The document proposes a low-cost supply chain model for e-commerce logistics in India. It analyzes the e-commerce logistics market trends and key players. A hybrid logistics model is suggested for Kochi that incorporates order clustering, electric vehicle implementation, smart packaging strategies, and AI for optimization. Financial projections are provided for the first year of operations in Kochi indicating revenue growth and positive net profits and cash flows. The implementation plan involves partner onboarding, warehouse setup, and expansion to other cities.

1. Mayank Kumar
Tabassum Rangrej
Harender Singh
Team: STEPS
Batch: 21-23
SIOM Nashik

2. Low
cost
Supply
Chain
model
ANALYSIS
CASE
Growth Drivers
 Domestic e-commerce
regulation
 Adoption of best
practices/Rapid-reaction
operations
 Formulation and facilitation of
domestic industrial
standards for smart devices
and IoT devices
 Action focused on
delighting customers
 Protection of e-commerce
partners
eCommerce - Logistics
Market Trend
 The Indian online grocery
market is estimated to reach
US$ 26.93 billion in 2027
from US$ 3.95 billion in
FY21, expanding at a CAGR of
33%
 India has the highest data
consumption rate worldwide
at 14.1 GB of data per
person a month
 The number of smartphone
users in India is expected to
reach 887.4 million by 2030
Key Players
Courier / Logistics Companies E-tailer Captive
Independent Players
Established logistics players are actively involved in the ecommerce
logistics segment and control over 70% of the Market currently
35%
34%
5%
2%
24%
FedEx
Others
DotZot
Gati
Bluedart
 For the courier companies, currently commerce
logistics constitutes a relatively small
proportion of the overall revenue
Bluedart: 10-12%
Gati: 3%
 Leading e-tailer have their own "last mile delivery'
companies such as ekart for Flipkart and JaVAS
for Jabong.
Challenges
Key Partners Key Activities Cost Structure Value Preposition Revenue Stream
Advancement Required
Exclusive
Product
launch
Wide
Selection
Unique
Features
convenience
Cheap
product &
Highly
Trusted
Cost &
Delivery
Optimization
 RFID tags for pallets store
information on delivery loc. & date
 Logistics partners run app for these
RFID tags & bid for delivery contract
 The logistics partner providing optimal
price & service gets contract
 Smart contracts - tracks the status &
delivery performance of the product
Current Focus: Improvised collaboration
within Supply Chain, Vendors, Strategist to
build Concrete Roadmap & excellent
customer experience
Products & Listing 25.2%
Packaging 5.2%
Fulfillment 19.9%
Shipping 6.8%
Customer Support 5.7%
Transaction fees 2.9%
Warehouse Maintenance 6.5%
Advertising 27.9%
o Postal addresses are not standardized
o Logistics is a problem in 000’s of Indian town
o Fleet management to cater hyperlocal sellers
that sell products like grocery, meat etc.
o Lack of brand Loyalty
Commission
Structure
from sales
Shopping
fees(Flipkart
assured
Program)
Own
Shipping
services -
Ekart
Cost Distribution in eCommerce market.
These percentages are only used to drive
the financial model and comparative
analysis
Design , Develop and Optimize
Introduce Advanced analytics / automation
across the board
Manage the Supply chain Network
Standardization of SOP , Efficient management of
Inventory real time basis
Collaborating with vendors
EV Vehicle OEM's partnership , FMCG suppliers , Fashion
and Clothing industry
Sellers Network
Locating effective suppliers , Convenient location for
hyperlocal deliveries
Order Fulfillment
Optimum Vehicle routing , Resource Planning
Order allocation
Maintaining Customer Delight
Order delivery , Packaging condition , Right Delivery
Feedbacks, low reverse logistics
Delivery executives
- Best in class compensation
- Attractive incentives
Strategy Partners
Supply chain networking, order clustering
and smart packaging consultants
Customer
Customer Delight: Delivering Customer
OTIFQ + Discount + Loyalty points
Product/Service Designers
Best-in-class designers - product & Services
Advanced Analytics & IT Team
Best-in-class service provides for AI,
Analytics, ML, warehouse robotics & others
Source:

3. MODEL
PROPOSED
Logistics Model Suggested
Approach used – Top-bottom
Method Used* – WeightedAverage Ranking Method
Weights given based on – Per Capita Income,
population, internet penetration, infrastructure and
roadways ranking
Top 5 States – Kerala, Tamil Nadu, Andhra Pradesh,
Uttar Pradesh, Gujrat
City Selection – Where Implementation is most feasible
Phase 3: Nagpur, Ludhiana, Mysuru, Varanasi,
Anand, Hubballi–Dharwad, Kanpur, Aligarh, Bhopal,
Visakhapatnam
Phase 2: Kollam, Agra, Jaipur, Kolhapur,
Kozhikode, Lucknow, Thrissur,
Thiruvananthapuram,Malappuram, Dehradun
Phase 1: Kochi, Coimbatore, Madurai,
Prayagraj, Vijayawada, Vellore,
Jamshedpur, Surat, Patna, Kakinada
City Selection Kochi – Hybrid Model
Zone
Picking
Order
Arrive
Order
Batching
Batch
Sequencing
Order
Picking
Order Picking Vehicle Routing
Waiting Time Packing Time Packing Time Delivery Time
Time Window
Customer
Vehicle
Bags/Parcel
Batches
Orders
Home & Kitchen 32%
Beauty & Personal Care 23%
Toys & Games 20%
Clothing, Shoes & Jewelry 18%
Health, Household & Baby Care 17%
Sports & Outdoors 16%
Arts, Crafts & Sewing 15%
Books 15%
Kitchen & Dining 14%
Baby 14%
According to Jungle Scout’s 2022 State of the Amazon
Seller Report, these are the top categories**, including the
percentage of sellers who have products listedin them.
Category Selection
Keeping in mind
Profitability
Selling
Experience
Sales
Fulfillment
Method
1. Order Clustering
For Last Mile
Hybrid Model Implementation
30% of the fleet with EV vehicles
Limited-servicestation
and maintenance
Low payload carriage
capacity
High cost to establish
infrastructure & Setup
Not appropriate fuel
live , R&D still in phase
2. EV Implementation
30%
70%
Less
mainetence
reqiured
75%
lesser
Operating
Cost
Challenges:
*In upcoming 18 months
0
100
200
300
400
500
600
700
800
25 50 75 100
Random
Clustered
Percentage Selecting a window
Total
average
cost
percentage
The cost of last mile highly decrease in e-commerce companies
when clustering the orders even when we offer customers
flexibility in selecting delivery time windows.
An integrated order
picking – vehicle
routing problem
Source:
https://doi.org/10.1186/s12544-
018-0333-5
 Delivery Discounts
 Flexible delivery hours
 Sustained environmental Impact
 Reduced last mile delivery costs
3. Smart Packaging Strategy
4. First Mile – AI Incorporation
Line Haul cost reduction
First Mile Middle Mile Last Mile
EV
Implementation
Order Picking
Vehicle Routing
Problem
Smart
Packaging
Strategy
AI Incorporation for
bettercontrol
Warehouse managers can utilize space efficiently, hence
reducing the cost.
Predictive analytics, AI systems can use past trends and
market signals to forecast demand.
AI employs algorithms to detect patterns in massive
amounts of data and interpret their meaning.
Shippers get deep visibility to SKU-level information
from first-mile to last-mile.
 Intelligent Packing: To communicate information about
perishable items
 Active Packing: Incorporation of intelligent packing with
addition to combat them
 Connected Packing: To provide information that's honest
and transparent
Detailed solution will be provided later
Customer
Customer
Customer
Coimbatore
Fulfillment
Center
Factory - 1
Factory - 2
Factory - 3
Factory - 4
Customer
eKart
Distribution hub
Parcel+Sortation
eKart
Distribution hub
Parcel+Sortation
Container
Pallet
Big Boxes
Small Boxes
RFID Tagging for future
Implementationpurposes

4. Onboarding Partners
Software Development
Locating & Establishing Supplier Relationship
Warehouse and Delivery Hub
Last Mile Logistics
Current Customer Last Mile Logistic Reviews
Setup Governance Facility /Mechanism
Expansion
Tier II Cities
Marketing Strategy
Expansion
Strategic Partner/
3rd Party IT Team/
EV OEM's
Delivery
Executives
(Compatible with
EV vehicle driving)
Appropriate
Suppliers
& Vendors
Setup Robotic Arm
for Enhanced
sortation
Track & Analyze
historical
demands for Shipment
Vehicle Routing &
sorting , Planning
Algorithm
e-Loc of Customer
Address wrt appropriate
approval
Location
Finalization
Supplier Selection
within the mentioned
location
e-Loc of Customer
Address wrt appropriate
approval
Smart Packaging
Strategy
Sortation of
Products/Items
based on size & Weights
EV Vehicle
Implementation &
Delivery Executives
Delivery Partner
pincode mapping
Assistance of e-Loc
facility Mitigate
location Challenge
Product offering &
SKU's presence
Regular feedback
mechanism
Dedicated Customer
Care Facility
Last mile delivery KPI
monitoring system
6
months
6
months
6 months
2nd Year
PLAN & FINANCIALS
IMPLEMENTATION
Business Model - Kochi
1. We have considered 10 cities for the proposedsolution implementation.
2. Average Selling Product is low ₹700 per order as the case study indicated.
3. The cost structure assumptions as 30% on product, 5% on packaging, 20% on warehouse
and 6.7% on Shipping. *ecommercecost structure
4. CAC Blended has been calculated for a city & used for all 10 cities.
5. The advertisement cost is also assumed to be same for the cities.
6. Assumed growth of customers is 15% and -5% for two halves of first year.
7. The orders receivedare assumed to be 20% more of customers acquired.
8. Advertisement cost is assumed on basis of FY21 Marketing Spend.
Assumptions:
Qtr. 1 Qtr. 2 Qtr. 3 Qtr. 4
Net Revenue ₹ 65,55,78,000 ₹ 73,82,57,800 ₹ 83,27,06,700 ₹ 94,07,00,600
Cost Of Goods Sold
Product / Manu ₹ 17,70,06,060 ₹ 19,93,29,606 ₹ 22,48,30,809 ₹ 25,39,89,162
Packaging ₹ 3,27,78,900 ₹ 3,69,12,890 ₹ 4,16,35,335 ₹ 4,70,35,030
Fulfillment ₹ 13,11,15,600 ₹ 14,76,51,560 ₹ 16,65,41,340 ₹ 18,81,40,120
Shipping ₹ 4,39,23,726 ₹ 4,94,63,273 ₹ 5,57,91,349 ₹ 4,62,83,001
Customer Support ₹ 3,75,00,000 ₹ 4,24,00,000 ₹ 4,78,00,000 ₹ 5,39,00,000
Transaction Fees ₹ 1,80,28,395 ₹ 2,03,02,090 ₹ 2,28,99,434 ₹ 2,58,69,267
Total COGS ₹ 44,03,52,681 ₹ 49,60,59,418 ₹ 55,94,98,267 ₹ 61,52,16,579
Gross Profit ₹ 21,52,25,319 ₹ 24,21,98,382 ₹ 27,32,08,433 ₹ 32,54,84,021
GP % 33% 33% 33% 35%
Advertising ₹ 18,75,00,000 ₹ 18,75,00,000 ₹ 18,75,00,000 ₹ 18,75,00,000
Post-Advert. Profit ₹ 2,77,25,319 ₹ 5,46,98,382 ₹ 8,57,08,433 ₹ 13,79,84,021
% of Revenue 4% 7% 10% 15%
Orders 936540 1054654 1189581 1343858
Average Order Value AOV ₹ 700 ₹ 700 ₹ 700 ₹ 700
Customer Acquisition Cost – Kochi
Streaming Platforms ₹ 31,25,000 ₹ 31,25,000 ₹ 31,25,000 ₹ 31,25,000
Social Media Fb, Insta ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000
Google ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000
Total Paid Ads ₹ 56,25,000 ₹ 56,25,000 ₹ 56,25,000 ₹ 56,25,000
Local Celebrities ₹ 43,75,000 ₹ 43,75,000 ₹ 43,75,000 ₹ 43,75,000
PR Agency ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000
Marketing Payroll ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000 ₹ 12,50,000
Total Other ₹ 68,75,000 ₹ 68,75,000 ₹ 68,75,000 ₹ 68,75,000
Customers
New Customers - Paid 18,915 21,896 25,348 29,343
New Customers - Organic 9,181 9,743 10,340 10,972
Returning Customers 7,500 7,500 7,500 7,500
Total Customers 35,596 39,140 43,187 47,816
Paid CAC ₹ 297.86 ₹ 257.30 ₹ 222.26 ₹ 192.00
Blended CAC ₹ 200.41 ₹ 177.97 ₹ 157.79 ₹ 139.68
Cost Benefit Analysis
For Purposed Model
Total Initial Investments ₹ 47,50,00,000
Benefits from Purposed Changes YEAR 1 2
Reduced last mile costs ₹ 1,56,36,908 ₹ 1,73,56,968
Reduced line haul costs ₹ 1,90,03,459 ₹ 2,10,93,839
Reduced first mile cost ₹ 31,67,243 ₹ 35,15,640
Total Benefits ₹ 3,30,05,68,003 ₹ 3,63,09,52,879
Costs (Excluding Investments) YEAR 1 2
Cost of Goods Sold ₹ 2,02,40,27,760 ₹ 2,24,66,70,814
Depreciation on expenditures ₹ 15,83,33,333 ₹ 15,83,33,333
Total Costs ₹ 3,03,14,60,279 ₹ 3,34,75,04,243
Totals YEAR 1 2
Net Benefits (Costs) ₹ 26,91,07,724 ₹ 28,34,48,636
Tax ₹ 8,07,32,317 ₹ 8,50,34,591
Value after tax ₹ 18,83,75,407 ₹ 19,84,14,045
Depreciation added back ₹ 15,83,33,333 ₹ 15,83,33,333
Cash flow -₹ 47,50,00,000 ₹ 34,67,08,740 ₹ 35,67,47,379
Cumulative cash flow -₹ 47,50,00,000 -₹ 12,82,91,260 ₹ 22,84,56,119
Net present value (NPV) ₹ 40,97,08,022
Internal rate of return (IRR) 54.12%
Payback period (in years) 1.36 years
Payback
Period
1.36 yrs.
+ve
NPV
₹ 40,97,08,021
Comparative Analysis
*Refer Annexure for detailed Cost benefit analysis
Cost Reduction with the Proposed Model
With the assumption stated in business model and Annexure, we could see…..
Fullfillment
Cost
2%
Reduction
Packaging
Cost
3%
Reduction
Shipping
Cost
8%
Reduction
COGS
Reduced by
2.3%
Implementation Plan

5. Thank You

6. References
Sources and links
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Kerala-1.pdf

7. Annexure - 1
TIER-2 CITY SELECTION
City State
Per Capita
Income
Population
Internet
Peneteration %
Infrastructure
(Index)
Roadways
Ranking(Density)
Weighted Score Rank
Kochi KL 728000 3301000 0.38 0.58 37.43 2.394189535 1
Coimbatore TN 609000 2935000 0.47 0.44 23.31 2.076909549 2
Madurai TN 553000 1798834 0.45 0.48 29.73 1.788098732 3
Prayagraj UP 357000 5954390 0.41 0.46 25.31 1.786681178 4
Vijayawada AP 546000 2168000 0.33 0.42 16.91 1.772916735 5
Vellore TN 460300 590000 0.39 0.52 21.7 1.382270418 6
Jamshedpur JH 420000 1661000 0.26 0.39 23.71 1.36582893 7
Surat GJ 130000 6936534 0.38 0.54 16.4 1.319446192 8
Patna BR 106000 5838465 0.28 0.32 38.67 1.088841954 9
Kakinada AP 371000 312538 0.19 0.41 13 1.05027671 10
Kollam KL 247014 2026000 0.29 0.43 35.71 0.981986915 11
Agra MP 92640 4418797 0.4 0.46 36.38 0.922411923 12
Jaipur RJ 120820 4008000 0.33 0.49 16.7 0.918113057 13
Kolhapur MH 119783 3876001 0.36 0.47 12.45 0.909464958 14
Kozhikode KL 113307 3921000 0.38 0.56 35.28 0.906923036 15
Lucknow UP 91901 3854000 0.47 0.47 30.13 0.875240111 16
Thrissur KL 135518 3351000 0.32 0.48 31.5 0.871873651 17
Thiruvananthapuram KL 222741 957730 0.41 0.53 34.71 0.831003971 18
Malappuram KL 94012 3816000 0.32 0.51 31.2 0.823591078 19
Dehradun UP 198000 1696694 0.29 0.45 37.41 0.816940926 20
Nagpur MH 123610 2405421 0.58 0.54 15.7 0.815582734 21
Ludhiana PB 152332 1917000 0.49 0.53 31.26 0.797794766 22
Mysuru KA 205829 1261000 0.28 0.57 22.92 0.779314601 23
Varanasi UP 193616 1198491 0.34 0.45 28.14 0.761514048 24
Anand GJ 225000 391000 0.34 0.51 14.3 0.741423117 25
Hubballi–Dharwad KA 177798 1158000 0.39 0.54 22.1 0.733727319 26
Kanpur UP 82378 3190000 0.33 0.44 26.31 0.720039426 27
Aligarh UP 56717 3673889 0.3 0.42 25.41 0.703721092 28
Bhopal MP 104829 2505000 0.35 0.47 37.51 0.700494346 29
Visakhapatnam AP 105362 2278000 0.4 0.48 17.3 0.690416967 30
Kannur KL 116982 2286000 0.31 0.48 31.3 0.690165875 31
Jalandhar PB 142134 1096000 0.54 0.49 30.92 0.68820833 32
Cuttack OR 109071 1888423 0.36 0.43 25.67 0.638206103 33
Nashik MH 110717 1486053 0.45 0.53 12.67 0.623978486 34
Raipur CG 118401 1760411 0.29 0.49 11.34 0.621111775 35
Meerut UP 113091 1728000 0.31 0.44 23.83 0.611122221 36
Bhubaneswar OR 127383 1226000 0.31 0.45 28.16 0.585944306 37
Nellore AP 156106 795000 0.21 0.39 15.3 0.570153185 38
Jammu JK 146079 717000 0.3 0.41 7.51 0.566208977 39
Amritsar PB 77948 1425000 0.53 0.54 33.1 0.562184042 40
Per Capita Income 35%
Population 20%
Internet Penetration % 35%
Infrastructure (Index) 10%
Roadways Ranking(Density) 10%
City State
Per Capita
Income
Population
Internet
Penetration %
Infrastructure
(Index)
Roadways
Ranking(Density)
Weighted Score Rank
Jodhpur RJ 85470 1548048 0.43 0.45 17.84 0.560449454 41
Warangal AP 124000 1007000 0.31 0.43 16.5 0.549747546 42
Indore MP 108157 1158000 0.34 0.45 36.4 0.539595592 43
Jabalpur MP 97119 1495679 0.3 0.42 36.1 0.53898181 44
Srinagar JK 102789 1219516 0.31 0.44 5.8 0.521433993 45
Kurnool AP 128308 686000 0.31 0.43 14.2 0.52108711 46
Shimla HP 152230 171640 0.31 0.51 25.31 0.519406471 47
Gwalior AS 85843 1442015 0.3 0.41 36.16 0.503676131 48
Bikaner RJ 95281 802000 0.43 0.42 18.32 0.493544304 49
Solapur MH 88821 1054911 0.36 0.46 13.34 0.483586988 50
Aurangabad MH 42102 1642000 0.49 0.54 14.7 0.482783241 51
Ajmer MP 105766 630000 0.35 0.43 33.5 0.471842382 52
Asansol WB 113000 563917 0.29 0.5 29.05 0.461065023 53
Amravati MH 79945 792620 0.45 0.51 13.1 0.460353149 54
Bareilly UP 74683 1317000 0.29 0.41 21.42 0.45566036 55
Kalaburagi KA 123489 533587 0.18 0.49 19.3 0.444989675 56
Vadodara GJ 10700 2277000 0.38 0.53 16.5 0.442621216 57
Jalgaon MH 81741 588888 0.45 0.48 11.7 0.439702044 58
Sangli MH 103588 602000 0.27 0.43 12.7 0.433801964 59
Guntur AP 82026 897000 0.31 0.44 14.1 0.429359699 60
Guwahati AS 62796 1155000 0.35 0.44 35.1 0.427264157 61
Ujjain MP 93509 618000 0.3 0.41 35.3 0.421730972 62
Salem TM 48802 1146000 0.39 0.45 29.5 0.404306339 63
Bhilai CG 54712 1245000 0.29 0.46 11.34 0.395624649 64
Rajkot GJ 10400 1989000 0.34 0.48 15.2 0.392222823 65
Ratlam MP 91296 327000 0.31 0.39 34.2 0.383685831 66
Belagavi KA 92249 610350 0.2 0.51 20.1 0.382072892 67
Nanded MH 67654 722000 0.31 0.49 11.13 0.371250494 68
Moradabad up 61705 887871 0.28 0.41 21.4 0.366344891 69
Rajamahendravaram AP 72514 561000 0.31 0.35 11.71 0.363466041 70
Mathura UP 58251 618000 0.38 0.41 24.7 0.359518536 71
Ranchi JH 24529 1511000 0.29 0.38 22.37 0.351942634 72
Firozabad UP 53401 870000 0.28 0.43 25.3 0.343275252 73
Vijayapura KA 71482 434000 0.28 0.51 21.1 0.335604467 74
Jhansi UP 54932 666000 0.31 0.43 25.48 0.332575102 75
Rourkela OR 63462 641000 0.25 0.41 21.75 0.329952683 76
Erode TN 61631 521891 0.3 0.51 32.65 0.32895107 77
Hamirpur UP 58109 504793 0.31 0.39 22.53 0.320564751 78
Dhanbad JH 33644 1162472 0.22 0.37 16.51 0.307414229 79
Gorakhpur UP 45283 777000 0.24 0.39 23.17 0.296972206 80
Bilaspur CG 22686 632971 0.23 0.45 11.34 0.217831175 81
Purulia WB 50074 128475 0.19 0.31 20.01 0.211485665 82
Tiruvannamalai TM 35241 145278 0.23 0.54 29.8 0.190920268 83
Bokaro Steel City TN 24569 414820 0.19 0.47 34.71 0.183013447 84
Weighted score is calculated for Top 80 tier – 2 cities with higher per capita
income, population, internet penetration, infrastructure and roadways ranking

8. Annexure - 2
BUSINESS MODEL
Flipkart
Financial Model
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Net Revenue ₹ 21,00,00,000.00₹ 21,84,00,000.00₹ 22,71,78,000.00₹ 23,63,52,200.00₹ 24,59,40,800.00₹ 25,59,64,800.00₹ 26,64,44,500.00₹ 27,74,02,300.00₹ 28,88,59,900.00₹ 30,08,42,500.00₹ 31,33,74,600.00₹ 32,64,83,500.00
COGS
Product / Manufacturing ₹ 5,67,00,000.00 ₹ 5,89,68,000.00 ₹ 6,13,38,060.00 ₹ 6,38,15,094.00 ₹ 6,64,04,016.00 ₹ 6,91,10,496.00 ₹ 7,19,40,015.00 ₹ 7,48,98,621.00 ₹ 7,79,92,173.00 ₹ 8,12,27,475.00 ₹ 8,46,11,142.00 ₹ 8,81,50,545.00
Packaging ₹ 1,05,00,000.00 ₹ 1,09,20,000.00 ₹ 1,13,58,900.00 ₹ 1,18,17,610.00 ₹ 1,22,97,040.00 ₹ 1,27,98,240.00 ₹ 1,33,22,225.00 ₹ 1,38,70,115.00 ₹ 1,44,42,995.00 ₹ 1,50,42,125.00 ₹ 1,56,68,730.00 ₹ 1,63,24,175.00
Fulfillment ₹ 4,20,00,000.00 ₹ 4,36,80,000.00 ₹ 4,54,35,600.00 ₹ 4,72,70,440.00 ₹ 4,91,88,160.00 ₹ 5,11,92,960.00 ₹ 5,32,88,900.00 ₹ 5,54,80,460.00 ₹ 5,77,71,980.00 ₹ 6,01,68,500.00 ₹ 6,26,74,920.00 ₹ 6,52,96,700.00
Shipping ₹ 1,40,70,000.00 ₹ 1,46,32,800.00 ₹ 1,52,20,926.00 ₹ 1,58,35,597.40 ₹ 1,64,78,033.60 ₹ 1,71,49,641.60 ₹ 1,78,51,781.50 ₹ 1,85,85,954.10 ₹ 1,93,53,613.30 ₹ 2,01,56,447.50 ₹ 2,09,96,098.20 ₹ 51,30,455.00
Customer Support ₹ 1,20,00,000.00 ₹ 1,25,00,000.00 ₹ 1,30,00,000.00 ₹ 1,36,00,000.00 ₹ 1,41,00,000.00 ₹ 1,47,00,000.00 ₹ 1,53,00,000.00 ₹ 1,59,00,000.00 ₹ 1,66,00,000.00 ₹ 1,72,00,000.00 ₹ 1,80,00,000.00 ₹ 1,87,00,000.00
Transaction Fees ₹ 57,75,000.00 ₹ 60,06,000.00 ₹ 62,47,395.00 ₹ 64,99,685.50 ₹ 67,63,372.00 ₹ 70,39,032.00 ₹ 73,27,223.75 ₹ 76,28,563.25 ₹ 79,43,647.25 ₹ 82,73,168.75 ₹ 86,17,801.50 ₹ 89,78,296.25
Total COGS ₹ 14,10,45,000.00 ₹ 14,67,06,800.00 ₹ 15,26,00,881.00 ₹ 15,88,38,426.90 ₹ 16,52,30,621.60 ₹ 17,19,90,369.60 ₹ 17,90,30,145.25 ₹ 18,63,63,713.35 ₹ 19,41,04,408.55 ₹ 20,20,67,716.25 ₹ 21,05,68,691.70 ₹ 20,25,80,171.25
Gross Profit ₹ 6,89,55,000.00 ₹ 7,16,93,200.00 ₹ 7,45,77,119.00 ₹ 7,75,13,773.10 ₹ 8,07,10,178.40 ₹ 8,39,74,430.40 ₹ 8,74,14,354.75 ₹ 9,10,38,586.65 ₹ 9,47,55,491.45 ₹ 9,87,74,783.75₹ 10,28,05,908.30₹ 12,39,03,328.75
GP % 33% 33% 33% 33% 33% 33% 33% 33% 33% 33% 33% 38%
Advertising ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00
Post-Advertising Profit ₹ 64,55,000.00 ₹ 91,93,200.00 ₹ 1,20,77,119.00 ₹ 1,50,13,773.10 ₹ 1,82,10,178.40 ₹ 2,14,74,430.40 ₹ 2,49,14,354.75 ₹ 2,85,38,586.65 ₹ 3,22,55,491.45 ₹ 3,62,74,783.75 ₹ 4,03,05,908.30 ₹ 6,14,03,328.75
% of Revenue 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 19%
ASSUMPTIONS
Advertising ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00 ₹ 6,25,00,000.00
Orders 300000 312000 324540 337646 351344 365664 380635 396289 412657 429775 447678 466405
Unit Economics
Average Order Value
(AOV) ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00 ₹ 700.00
Cost of Goods Sold
Product / Manufacturing ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00 ₹ 189.00
Packaging ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00 ₹ 35.00
Fulfillment ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00 ₹ 140.00
Shipping ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 46.90 ₹ 11.00
Total ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 410.90 ₹ 375.00
Gross Profit ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 289.10 ₹ 325.00
GP % 41% 41% 41% 41% 41% 41% 41% 41% 41% 41% 41% 46%
Blended CAC ₹ 208.33 ₹ 200.32 ₹ 192.58 ₹ 185.11 ₹ 177.89 ₹ 170.92 ₹ 164.20 ₹ 157.71 ₹ 151.46 ₹ 145.42 ₹ 139.61 ₹ 134.00
Post-Marketing Profit ₹ 80.77 ₹ 88.78 ₹ 96.52 ₹ 103.99 ₹ 111.21 ₹ 118.18 ₹ 124.90 ₹ 131.39 ₹ 137.64 ₹ 143.68 ₹ 149.49 ₹ 191.00
Transaction Fees 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75%
% of orders with
questions 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10% 10%
questions 30000 31200 32454 33765 35134 36566 38064 39629 41266 42978 44768 46641
questions / support rep 250 250 250 250 250 250 250 250 250 250 250 250
support reps 120 125 130 136 141 147 153 159 166 172 180 187
Pay / month (+ benefits) ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00 ₹ 1,00,000.00
1. Average Selling Product is low ₹700 per order as the case study indicatedto take low ASP products for tier-2 cities
2. The cost structure assumptions as 30% on product, 5% on packaging, 20% on warehouse and 6.7% on Shipping. *ecommercecost structure
3. CAC Blended has been calculated for a city & used for all 10 cities.
4. The advertisement cost is also assumed to be same for the cities.
5. Assumed growth of customers is 15% and -5% for two halves of first year.
6. The orders receivedare assumed to be 20% more of customers acquired.
7. Advertisement cost is assumed on basis of FY21 Marketing Spend. The transaction fee is assumed to be 2.75 % for the transaction
COST BENEFIT ANALYSIS
Company Data Rate
Required rate of return 10%
Tax rate 30%
Initial Investment for Purposed Changes YEAR 1 2 3
Hardware (AI Incorporation e.g., servers) ₹ 8,40,00,000.00
Software (e.g., e-commerce software) ₹ 15,00,00,000.00
EV Fleet & Charging station ₹ 6,90,00,000.00
Development (e.g., third-party design and development) ₹ 17,20,00,000.00
Total Initial Investments ₹ 47,50,00,000.00
Benefits from Purposed Changes YEAR 1 2 3
Direct sales ₹3,16,72,43,100.0 ₹3,48,39,67,410.0 ₹3,83,23,64,151.0
Incremental sales resulting from enhanced promotional ₹9,50,17,293.0 ₹10,45,19,022.3 ₹11,49,70,924.5
Reduced last mile costs ₹1,56,36,907.9 ₹1,73,56,967.7 ₹1,92,66,234.2
Reduced line haul costs ₹1,90,03,458.6 ₹2,10,93,839.0 ₹2,34,14,161.3
Reduced first mile cost ₹31,67,243.1 ₹35,15,639.8 ₹39,02,360.2
Reduced customer service costs ₹5,00,000.0 ₹5,00,000.0 ₹5,00,000.0
Total Benefits ₹3,30,05,68,002.6 ₹3,63,09,52,878.9 ₹3,99,44,17,831.3
Costs (Excluding Initial Capital Investments) YEAR 1 2 3
Product/Manufacturing ₹85,51,55,637 ₹94,92,22,757 ₹1,05,36,37,260
Packaging ₹15,83,62,155 ₹17,57,81,992 ₹19,51,18,011
Fulfillment ₹63,34,48,620 ₹70,31,27,968 ₹78,04,72,045
Shipping ₹19,54,61,348 ₹21,69,62,097 ₹24,08,27,927
Customer Support ₹18,16,00,000 ₹20,15,76,000 ₹22,37,49,360
Transaction Fees ₹8,70,99,185 ₹9,66,80,096 ₹10,73,14,906
Maintenance (AI, EV, Smart Packaging and Flipfly) ₹1,20,00,000 ₹1,33,20,000 ₹1,47,85,200
Advertisement and Marketing ₹75,00,00,000 ₹83,25,00,000 ₹92,40,75,000
Depreciation on capital expenditures(calculation uses three-year period) ₹15,83,33,333 ₹15,83,33,333 ₹15,83,33,333
Total Costs ₹3,03,14,60,279 ₹3,34,75,04,243 ₹3,69,83,13,043
Totals YEAR 1 2 3
Net Benefits (Costs) ₹ 26,91,07,724 ₹ 28,34,48,636 ₹ 29,61,04,788
Tax ₹ 8,07,32,317 ₹ 8,50,34,591 ₹ 8,88,31,437
Value after tax ₹ 18,83,75,407 ₹ 19,84,14,045 ₹ 20,72,73,352
Depreciation added back ₹ 15,83,33,333 ₹ 15,83,33,333 ₹ 15,83,33,333
Cash flow -₹ 47,50,00,000 ₹ 34,67,08,740 ₹ 35,67,47,379 ₹ 36,56,06,685
Cumulative cash flow -₹ 47,50,00,000 -₹ 12,82,91,260 ₹ 22,84,56,119 ₹ 59,40,62,804
Evaluation Metrics Values
Net present value (NPV) ₹ 40,97,08,022
Internal rate of return (IRR) 54.12%
Payback period (in years) 1.36

9. Annexure - 3
CUSTOMER ACQUISITION COST
Tier 2 City Kochi
City Population 3301000
Internet Penetration 38%
CAC Definition: How much does it cost the company (in advertising) to get one brand new customer.
Significance: If you know how much customers buy on your products over their lifetime (CLV), you can compare CLV to CAC to understand profitability.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Marketing Costs ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667 ₹ 41,66,667
Paid Advertising
Streaming Platforms ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667 ₹ 10,41,667
Social Media Facebook, Insta ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667
Google ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667
Total Paid Ads ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000 ₹ 18,75,000
Other Marketing
Local Celebrities ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333 ₹ 14,58,333
PR Agency ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667
Marketing Payroll ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667 ₹ 4,16,667
Total Other ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667 ₹ 22,91,667
Sales
Customers
New Customers - Paid 6,000 6,300 6,615 6,946 7,293 7,658 8,041 8,443 8,865 9,308 9,773 10,262
New Customers - Organic 3,000 3,060 3,121 3,184 3,247 3,312 3,378 3,446 3,515 3,585 3,657 3,730
Returning Customers 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500
Total Customers 11,500 11,860 12,236 12,629 13,040 13,470 13,919 14,389 14,880 15,393 15,930 16,492
Total Orders 13,800 14,232 14,683 15,155 15,648 16,164 16,703 17,266 17,856 18,472 19,116 19,791
Paid CAC ₹ 312.50 ₹ 297.62 ₹ 283.45 ₹ 269.95 ₹ 257.09 ₹ 244.85 ₹ 233.19 ₹ 222.09 ₹ 211.51 ₹ 201.44 ₹ 191.85 ₹ 182.71
Blended CAC ₹ 208.33 ₹ 200.32 ₹ 192.58 ₹ 185.11 ₹ 177.89 ₹ 170.92 ₹ 164.20 ₹ 157.71 ₹ 151.46 ₹ 145.42 ₹ 139.61 ₹ 134.00