the harvard national case competition market opportunities for amazon drone delivery faisal khurshid...
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The Harvard National Case Competition
Market Opportunities for Amazon Drone Delivery
Faisal Khurshid Neil Singh Neel Yalamarthy
Brown University
OverviewDrone constraints:
o 5 lb. payloado 10 mile rangeo 40 MPH average
speedo $24,000 per droneo Human-controlledo 30-minute battery
life
Geographic Factors
Supply chain optimization
Socioeconomic status
Suburbs
Demographics
Lifestyle
Delivery necessity
Poor walkability
Pricing Scheme
Amazon Prime Customers
$4.99 per delivery
Builds customer loyalty
A la carte service
$5.99 per delivery
Drives sales volume
Year 1: Dallas-Fort Worth
Nearby fulfillment centers
Population density
Wealthy suburbs
Bad walk score
Year 1: Dallas-Fort Worth
Existing fulfillment centers
Population density
Wealthy suburbs
Bad walk score
TOTAL AVAILABLE MARKET
ELIGIBLE CUSTOMER
S 4.5 MILLION
6 MILLION
TARGET POPULATIO
N 3.3 MILLION
MARKET PENETRATION 1.5 MILLION
PRIME CUSTOMERS
~300K
Year 1: Dallas-Fort Worth
REVENUES COSTS
1.5 orders/month (Non-Prime members)
$5.99/order
2 orders/month (Prime members)$4.99/order
Non-prime: 1.8 million orders/month Prime: 600,000 orders/month
Total: $ 28.8 million orders/year
Annual Revenue (first year):$4.99 * 7.2 mill. orders = $ 35.93 million$5.99 * 21.6 mill. orders = $ 129.38 million Total Revenue = $165,312,000
Fixed Costs$ 46.5 million (Plant, Property & Equipment)$ 75 million (Drones + batteries) (CoGS)
Variable Costs$ 12 million (salary) (OpEx)
Total Costs (first year)$ 128 million
PROFIT (first-year):$37.31 million
Year 1: Dallas-Fort Worth
Drone Costs Explained
PROFIT MARGIN:23%
1 Drone -> 20 orders/day (2 per 80 min.)1 drone -> 7300 orders/year
Number of Orders: 28.8 million Number of drones needed: ~3946 drones
Cost: 3946 * $18000 = $ 71,028,000
Cost of Drones + Battery = ~$75 million
PROFIT (first-year):$37.31 million
Break-even Analysis:4.5 years
Fulfillment centers
Dense Population
High income
SeattleChicag
oPhilly Wash.
DC
Geography factors
Poor walk score
Demographics
Fulfillment centers
Poor walk score
Fulfillment centers
Geography factors
Poor walk score
5-Year Growth Plan
5-Year Growth PlanDallas-
Fort Worth
Seattle
Chicago
Philly
Wash. DC
4,000 drones
12,000 drones
20,000 drones
$165M revenue
$400M revenue
$700M revenue
BOOST REVENUE
DRIVE IMPACT
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