Drone-Delivered Holiday Shopping? Not Quite Yet
Drones for package delivery? What do the experts think?
To find out, I talked to Christopher Hewlett, our resident drone expert at PwC. Chris recently retired as a commander in the U.S. Navy after 21 years of service. In one of his final assignments, he led a program to build a unit that integrated drones. Below is our conversation.
Barr: Let’s start with the elephant in the room. Will drones replace us?
Hewlett: Here’s what I learned in my work with the Navy: As with the Navy’s drone program, the overall drone market in the US will supplement manned operations rather than supplant them.
Barr: What does the market for retail package delivery look like?
Hewlett: The idea of drones is very enticing; it has certainly captured the public’s imagination. Simply put, drones represent a simple transport mechanism that can carry up to five pounds. Coincidentally, 86% of Amazon’s packages weigh five pounds or less.
Barr: Yes, retailers told us they will increase their investment in drone technology by a factor of seven over the next three years. What can they expect?
Hewlett: For drones to become a viable commercial delivery mechanism, three essential factors need to coalesce. The first is safety. Drones need to operate safely outside commuter air space while also routinely navigating tall buildings. Collision avoidance and air-space management are critical.
In June 2016, the US Federal Aviation Administration cleared a path for preliminary commercial drone use, establishing safe-use rules that include airspace, speed, pilot certification and other guidelines for operators. For drones to be more widely used for package delivery, those rules will continue to evolve.
Barr: And consumers will become more comfortable with the idea of drone delivery, certainly.
Hewlett: Yes, say you forget to pick up something when you’re at the store. A drone could have it to you in no time at all, considering the reach of Walmart stores, for example — 70% of Americans live within five miles of a Walmart store. We already know that the vast majority of packages delivered weigh five pounds or less. This is a situation ripe for drone technology.
But again, while everyone loves the idea of drone delivery, consumers have to believe that the item they paid $50 or $100 for is going to be delivered intact and on time by a drone. They have to go beyond the idea of drones for package delivery to the reality of drones for package delivery.
Barr: Agreed. And we know consumers are picky about delivery because they told us: 75% want to see a delivery vehicle identified by logo or a delivery person identified by uniform while 50% want that logo and uniform to reflect a brand they know and trust.
Hewlett: Yes, they want something familiar. Recognizable. Drones aren’t there yet. They will be — in time. But first, we need to have the infrastructure in place.
Barr: I imagine that will take a few years. What return on investment can companies expect?
Hewlett: Our analysis at PwC estimates the global market for commercial applications of drone technology at upwards of $127 billion. However, that analysis includes applications such as crop health assessments in agriculture; aerial photography and special effects in the entertainment industry; and monitoring of infrastructure assets. Package delivery is barely on the radar yet.
We do know companies are testing various options. Amazon, for example, has tested drone delivery from warehouses. UPS, meanwhile, has tested package delivery vehicles that come equipped with drones. These drones can deliver lighter packages on the final lap of the delivery route — making the delivery person’s job that much more efficient.
For now, these tests have been confined to rural settings for two reasons. First, they have more room to fly freely, outside of dense urban infrastructure. And second, drones are also more efficient and cost-effective than traditional delivery methods at reaching rural locations.
We still need a robust transportation network for more widespread commercial drone delivery. The question is: Which companies are willing to make that investment?
Barr: Yes, the likely candidates would seem to be logistics companies. Or large retailers with a logistics network already in place. This holiday though, that familiar earth-bound delivery van will continue to make its rounds.