room for optimism. Uber is set to launch its parcel delivery service, Uber Parcel, on ONDC and has already tied up with eKart. The move could give logistics a much-needed shot in the arm in the coming months.

In contrast, mobility continues to fire on all cylinders. The segment saw a 6.5 percent jump in May, reaching 9.98 million transactions, up from 9.38 million in April. Mobility now accounts for 61 percent of total ONDC transactions, up from 40 percent just seven months ago.

“The growth of mobility orders is also being driven by ONDC’s metro and bus ticketing integrations, which create a unified mobility experience,” said a mobility network participant. “As more mobility players come on board, we expect the network effect to further accelerate this growth trajectory.”

Interestingly, most of the mobility growth is coming from metro and bus ticketing. ONDC’s backend integrations with players like Uber and Rapido in recent months have enabled faster rollouts, boosting order volumes in the unreserved ticketing space.

While ONDC has made clear its ambitions to expand in the ride-hailing space, major players like Ola, Uber, and Rapido have stayed away. Currently, Bengaluru-based Namma Yatri is the only meaningful presence in ride-hailing on the network.

“The problem right now is that mobility players are not integrating with ONDC for ride hailing, because the network is not solving for any gaps or pain points in this segment,” said a source at a large mobility firm not yet on ONDC for ride-hailing.

“ONDC back-end infrastructure helped players like Uber and Rapido start offering metro ticketing six months sooner than they would have without that infrastructure. But no such incentive is present for ride hailing,” they added.

Part of the cooling demand across categories can also be traced to shrinking platform incentives. Since August 2024, ONDC has steadily reduced its payouts to network participants, except for a brief festive-season spike in October. As subsidies have dried up, so has artificially inflated demand.

ONDC was initially pitched as the “UPI for e-commerce,” with the goal of unbundling digital commerce in India. It shot into public consciousness in 2023 by offering deeply discounted food delivery, prompting speculation that it could disrupt incumbents like Swiggy and Zomato. That wave of attention drew in players like Paytm, PhonePe, Ola, Meesho, Magicpin, and Shiprocket.

But retail’s momentum has cooled, weighed down by inconsistent product listings, clunky checkout experiences, and limited post-sale support, analysts say.

The network is also navigating a leadership transition. In April, long-serving CEO T Koshy stepped down, citing personal reasons. His exit followed those of CBO Shireesh Joshi and non-executive chairperson R S Sharma, marking a period of churn at the top. Vibhor Jain, the former COO, has since stepped in as acting CEO.

Whether ONDC can chart a new path under new leadership remains to be seen. For now, mobility is keeping the engine running, even as retail and logistics stall.