the harvard national case competition market opportunities for amazon drone delivery faisal khurshid...
TRANSCRIPT
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