Drone Delivery – Who’s Going to Make It?

The car-based delivery app business model is not profitable.  Drone delivery, whose costs are 1/10 those of human car-based delivery, stands a better chance. But while it appears to be economically viable from this early viewpoint, does that make it amenable to Big Tech? 

Drone delivery is being developed by the major online retailers, Amazon and Walmart, and by Google’s Wing Aviation. Wing has successfully made more than 100,000 deliveries in Australia and is expanding service. including partnering with a new KFC purpose-built kitchen. Walmart recently bought DroneUp and started service at three locations in Arkansas.  Amazon Prime Air, after a delivery in late 2016, has not launched a service.  What’s up with Amazon? Is it technical difficulties or business model difficulties? Looking at Amazon’s patent portfolio, we see that application filings started tapering off in 2018 and were down to just one application filing in 2021.  

Drone patent applications were down across the board for 2020 and 2021, but not before then, so it looks like Amazon is really bailing out.

Wing Aviation CEO James Ryan Burgess, with insight from success in Australia, thinks smaller groups of drones in multiple areas can provide a better service model than a centralized drone operation, meaning major shopping centers are the natural location for a drone service. Picture shopping centers with a general merchandise big box retailer (Target, Walmart) and many small restaurants to meet all the retail convenience demands.  

Maybe same-hour delivery of freshly produced meals and other essentials isn’t going to work for Amazon. There are about 500 Whole Foods Markets in the US, but is that enough to justify a dedicated drone operation?  Compare that to about 1,900 Target stores and 4,700 Walmart stores.  They are certainly not going to contract Amazon for deliveries, so Amazon is limited to its Whole Food sites.  Whole Foods’ hot bar also competes with local restaurants, possibly hindering collaboration for a mutual delivery service.

Amazon doesn’t fit the new service model, but Flytrex does. Flytrex, a drone delivery service, raised $40M to expand drone delivery to US suburbs and has recently expanded service into the Raleigh-Durham Metro area. The new Holly Springs service delivers for a Target store and local restaurants and the Fayetteville NC service delivers for a Walmart store plus local restaurants.  Those are natural nesting places for drones. It looks like drone delivery is finally here, at least for Suburbia. This probably also means a change in real estate values in and around those types of shopping centers and some serious competition for Amazon.