The future of drone delivery is here, “it’s just not evenly distributed,” to borrow the words of William Gibson. Within the next five-plus years, Amazon aims to deliver a half of a billion packages per year by drone. Today, Zipline has already reached a million drone deliveries thanks to its global presence and Google’s Wing subsidiary has hit 350k. Last month, the US House of Representatives passed the FAA Reauthorization Act of 2024 that reduces the amount of bureaucracy required for drone startups to launch new delivery markets. Meanwhile, a battleground is currently forming in Dallas, TX as major drone players like Zipline, DroneUp, Wing, and Flytrex form partnerships with big box retailers like Walmart and franchisees of brands like Domino’s, Jersey Mike’s, and Whataburger. This hub has become ground zero for drone deliveries thanks to its high-income suburban sprawl that also boasts clear skies. So where are we in the current evolution of this technology, what’s its promise, and what will it look like in the future? Over the past few months HNGRY and OttoMate teamed up on a project to investigate further and below is a summary of what we’ve learned.
The Promise of Drone (Food) Delivery
Food has become one of the prime use cases of drone delivery thanks to its lighter payload, high level of urgency, and volume. Furthermore, there are higher marketplace take rates to merchants and price markups to customers that make it more ripe for drone delivery disruption than other lower-margin verticals like grocery and convenience stores. The latter categories are only supported by smaller basket sizes due to the weight restrictions of drones. The pitch for merchants is simple: faster, cheaper deliveries thanks to lightweight drones over 4,000-pound cars driven by gig workers.
While Zipline was able to reach its millionth delivery milestone thanks to its blood delivery operations in Africa, such healthcare partnerships rely on higher uptime and regulatory hurdles. On the flipside, startups can charge higher prices per delivery for such customers at a time when the unit economics aren’t quite positive yet. The other route is to get retailers like Walmart to subsidize the cost of drone delivery today in order to generate PR whilst trying to compete with Amazon. Three years ago, the retailer invested in DroneUp and has rolled out the service to over 30 store locations as it also partners with Zipline and Wing in Dallas.
While Zipline has announced impressive partnerships with brands like Mendocino Farms, sweetgreen, Panera Bread, and Jet’s Pizza, it has yet to launch any real pilots. Meanwhile, Wing launched drone delivery with 60 DoorDash merchants in Australia in late ‘22 and expanded to Christiansburg, VA in partnership with Wendy’s in March. Tel Aviv-based Flytrex has done over 85k deliveries, mostly from restaurants, in small towns located throughout Texas and North Carolina. This is thanks to the startup’s partnerships with franchisees of Inspire Brands (Sonic, Jimmy John’s, Buffalo Wild Wings) and large standalone QSRs like Domino’s and Chick-Fil-A.
Because drone delivery requires recipients to have satellite-visible yards for drop-off, it is relegated to more suburban markets. Denser networks of drivers, restaurants, and diners in tier-1 cities are also harder for drone deliveries to compete with as batching efficiencies continue to improve. In an interview with HNGRY’s Matt Newberg, Flytrex co-founder and CEO Yariv Bash called attention to the ~82 million suburban American homes with backyards as the large opportunity with high delivery costs, referring to urban delivery as a “niche market.” Zipline’s latest Flynn Group partnership with franchisees of Jet’s and Panera Bread are set to launch in the Seattle and Detroit regions, likely in their outer suburbs.
Technology Wars
In an effort to get to market quicker with less capital, scrappier drone startups like Flytrex, DroneUp, and Manna leverage off-the-shelf quadcopter drones vs. Zipline, Amazon, and Wing’s proprietary eVTOLs (electric vertical take-off and landing aircraft). As their name implies, eVTOLs take off and land vertically, transitioning their thrusts horizontally during flight. While quadcopters can handle more weight than eVTOLs, they have a significantly lower delivery radius and can be noisy. On the other hand, Wing and Zipline have spent heavily on R&D to build longer-range, lower-energy drones that barely hum. While most drones deliver each package via a retractable cable with an attached wench, Zipline even went as far as inventing a “droid-in-drone” tethered from 300 feet above a home.
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