Photo: Walmart
Is Drone Delivery Gaining or Losing Steam?
Despite challenges ranging from regulations to noise, cost, safety, and public acceptance, Walmart continues to push ahead with tests of drone delivery. A new partnership with Wing, a drone-delivery provider owned by Alphabet, Google’s parent company, enables air delivery to an additional 60,000 homes in the Dallas-Fort Worth metro area — even for frozen items like ice cream and fragile products like eggs.
The partnership begins in the coming weeks with deliveries under 30 minutes from a Walmart in Frisco. A second hub will open nearby later this year.
Walmart said that over the last two years, it’s completed more than 10,000 deliveries out of 36 stores across seven states, including from drone hubs already operating in the Dallas area with partner DroneUp. A successful Wing partnership could accelerate Walmart’s drone efforts.
Prathibha Rajashekhar, SVP of innovation and automation for Walmart U.S., wrote in the announcement, “With drones that can fly beyond visual line of sight, we’re able to unlock on-demand delivery for customers living within an approximate 6-mile range of the stores that offer the service.”
The reported departure in early August of two key executives from Amazon’s Prime Air unit amid stringent regulatory restrictions and crashes was seen as a setback for drone delivery.
In a blog entry earlier this year, however, McKinsey’s analysis found that while regulations need to evolve, if drone operators can manage 20 drones simultaneously, “a single package delivery will cost about $1.50 to $2.” This is in line with the per-package cost for an electric car delivering five packages or any type of van delivering 100 packages in a single trip. CO2 emissions are also expected to be lower.
The bigger hurdle may be consumer acceptance, as a Morning Consult survey from June 2022 found that 57% of American adults have trust issues with drone delivery. Asked about drone-related issues, 80% were concerned about unsuccessful deliveries, 71% about data privacy given drones’ capacity to record property, 66% about air traffic safety, and 65% about job loss.
In a recent column for Progressive Grocer, Yariv Bash, CEO of drove-delivery startup Flytrex, said many concerns have been addressed. He wrote, “As with any innovation, there’s still much work to be done to achieve full consumer acceptance.”
Discussion Questions
DISCUSSION QUESTIONS: How confident are you that drone delivery will be sustainable and soon scale nationwide? Do you see cost-effectiveness, consumer acceptance, safety, or another issue as the largest hurdle?
Poll
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Mark Ryski
Founder, CEO & Author, HeadCount Corporation
David Weinand
Chief Customer Officer, Incisiv
Drone delivery is growing but it remains a very small part of the overall delivery market. While retailers like Walmart are expanding drone capability, their efforts remain somewhat experimental. Indeed, even though Walmart launched drones 2 years ago they have, to date, only made around 10,000 deliveries. At this scale I doubt the venture can be profitable on an overall basis or on a per-delivery basis. The problem is that to become profitable drone activity would need to be scaled up and that comes with a whole host of issues: airspace regulation, safety concerns, issues of flying over property, and so forth. As such, I think drone delivery will be confined to some specific use cases and geographical areas for the time being.
I’m not convinced that drone delivery will ever be big, despite Walmart’s determination. Drone delivery at scale would be a nightmare. Imagine the skies filled with drones? Do you really need a tub of ice cream delivered via drone? While I do believe that there are cases where drone delivery make sense, like delivering medication to hard to reach consumers, I am confused by Walmart’s persistence on a service that will be very small relative to their operation — it’s perplexing. 10,000 Deliveries over two-years may be a high water mark in the drone delivery business, but it’s a drop in the bucket for Walmart.
Agree.
I’ve never been bullish on drone delivery. Not that I don’t think it works. Quite the contrary, that’s the problem. If enough retailers and shippers opt for drones the suburban skies will be full of flying machines competing for airspace, so the more activity, the harder it will be to ensure that crashes don’t occur. And, the first time a drone hits a person as a result of a crash or mechanical failure and injures them the drumbeat will start to ban them.
There is a tendency for the public to poo-poo newfangled ideas. “The great obstacle to the development of the automobile was the lack of public interest. To advocate replacing the horse, which had served man through centuries, marked one as an imbecile.”
The problem we all have is we tend to see the new technology in today’s terms rather than what the future will bring. Consider driverless taxis in San Francisco.
Sadly, the military developments for drones far outstrip the simplicity of package delivery. Drones for delivery eventually will become a prominent means of delivery if we don’t blow ourselves up first.
Drone delivery, like water, will seek its own level. Testing and research will tell us where that level is. It will work where it can and it will be used less or not at all, in places where barriers exist. The use of the technology will be regulated – probably more noticeably than it is today – but it will be used; not by everyone, not everywhere and not always.
There are just still a lot of pieces to this puzzle that come down to basic physics. Weather in particular is one thing that will always put an upper limit on what you can do with drones and whether the service can be consistent enough for retailers or consumers to rely on it.
Nikki, can you still get a license to shoot them down in Colorado?
Is this really the best use of our collective creativity, capital and capabilities, delivering (presumably small) items by drone so we can get “stuff” even faster?
I see the primary use cases for Drone delivery being far more valuable on the critical component scenarios like medicines, first-aid, etc. vs. ice cream and eggs to consumers. The regulations, air traffic, etc. in a scaled roll-out of consumer delivery seems that it will be overly egregious. I see that there could be value to delivery to remote areas for food, etc. but I don’t see a Jetsons scenario where hundreds of drones will be delivering items around an urban area.
A few years ago I would have said drone delivery was just PR hype, but I’m starting to come around to the possibility that it’s more viable than I once believed.
For one, there’s a massive need for last-mile innovation. The WEF report on the future of the last mile ecosystem projects that by 2030, without intervention, ecommerce growth will drive a 36% increase in the number of delivery vehicles on the road, a 21% increase in commute times (due to road congestion), and a 32% increase in emissions.
As I’ve started looking at a few of the second-wave drone delivery players like Zipline and Manna, it’s clear that the technology has evolved from the noisy gen-1 drones I was more familiar with.
Zipline claims it can deliver 7x as quickly as a car (10 miles in ~ 10 minutes for up to an 8 lb payload), reducing emissions by 97%. They expect to be able to handle “a majority of food, convenience, and health deliveries” in the U.S.
Economically, the labor and fuel cost savings will be significant if the technology scales.
As others note, there are all kinds of regulatory challenges ahead. And there are other last-mile alternatives like e-cargo bikes that are building momentum in high-density urban areas.
But with quieter and more precise drone delivery and growing interest from retailers and municipalities in reducing congestion and emissions, the market may be more viable than it seems at first glance.
Yes, Keith, it isn’t only the last mile. Do we send a truck 10 miles to make one delivery or do we send a drone?
It never had any steam to lose. It’s risky, and there are places where people would happily shoot them down.
I see naïveté as the largest issue. And believing every word Jeff Bezos says
Best reply yet. This whole concept is doomed, but it keeps Amazon in the newspapers.
I would think that the loss of foot traffic that comes with BOPIS should be a consideration in how widely some retailers would want to adopt drone delivery.
“Soon” is the key term here. Given that there is still allot of work to be done on the behavioral consumer side of acceptance to the very real issues still with package damage, potential collisions with people and things. Today, the skimming strategy of using it for highly urgent receivers at a premium service level is a good position as the tweaks are worked through over some time, but not soon at all.
Well if it meant you didn’t have to wait for someone at CVS to take the key of their wrist scrunchy and get deodorant, I’d see an opportunity. But people do not want drones flying over them. Let them stay with the military.
While challenges exist, such as regulations and public acceptance, ongoing efforts by companies like Walmart, and partnering with providers like Wing, suggest optimism for drone delivery’s sustainability and potential nationwide expansion.
Key hurdles for drone delivery are cost-effectiveness and safety. Balancing expenses, technology, regulations, and public trust is crucial for sustainable adoption. Consumer acceptance and privacy concerns are also significant challenges.
Skepticism about drone delivery due to potential airspace congestion, safety risks, and public acceptance challenges if accidents occur.
I cannot fault any retailer, including Walmart, for investing in Drone delivery technology as an investment in learning new ways to serve their customers. A willingness to try new technology is vital in retailing today, and the history of Walmart is full of examples of testing new ideas that ultimately gained traction and became core to the company’s success.
That said, I wonder about the “cost to serve” for drone technology as it continues to scale in the marketplace. Will costs per order drop over time, and will the inherently small and limited AOS/AOV limit the ability to scale this technology to profitability?
I’m rooting for this initiative to succeed, as the potential use cases are compelling for customers as well as for retailers. However, I have some concerns about it’s ability to scale to profitability in the years ahead.
I’m very confident…that it won’t. The reasons are really “all of the above”.
(And I’m equally confident my answers won’t have changed in a month or two when this same topic is brought up again.)
I still haven’t seen a comprehensive plan or a wider discussion as to how government and necessary drone usage will be able to coexist in our skies with an array of commercial, business and casual usage. All of these need to operate safely, and alleviate any national defense concerns over rogue states.
I may be wrong, but delivering eggs or a pair of jeans by drone seems to be at the low end of priorities until major safety and traffic issues are sorted out.
Drone delivery has potential, but cannot achieve mainstream acceptance and use because of strict FAA requirements and overall safety issues. Who will be managing these drones as they fly within 10 or 20 feet from the ground and have to encounter suddenly changing obstacles like birds, balloons, toys and other drones? This might be more about not getting hit, rather than striking or crashing into something. Most importantly, what does this mean for the safety of people on the ground? Failure of any type while the drone is in the air, almost certainly means tragedy for the people on the ground.
Drones have a use case in remotely populated areas or where deliveries are difficult in under served rural delivery destinations. Not sure the juice is worth the squeeze otherwise.
I think there is a place for drone delivery for unique instances. However, they don’t solve a problem that exists between a retailer and a customer. A wheeled vehicle with a human or autonomous driver can do all this on an existing route.
And for now, drone delivery is constrained by the weight the drone can carry. The other issue is getting the items from the drone to the home, parachute, smaller delivery mechanism, cool ideas but still pretty experimental.
I don’t see this scaling or going nationwide in the next decade.