• Walmart's Drone Delivery Test Challenges Amazon

    Walmart's Drone Delivery Test Challenges Amazon in Race for Quicker Service

    Amazon Got Approval for a Similar Program Last Month

    One of Walmart?s partners, an Israeli drone company called Flytrex, tested delivery drones in North Dakota and in Iceland. (Walmart)
    One of Walmart’s partners, an Israeli drone company called Flytrex, tested delivery drones in North Dakota and in Iceland. (Walmart)

    The battle of the delivery drones has officially begun: Amazon took a shot last month and now Walmart is firing back in kind.

    Walmart, the world's largest brick-and-mortar retailer, announced two separate deals with drone delivery services in the past week. They are designed to allow the company to experiment with a drone program involving grocery, household and health items to try to one day get orders to customers faster than by truck.

    The news comes just days after Amazon, the largest e-commerce company, received Federal Aviation Administration approval to experiment with drone deliveries as part of its Prime Air division, which it announced seven years ago.

    “We know that it will be some time before we see millions of packages delivered via drone,” Tom Ward, Walmart’s senior vice president of customer product, said in a blog announcement. “That still feels like a bit of science fiction but we’re at a point where we’re learning more and more about the technology that is available and how we can use it to make our customers’ lives easier.”

    Drone deliveries are one way Walmart is expanding the use of its investment in 6,000 stores and numerous fulfillment and warehouse sites. It can also address swelling demand for quick delivery as well as finding ways to cut the escalating related costs of labor-intensive deliveries, all while reducing its carbon footprint and truck traffic.

    It’s much the same for Amazon. The company is building fulfillment warehouses, positioning its Whole Foods stores for double duty as distribution sites, and expanding full grocery- and convenience-store sites that it plans to also use as fulfillment centers.

    Despite all the progress, a world where various drones are flying around your neighborhood is still years away. Besides the safety measures that must be met to avoid a drone hitting someone in the head, for instance, deliveries may be regulated per municipality. That could lead to a hodgepodge of air-traffic issues.

    While drones might do wonders to speed delivery, there’s skepticism about their impact on e-commerce profitability, considering the expense of developing the technology, operating it and the small payloads they can carry, said Anjee Solanki, the national director of retail services for Toronto-based brokerage Colliers International.

    Given that there are many less complicated ways for consumers to obtain their purchases, the technology might be better used for food-delivery services like pizza parlors, Grubhub and Bite Squad, she told CoStar News.

    “Are we solving a problem here, or is it just a cool way to get the goods there?” Solanki asked.

    Futuristic Deliveries

    When Amazon CEO Jeff Bezos first unveiled the e-commerce giant’s Prime Air plans — using drones to deliver packages — on “60 Minutes” in 2013, he noted the futurism of a world with tiny helicopters air lifting bundles to doorsteps.

    “I know this looks like science fiction,” he said. “But it’s not.”

    Bezos predicted then drones would be a common sight in five years, which didn't happen. But in 2020 when a pandemic shifts more consumer spending online and same-day delivery becomes a mantra, Bezos’ future looks like it could be closer.

    Late last month, the FAA gave Amazon’s Prime Air division the nod to move its proprietary MK27 drone from test-only flights to real delivery fulfillment for customers in select areas. It followed similar OKs for Google parent Alphabet and UPS Flight Forward, neither of which has started drone deliveries.

    That put Amazon a step closer to its vision of 30-minute delivery, though there are still plenty of regulatory and consumer acceptance issues to hurdle.

    Walmart, which has been toying with drone delivery for many years as well, announced it is launching a pilot drone-delivery program of select grocery and household essential items with Flytrex, an end-to-end delivery firm.

    It plans to test the automated drones from its stores in Fayetteville, North Carolina, which borders the Fort Bragg military base.

    Walmart also said it is teaming with Zipline, known for its lifesaving drone deliveries in Ghana and Rwanda, for on-demand health and wellness product deliveries. The Bentonville, Arkansas, retailer plans to test that system near its headquarters early next year, trying 60-minute or less deliveries in a 50-mile radius.

    (Courtesy of Walmart)

     

    The moves by the major retailers could cause ripple effects on the commercial real estate market beyond enriching the investment the companies already have their physical locations.

    By Solanki's reckoning, some suburban retail real estate might be more easily converted into drone-friendly properties. Big-box stores in particular could be well suited to such uses.

    Making such changes would not be far off from what some retailers have already done, she said, pointing to Best Buy as an example.

    During the coronavirus outbreak, the company has reconfigured its stores to be better suited to customers in cars lining up out front to pick up orders placed online. Their locations, which once had vast sales floors, are now mostly used as warehouse for fulfillment operations with light, traditional retail in front.

     

    In June 2019, Jeff Wilke, CEO of Amazon Worldwide Consumer, debuted the MK27 delivery drone at the company's re:MARS event in Las Vegas. Courtesy of Amazon

     

    Israeli Drones

    Flytrex, the Tel Aviv, Israel-based aerospace company, is providing Walmart’s drones. The company was already part of a backyard drone delivery experiment spearheaded by the FAA and the North Carolina Department of Transportation that kicked off in 2017.

    Flytrex drones have been designed specifically with the suburban landscape and “backyard deliveries” in mind, according to the company website.

    “Our delivery service is the first of its kind to bring on-demand drone delivery convenience to the suburbs,” reads the website. “While urban dwellers can choose from a myriad of affordable on-demand delivery options, those living in the suburbs have been left with expensive and inconvenient choices until now.”

    The drones can carry up to 6.6 pounds, equivalent to about six to eight hamburgers, and cruise at 32 miles per hour. The drone lowers the package using a wire until it reaches the ground in a customer’s backyard.

    With Fort Bragg, Fayetteville and the surrounding suburbs, that area of North Carolina area has a population of about 530,000, according to regional planning officials. That gives Walmart lots of potential customer muscle to test its service.

    For Amazon, it took up the task of developing its drone from the ground up, rather than collaborating with a third party. Eventually, Amazon expects the MK27 could be capable of delivering up to 85% of the products it sells to customers’ homes and designated drop-off points.

    Amazon officials say the MK27 has a sensitive systems of sensors that allow it to “see” and identify things on the ground.

    "A customer’s yard may have clotheslines, telephone wires, or electrical wires. Wire detection is one of the hardest challenges for low-altitude flights," Jeff Wilke, CEO of Amazon Worldwide Consumer, wrote about the MK27 last year. "Through the use of computer-vision techniques we’ve invented, our drones can recognize and avoid wires as they descend into, and ascend out of, a customer’s yard."

    Even so, neither Amazon nor the FAA don’t appear to be willing to take unnecessary risks. Care has been taken to avoid flight paths that might take the drone over people and buildings or into the path of other aircraft, which greatly constrains where it can go. As per the decision, the service can operate only within 7.5 miles of an existing experimental test site in an undisclosed rural area.

    That means it will be available to a select number of potential Amazon shoppers, just 10 homes in fact.

    The craft, though it chooses its own route and interacts autonomously with the environment, is meant to be closely monitored and managed by a crew of humans on the ground.

    The crew lineup includes six different job titles, among them a “visual observer” and an “aircraft observer.” The former is responsible for anticipating physical conflicts the drone might not be able to sense, and the latter is responsible for “maintaining visual contact with the aircraft at all times” when it is in forward flight.

    The government approval is a milestone for Amazon, which, with the FAA’s blessing, began testing the technology in 2015, two years after the announcement of intentions to develop drone delivery.

    “We recognize the only solution worth launching is one that is safe and reliable, and this [FAA decision] is a big step in that direction,” the company said through a spokeswoman in an email to CoStar. “It does not mean that we’ll be regularly delivering packages to customers’ yards tomorrow but we’re actively flying and testing. It will take time and more hard work before our operations are ready to scale.”

    But with all new technologies, new rules and regulations on delivery drones are expected to follow. The FAA’s recent measure, for instance, only permits the MK27 to operate within very narrow limits.

    According to FAA documents, the craft will be able to deliver packages of 5 pounds or less, and is restricted to a maximum gross takeoff weight of 88 pounds, including the payload. Among the constraints imposed on the new technology, it can only operate during daylight hours, and will be grounded in icy or windy conditions.