"They played exceptionally well and we didn't. We can play much better than that but they were exceptional. I thought from start to finish, I thought they were strong, I thought they were very comfortable with the ball," O'Neill told Sky Sports.
"We have a good distance to go yet to be up competing on a regular basis with those sides," he said.
"We will regroup, we get ourselves ready and prepare for the next game," he said.
"But in many aspects (it was) a great experience here today. We were at the wrong end of it but an experience because that's where you want to be - that's what you want to be aspiring to."
He added his team had played better this season but he did not want to take anything away from Chelsea's superb play.
"We weren't good enough and we have to accept that today.
"We have got a distance to go - I think everybody who belongs to Aston Villa would accept that," he said.
"We just never got into it and that is great credit to Chelsea" said O'Neill, adding: "This is where you want to be, that is what you what to compete against and that's why it should be worth it."