Case Study for Deciding The location of New Warehouse

Indian e-Commerce Market

Size of Indian e-commerce market: 12.6 billion

Share of online travel: 70%
E-commerce market size without travel: 3.78 billion
Share of Fashion: 30%
Fashion market size: 1.134 billion
Average spend/year/person: 691
Number of transactions: 1.6411 million
Top 10 cities have share: 67.50%
South India share: 41%
West India share: 27%
South India size: 0.46494 billon
 Indian e-Commerce Market

According to Forresters Asia Pacific online retail forecast for 2013- 2018, the number of online buyers
in India will reach 39 million by the end of 2014 and 128 million by the end of 2018.

Increasing sales from tier two and tier three cities Madurai, Coimbatore and Trichy as well.

Only 31 per cent of the total Indian population lives in urban India whereas 69 per cent lives in rural
India

The distribution of inventory across the warehouses is a function of customer demand and market
size

In India, the top 10 cities contribute to 65-75% of the business for a geographically focussed e-tailer
and 50-60% for the dispersed ones. Having 3-4 warehouses can easily service these markets with
optimum cost.
 Additional warehouse Benefits and Challenges

Benefits:

Reduction of Turn Around time

Better customer satisfaction In South India

Reduction in logistics cost

Challenges

Increased complexity of operations

Inventory management will become tougher

High cost of opening and operating a new

warehouse
 Factors affecting the choice of warehouse location

Proximity to customers

Volume of orders around that region

Proximity to suppliers

Availability of Land

Cost comparison-new warehouse cost Vs. reduction in logistics cost

Local infrastructure (road, electricity etc.)

Political factors

Please see the excel sheet warehouse factors

 Factors affecting the choice of warehouse location

Existing possible possible possible possible

warehouse location location location location
south Andhra/
warehouse location--> Gurgaon/Delhi Bengaluru Mumbai Chennai
Hyderabad
warehouse rent in Rs per
sq ft. 10 to 15 20-25 5 to10 15-30 20-25
warehouse coverage
(North India,South India
etc) North/central/east south/central/west south/centre west/south south/central/west
how much sale is how much sale is how much sale is how much sale is
location business %age Jabong how much sale is Jabong Jabong Jabong Jabong
doing in this region ? doing in this region ? doing in this region ? doing in this region ? doing in this region ?
other
competitors/similars Amazon/myntra Amazon/myntra/flipkart wallmart/amazon amazon amazon

tax laws-Vat % 12.5% 12.5% 12.5% 14.5% 12.5%

Amazon's warehouse got

labour/political/other
into issues
issues
-recent news
% of total suppliers assuming equal assuming equal assuming equal assuming equal assuming equal
fast delivery by jabong yes no no yes no

air/road -
transport/logistics -Best coverage for south
connectivity air/road India air/road air/road air/road

Please see the excel sheet warehouse factors

 Finding the Least Cost

Jabong needs a warehouse in south India.

Preferred cities for opening warehouse are Hyderabad,Chennai,Bangalore,Mumbai.

Assuming that majority of business for Jabong-in south India- comes from above
mentioned cities and Pune

Also Assuming that sales is equal in all the areas

I have tried to calculate,( in attached excel) , least cost assuming 1 Item is shipped
from proposed location to all other locations

Distances in Kms

Cost per km is assumed as 1 Rs

Please see the excel sheet warehouse factors

 Finding the Least Cost

With Pune

Minimum
cost

Without Pune

Minimum
cost

Please see the excel sheet warehouse factors

 Final Conclusion

Based on all this, Southern Andhra seems to be a good choice.

Amazons warehouse in Karnataka faced problems, so better avoid Karnataka.

For two warehouses:

(percentage of fulfillment
from each warehouse
depends on actual sales
data)

From Proposed warehouse

From Current warehouse
Warehouse in Southern
Existing Gurgaon
Andhra will be catering to
warehouse will be catering
Central, South and West
to North and East India
India

Please see the excel sheet warehouse factors