• Reliance is test-running the service in a few neighborhoods around Mumbai
  • Reliance’s service links stores to customers through an app
  • Only 0.15% of India’s population currently use online grocery services

Mukesh Ambani, the wealthiest man in Asia and chairman and managing director of Reliance Industries, is making a big move in India against e-commerce giants Amazon (AMZN) and Walmart (WMT).

Reliance Industries, a conglomerate that owns a wide array of subsidiaries, will use its huge 360-million mobile phone customer base to kickstart its new grocery delivery service called JioMart, which offers “free and express delivery" of some 50,000 different food items.

The joint venture, which was launched by two Reliance subsidiaries, Reliance Retail and telecom operator Reliance Jio, will link local stores and customers through an app rather than delivering the groceries itself.

The new service has launched in parts of the western state of Maharashtra: Navi Mumbai, Kalyan and Thane. The company plans to expand in other parts of India in the coming months.

“This [new product] will modernize even the smallest neighborhood shop to become a future-ready digitized store,” Ambani said last August.

India's e-commerce market is presently dominated by Amazon and Flipkart Private Ltd., a subsidiary of Walmart, but only about 0.15% of India’s vast population currently use such services.

"With its own telecom network, Reliance in India can go way beyond Amazon and Flipkart," Arvind K. Singhal, head of the management consultancy Technopak Advisors, said. "The Reliance ecosystem -- still in progress -- for digital economy has multiple, very powerful components that include retail, entertainment, education and financial services."

Analysts predict the online grocery market in India could be worth $14.5 billion by 2023, up from $870 million at present.

Moreover, Amazon and Walmart were seriously hampered by laws introduced last year by the Indian government, which restricted foreign-owned online retailers from selling products through vendors they hold an equity stake in. They were also banned from entering into exclusive deals with sellers.

The ruling prompted both Walmart and Amazon to pull hundreds of thousands of products from their online sites in India. One year later both retailers are still scrambling to adapt to the new rules. These laws did not affect domestic retailers, which would open up opportunities for Reliance.

Nonetheless, both Amazon and Walmart are determined to succeed in India. Both have already invested billions in India and plan to expand into new markets in the country.

Naman Vijay, CEO & co-founder of ClickPost, a logistics intelligence platform, estimated that India’s total retail market is valued at some $600 billion. E-commerce comprises only 5% of that figure.

“Compare that to the 15% stake e-commerce has in the U.S. market, and it becomes clear there’s still plenty of room for growth,” he said.

Vijay noted that India’s internet user base is projected to grow from 665 million in 2019 to 829 million by 2021. “So, the inherent potential of the market is undeniable,” he said. “And, yet, e-commerce remains highly underpenetrated with only 50 million online shoppers, of whom only 20 million are active monthly purchasers.”

In addition, some 70% of e-commerce customers in India are men with an average age of 25. “But these figures are set to drastically change,” Vijay said. “Women are set to claim an equal share in the market, while the average age is expected to rise to 28 years. Also, as people become more accustomed to shopping online, the ordering of basic necessities will outpace discretionary purchases.”