Walmart (NYSE:WMT) and his partner DroneUp are significantly scaling back their drone delivery services, shutting down services in Phoenix, Salt Lake City, and Tampa. This decision comes after an ambitious expansion announced for 2022, touted as the first large-scale drone delivery service in the United States.
As a result, 18 Walmart delivery centers will close in those cities, resulting in job losses for 70 DroneUp employees, or 17% of the company’s workforce. Drone delivery services will be limited to just 15 Walmart locations: 11 in Dallas, three near Walmart headquarters in Bentonville, Arkansas, and one in Virginia Beach, where DroneUp is based.
DroneUp CEO Tom Walker said Axios that while the services in the abandoned cities provided valuable insights into consumer demand, they were ultimately not sustainable at their current scale. The company is now shifting its focus to developing a more scalable model with an emphasis on automation and improved drone capabilities.
The biggest challenge with drone delivery is cost-effectiveness. Currently, DroneUp charges about $30 to deliver a package via drone. The company wants to reduce that price to less than $7 per delivery, competing with ground delivery while offering a significantly faster service.
As part of its sustainability strategy, DroneUp is introducing a new “ecosystem” for autonomous drone operations, including climate-controlled storage cabinets for package handling and battery charging, and more advanced drones that can travel at 60 mph, have a 30-mile range and carry a 10-pound payload.
Walmart remains optimistic about the future of drone delivery, citing positive customer response. The retail giant is now focusing its efforts on the Dallas-Fort Worth region, where it plans to expand its drone delivery services to 1.8 million residents, or about 75% of the local population. In this region, Walmart is also working with other drone delivery companies, such as alphabet-in possession wing and the startup Zipline.
Information for this story was found through the sources and companies mentioned. The author owns no securities or affiliations with the organizations discussed. No recommendation to buy or sell. Always conduct additional research and consult a professional before purchasing any security. The author holds no licenses.
