Order economics: last mile, dark stores, and returns

Calculate the contribution of one quick commerce order, the break-even volume of a dark store, and the cost of returns in online fashion.

Industry brief, with a one-minute summary: E-commerce and quick commerce

Key takeaways

In e-commerce the unit is the order.
Quick commerce means delivering groceries and daily items in about 10 to 30 minutes.
The last mile is the final trip from a warehouse or store to the customer's door.

Key idea

In e-commerce the unit is the order. An order makes money only if what the company keeps from it covers picking, packing, delivery, payment, and discounts, and then enough orders flow through each warehouse or dark store to cover its fixed costs.

Quick commerce means delivering groceries and daily items in about 10 to 30 minutes. To do this, companies run dark stores: small warehouses, closed to the public, placed inside dense neighbourhoods so a rider can reach most homes in minutes. The model is common in India (Blinkit, Swiggy Instamart, Zepto) and the Gulf (talabat mart, Noon Minutes, Careem Quik, Amazon Now in the UAE). In Western Europe and the US it has struggled; see lesson three.

Worked case

Does a quick commerce order make money, and how busy must a dark store be?

The prompt

An illustrative quick commerce player in India has an average order value of INR 600. It earns an 18 percent margin on goods, advertising income worth 3 percent of order value, and a delivery and handling fee of INR 15 per order. Per order it pays INR 45 to the rider, INR 7 for packaging, 1.5 percent of order value in payment fees, and INR 20 in discounts. Each dark store has fixed costs (rent, staff, power) of INR 18 lakh a month. What is the contribution per order before store costs, and how many orders a day does a store need to break even? Use a 30-day month.

Open this case to practice it with a partner

The structure

Store profit = orders x contribution per order minus store fixed costs
- Income per order: goods margin, advertising, customer fees
- Variable costs per order: rider, packaging, payment, discounts
- Break-even orders = store fixed costs / contribution per order

Working it through

1. Goods margin
18 percent of INR 600.
Goods margin per order (INR):600 × 0.18 = 108
2. Advertising income
3 percent of INR 600.
Advertising per order (INR):600 × 0.03 = 18
3. Total income per order
Add the customer fee of INR 15.
Income per order (INR):108 + 18 + 15 = 141
4. Variable costs
Rider 45, packaging 7, payment 1.5 percent of 600 (which is 9), discounts 20.
Variable cost per order (INR):45 + 7 + 600 × 0.015 + 20 = 81
5. Contribution per order
Income minus variable costs.
Contribution per order (INR):141 - 81 = 60
6. Break-even orders a month
INR 18 lakh is INR 1,800,000.
Break-even orders per month:1,800,000 ÷ 60 = 30,000
7. Break-even orders a day
Divide by 30 days.
Break-even orders per day:1,800,000 ÷ 60 ÷ 30 = 1,000

The recommendation

The company should open dark stores only in areas that can reach about 1,000 orders a day, because each order contributes about INR 60 against INR 18 lakh of fixed cost per store each month. First, income per order is INR 141 against INR 81 of variable cost. Second, this means a store needs 30,000 orders a month before it earns anything. The risk is that new stores take months to reach mature volume, so a young network loses money. As a next step, grow basket size, cut the INR 20 discount and track orders per day by store.

Risks: Rider cost rises at night, in rain, and during peaks; New stores take months to reach mature volume, so a young network loses money even if each mature store is profitable.

Illustrative quick commerce order in India, INR per order(INR per order)

So-what

The rider is the largest cost. Anything that puts more items or more orders on each trip helps most.

The last mile

The last mile is the final trip from a warehouse or store to the customer's door. It is often the most expensive part of delivery because each stop serves only one customer. Its cost per order falls when stops are close together (density), when a rider carries several orders per trip (batching), and when customers accept a delivery window instead of an instant slot. Parcel e-commerce uses large sorting centres and vans. Quick commerce uses riders on motorbikes or bicycles from dark stores. Cash on delivery, still common in India, parts of the Middle East, and Africa, adds handling cost and failed deliveries.

Returns: the hidden cost of online fashion

Worked case

What a higher return rate does to an online fashion retailer

The prompt

An illustrative online fashion retailer in Germany has an average order value of EUR 80 and a gross margin of 50 percent on items that are kept. Every order costs EUR 5 to ship. Each returned order costs EUR 12 to collect, check, and restock, and earns nothing. The return rate is 30 percent of orders. What is the contribution per order, and what happens if returns rise to 40 percent?

Open this case to practice it with a partner

The structure

Contribution per 100 orders = gross profit on kept orders minus return costs minus shipping
- Kept orders earn 50 percent of EUR 80
- Returned orders cost EUR 12 each
- All orders cost EUR 5 to ship

Working it through

1. Gross profit on kept orders
70 of 100 orders are kept; each earns EUR 40.
Gross profit per 100 orders (EUR):70 × 80 × 0.5 = 2,800
2. Contribution at 30 percent returns
Minus 30 returns at EUR 12 and 100 shipments at EUR 5.
Contribution per 100 orders (EUR):70 × 40 - 30 × 12 - 100 × 5 = 1,940
3. Per order
Divide by 100.
Contribution per order (EUR):1,940 ÷ 100 = 19.4
4. At 40 percent returns
60 orders kept, 40 returned.
Contribution per order at 40 percent returns (EUR):(60 × 40 - 40 × 12 - 100 × 5) ÷ 100 = 14.2

The recommendation

The retailer should make cutting returns a priority, because ten more points of returns cut contribution per order from EUR 19.40 to EUR 14.20, a fall of about 27 percent. First, each return costs EUR 12 and loses the EUR 40 of gross profit on the order. Second, this means better size guidance and accurate photos are often worth more than a small price increase. The risk is that return fees for serial returners push away good customers. As a next step, test better size guidance in the categories with the highest return rates.

Timed math drill

A marketplace in Brazil has GMV of BRL 50 billion and revenue of BRL 7.5 billion from commissions, fees, and advertising. What is its take rate, in percent?

Timed math drill

A dark store in Dubai has fixed costs of AED 150,000 a month. Each order contributes AED 10 before store costs. How many orders a day does it need to break even? Use a 30-day month.

Timed math drill

Blinkit reported net order value of INR 14,386 crore from 273.9 million orders in the quarter to March 2026. What was the average net order value per order, in INR, to the nearest rupee? (1 crore = 10 million.)

Check your understanding

Which change most improves the contribution of a quick commerce order?

Terms in this lesson

Contribution Contribution margin Breakeven Fixed cost Variable cost Capacity utilization Unit economics Dark store Quick commerce Last mile Return rate Gross merchandise value (GMV)Take rate

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