Who Are The Big 3 In US Drone Delivery?

The battle to deliver on the promise of drone delivery continues to heat up as regulators, customers, and the providers themselves learn what it takes. The Federal Aviation Administration (FAA) has taken tremendous steps to enable beyond visual line of sight (BVLOS) operations. For years, industry had uniformly called for clear guidance on how to extend beyond the sight of its pilots, to go further than one or two miles at a time and now that most important requirement for companies to get goods to where they need to be at scale is in place. So the question many are asking, are who are the big players and what makes them the gatekeepers for success in this space? The answer to that is of course the same with any service, who are the gatekeepers to customers; who are your trusted partners? In this space, that comes down to the folks who traditionally bring goods to people at scale – Walmart, UPS, and Amazon.

Last year (2023) saw some of the most significant movement for leading companies Matternet, Wing and Zipline receiving approvals that extended their operations and allowed the big logistics partner companies like Walmart
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and UPS to make plans for how to integrate and scale those efforts. More recently, companies like Flytrex and DroneUp have been able to claim some form of BVLOS in their effort to compete with those industry leaders. With the “is it possible” question seemingly answered, partnerships and scale are expected to come next.

Walmart’s race across the US

Walmart’s approach to drone delivery has always been a focus of the tech world as, rather than seek to develop the technology in-house (like Amazon
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has), it has chosen to engage multiple potential partners and pit them against one another in a winner take all race across the country! No, there is no big race or competition directly, and everyone in the space will tell you that “rising tides lift all boats,” yet Walmart’s approach has been to to engage multiple drone delivery partners to serve customers in different areas. While Flytrex, DroneUp and Zipline have been multi-year partners of Walmart with operations in North Carolina; Texas, Arizona, and Florida; and Arkansas, respectively, Google’s Wing became partners more recently. In 2022 alone, Walmart’s operators (Flytrex, Zipline, and DroneUp) conducted “over 6,000 drone deliveries to customers…” with the vast majority being conducted by Zipline.

With Wing entering a partnership with Walmart, they and Zipline both announced around the Consumer Electronic Show (CES) an expansion of service in the Dallas Fort Worth (DFW) area that would provide an additional 1.8 million customers with drone delivery at a radius of up to 10 miles from a Walmart with the capability to support the service. What this means, is that 75% of the DFW Metroplex will have access to 30 minute or under delivery of nearly 80% of the goods that Walmart offers.

The Drones with brown shorts at United Parcel Service (UPS)

The behemoth of logistics, UPS, has widely been considered a natural leader in drone delivery for years and though their service provision has not kept up with Walmart’s, their partnership with industry manufacturing pioneer Matternet through their subsidiary UPS Flight Forward (an extremely professional team with an extensive aviation pedigree) keeps them at the forefront of any drone delivery conversation. In 2022, Matternet achieved the first of its kind non-military FAA standard Type Certification and Production Certification allowing them to manufacture and sell the only type certified drone for delivery and a type certification amendment in 2023. What’s fascinating, is that though UPS Flight Forward can now leverage a type certified aircraft, and they themselves have achieved a Part 135 Operational Approval (necessary for delivering packages for compensation), the industry has not seen significant announcements of scaling or growth.

Speculation continues as to UPSs investment strategy and challenges when it comes to leveraging drones. One insider recently indicated that on-going conversations with labor leaders has made implementing and scaling drone delivery a major challenge for UPS as the concern over greater automation reducing job opportunities is a concern. Another belief is that UPS may be looking to refine the drone delivery capability to better integrate with their plans for next generation trucking solutions in a multi-modal context. Tests have been underway since 2017 to enable a UPS truck to launch a drone in one location and recover it in another – helping to offset the mostly costly segment of the last mile journey; especially in more rural communities.

What’s going on at Amazon?

The drone delivery industry cannot be discussed without mentioning the elephant in the room, Amazon. Ask any average person on the street, and the first thing they can recall about drone delivery starts with Jeff Bezos on 60 Minutes claiming that within 5-years we’d have 30 minute deliveries from the sky. While that vision has taken much longer to come to fruition than previously expected, the technology, operations, and integration work continues on at Amazon; logistics champion that has many advantages before it. Amazon owns their own customer experience from developing goods to selling goods to delivering goods; a competitive advantage that ensures they don’t need short-term victories at the cost of long-term win engineering. Amazon’s focus has also allowed them to develop sub-systems (like detect-and-avoid, Uncrewed Traffic Management, etc.) that will enable much more complex operations than many of the other competitors in the space and at a size of delivery that, at least for now, is unique.

While the number of deliveries that Amazon has publicly announced for their two locations is “in the hundreds of household items” rather than the hundreds of thousands, one shouldn’t make the assumption they are far behind. While venture backed competitors are beholden to meeting external demands from partners, Amazon may be able to weather this nascent phase of low-altitude aviation access without costly services that don’t lead to financial success and could be well positioned with a refined aircraft for its overwhelmingly large customer base when the time is right.

So what does it all mean?

If we look at the landscape today, it’s clear that the big 3 logistics partners that all drone delivery providers would love to work with have different strategies for serving their customers. At least for now, Walmart is open to partnering with whichever technology provider can serve their customer needs today, Amazon is looking to own the technology stack, customer experience, and offerings as they do with any number of other services to their customers. Meanwhile, UPS looks to be working with its people partners and existing technology to support an evolution of their logistics systems with fewer, but trusted, partners.

As 2024 kicks off it’s safe to say that the drone delivery market is in a better place than it was in early 2023, when lass lay-offs hit companies across the industry. Industry has received vital approvals and certification that should continue to expand operations across the country in all but the most densely populated areas or most complex airspaces. Companies are seeing the viability of drone delivery and with price points as low as of $4.00 per 30-minute delivery cost, consumers are really seeing the benefit of on-demand, rapid, ordering. The next question to answer? Just who will be the Walmart darling? With Manna, an Irish drone delivery company beginning operations in Texas, will there be an international player who can pop-up to compete with these US companies?