American medical product delivery company Zipline is partnering with Walmart to offer on-demand drone deliveries of health and wellness products. The pilot program is Walmart’s latest drone initiative and the first step toward a national-scale operation that could have an immense impact on the drone delivery market.
Last week, Walmart and Zipline announced they were working with Israeli startup Flytrex to use automated drones for delivering select groceries and household items in North Carolina.
Drone deliveries have been particularly attractive during the COVID-19 pandemic. Because drones can reduce contact between couriers and customers, they have become a popular option for shipping small products over medium distances.
Walmart has been making drone delivery tests since 2015 when it requested permission from the Federal Aviation Administration to do grocery pickup and warehouse inventory management. In 2016, the company used drones to scan items stacked floor to ceiling, helping catalog products that normally take employees a month in as little as a day.
Zipline, on the other hand, has been working with hospital systems to make contactless deliveries of equipment and medical supplies. In 2016, the company became the first national drone delivery system to deliver blood to patients in remote areas of Rwanda. Since then, Zipline has delivered over 200,000 critical medical products to health facilities around the world.
The drone delivery market is estimated at $22.5 billion in 2020 and is expected to grow to $42.8 billion in 2025 at a significant CAGR of 13.8% from 2023 to 2030. Services such as product deliveries are the largest segment in the global drone market.
The Drone Delivery Market
About 20,000 delivery drones are active today, the majority of them shipping medical supplies and basic groceries. Research firm Gartner predicts that, by 2026, the number will increase to over 1 million.
There have been several successful drone delivery examples in the last years. In 2016, pizza giant Domino’s partnered with the startup Flirtey to make their first pizza delivery by drone in New Zealand. In 2017, ecommerce platform AHA partnered with Flytrex to set up a small delivery route in Reykjavik, cutting delivery times for a road that normally circumvents a bay of the North Atlantic Ocean.
Among the companies regularly using delivery drones today are Zipline and Alphabet’s Wing. While Zipline has been focused on medical supplies and protective equipment for North Carolina, Wing has been making deliveries of groceries like pasta, milk, bread, and baby food in Virginia, Finland, and Australia. Both companies saw a significant increase in demand in recent months, mostly due to COVID-19 social distancing rules.
But drones can do more than deliver supplies between locations. They have also been used inside restaurants. For example, in 2015, Infinium Robotics developed a drone waiter (the Infinium-Serve) that could carry 4.4 pounds of food and drinks. In 2016, a Dutch university opened a pop-up cafe that only used drone waiters to take and deliver orders.
One of the challenges of making drone deliveries and adoption more widespread is consumer acceptance and drone sensitivity. Many fear drones will replace human workers or associate them exclusively with military use. Customers are also concerned their packages could be damaged or lost in the process.
Drones can be tremendously beneficial, but only if there are regulations in place that can protect people’s safety and privacy. In the long term, they will undoubtedly help reduce cost per delivery and delivery time.
The Race Between Walmart and Amazon
Walmart is not the only company planning on launching a nation-wide drone delivery initiative. Last month, Amazon received approval from the Federal Aviation Administration to operate nationally as a drone airline. Because Walmart contracts its drones from Flytrex (which are already part of the FFA’s UAS Integration Pilot Program), they don’t need to apply for direct certification.
Online shopping for groceries skyrocketed during the COVID-19 pandemic. Amazon Prime, with more than 150,000 million paid subscribers, saw further growth during this time. However, Walmart launched what promises to be a clear competitor: Walmart Plus.
Both services will be able to do same-day deliveries of groceries and other products you would normally find in a big box store. Walmart Plus will cost practically the same as Amazon Prime ($12.95 vs. $12.99 a month, though Walmart Plus is cheaper if paid yearly), but will not include streaming services and media. Unlike Prime, Walmart Plus includes a five-cent per gallon gasoline save at Walmart, Murphy USA, and Murphy Express gas stations.
The battle between the two giants can only get tougher with the introduction of drone deliveries.
Amazon had drone operations planned for July 2020; however, the service failed to materialize. When it does, their Amazon Prime Air is expected to deliver packages up to five pounds, using small drones, in 30 minutes or less. Walmart’s trial deliveries are expected to begin in early 2021 near their Northwest Arkansas headquarters.
Some time will have to pass before we see millions of packages being delivered to homes and businesses using drones, yet Walmart seems to have an advantage for when that day arrives.
While Amazon still dominates the ecommerce market in the United States, Walmart has a giant network of stores nationwide. Given that around 90% of Walmart customers live closer than 15 minutes from a store, the launch off points the company can provide are already in place.
This means that, despite the fact that Amazon outpaces the rest of retail, Walmart might actually be better positioned to offer speedy shipping.