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Here Come The Drones

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Back in 2016, I wrote a piece about Amazon entitled Amazon: Gamer, Or Game Changer?, to make the point that while Amazon has dramatically raised the barriers to competition in retail, it also isn’t above distracting an industry that is already prone to “Shiny New Object Syndrome” with something outlandishly new, exciting, and... (as it turns out) premature. At that time, I was thinking about the 2013 interview with Jeff Bezos on CBS 60 Minutes, when he announced Amazon’s plans to develop delivery drones. Three years later (Dec. 2016), I remarked that perhaps Mr. Bezos was gaming the industry:

“...what is the state of drone package delivery? Well, Google is still experimenting with its “Wing Marketplace” drone concept, although the drones apparently have trouble occasionally landing in trees... in the USA, new FAA regulations have inhibited much serious effort on drone deliveries. Slow progress notwithstanding, the December 2013 pronouncement was a clever bit of promotion from Amazon’s Jeff Bezos, and the Retail industry fell all over itself trying to figure out what the response should be... Well played, Mr. Bezos!”

Now, let’s fast-forward to 2020. Retail has changed dramatically in the 7 years since the 60 Minutes interview. As we celebrated a new year, customers had internalized the concept of digitally enabled shopping journeys (the whole omnichannel agenda), and retailers thought they had also figured out ways to redefine the store in the context of omnichannel shopping. Then COVID hit, and “buy online pickup instore” has become “buy online pickup curbside” and the volume of digitally created customer orders has increased significantly. As part of that, the number of direct-to-consumer shipments continue to grow and demands for fast, reliably, and cheap deliveries are ever-increasing (even as recent changes in U.S. Postal Service processes have slowed the mail down!).

Another thing that has changed is the progress of drone technology itself and its related projects. Guess what? What seemed fanciful in 2013 has become a reality. For example, last weekend the San Francisco Chronicle reported that:

Walmart said it is teaming up with Zipline to launch a drone delivery program early next year that will deliver health and wellness products close to the retailer’s headquarters in Northwest Arkansas. It was the second delivery drone deal for Walmart within a week. It’s using drones from startup Flytrex, right, to deliver groceries and household essentials from its Walmart stores in North Carolina.”

Zipline has been deploying drones since 2016 in Rwanda and Ghana, primarily delivering medical supplies to remote areas. In 2018, the financial news channel CNBC reported that “drone delivery start-Up Zipline <had beaten> Amazon, UPS and FedEx to the punch”.

Here in the U.S., would-be commercial drone operations have had to get past the Federal Aviation Administration (FAA), the regulatory agency that controls U.S. commercial airspace. That roadblock was first cleared in April 2019 when a startup sponsored by Google parent company Alphabet called Wing received approval from the FAA to operate a drone network in the U.S. (Australia okayed a Wing project the year earlier). At the time, it was reported that:

“The approval means that Wing, which has the same parent company as Google, can start making deliveries in Virginia in the coming months, where it plans to deliver goods from local businesses to rural communities in Blacksburg and Christiansburg. Wing will be able to apply for the FAA’s permission to expand to other regions in the future.”

Then in October 2019, the FAA approved an application by United Parcel Service (UPS) to operate a fleet of drones in its Flight Forward initiative. At the same time, U.S. pharmacy chain CVS announced a partnership with UPS to explore prescription deliveries via Flight Forward. Simultaneously, CVS competitor Walgreens announced a partnership with Wing. At the time, the Illinois based pharmacy chain announced that:

“Starting Friday, Oct. 18, Walgreens and Wing, a subsidiary of Alphabet, will begin a trial drone delivery service for select residents of Christiansburg, Va. This industry-first strategic partnership, announced in September, will offer quick, convenient delivery of some of our most sought-after health and wellness, food and beverage, and convenience items.”

The question remained, what happened to Amazon? After all, Bezos kicked the whole thing off with his 2013 “surprise”! That question was answered just a couple of weeks ago, when the FAA approved plans for a fleet of drones for Amazon Air. Prime Air vice president David Carbon said in a statement that:

“This certification is an important step forward for Prime Air and indicates the FAA’s confidence in Amazon’s operating and safety procedures for an autonomous drone delivery service that will one day deliver packages to our customers around the world... We will continue to develop and refine our technology to fully integrate delivery drones into the airspace, and work closely with the FAA and other regulators around the world to realize our vision of 30 minute delivery.”

“Up In The Air! It’s A Bird! It’s A Plane! It’s...”

With apologies to fans of the 1950’s era TV program Superman, what will be up in the air pretty soon are delivery drones. Retail skeptics (like me) should acknowledge that this stuff is getting very real, and that it’s another manifestation of the new dynamics of retail. COVID has refocused on the home as the locus for consumer shopping, and given the difficulties that the pandemic has created for shoppers to visit stores, it is serendipitous that new technologies like drones are helping retailers find low cost, reliable, and fast ways to bring products to consumers.

 

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Articles & Opinions September 22, 2020
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