Walmart has decided to put some of its delivery drones into flight mode.
The retail giant has decided to shut down its drone operations in Phoenix, Salt Lake City and Tampa, Florida, where it operated with the help of its partner DroneUp.
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A Walmart spokesperson said the company decided to reduce drone capacity in those areas to focus more on exploring what large-scale drone deliveries might look like in a single metropolitan area: Dallas-Fort Worth.
“We are excited about the momentum and positive customer response we have experienced around drone delivery. This service will continue to evolve as we learn more about customer preferences and drone capabilities,” the spokesperson said. “Our drone delivery program is still a pilot and by focusing our efforts on Dallas-Fort Worth, we can learn more about the potential to scale this innovative delivery option for Walmart customers.”
Walmart plans to continue its partnership with DroneUp in the Dallas-Fort Worth metropolitan area, where it operates 11 facilities. There are currently no plans to close additional drone delivery centers. Walmart operates three centers with DroneUp in Arkansas, near its headquarters in Bentonville, Arkansas, and one in Virginia Beach, Virginia.
In line with the flight bans in Arizona, Florida and Utah, DroneUp told Axios that the company will close 18 Walmart delivery centers and lay off 70 employees, or about 17 percent of its total workforce.
A company spokesman said the business would continue to adapt to market demand.
“Layoffs are an unfortunate part of a company that literally defines its own industry. As with so many innovators before us, the decision to automate often results in similar circumstances, but we recognize this is a difficult time, especially for those we have parted ways with. While we are deeply grateful for their service, DroneUp remains committed to a strategy that supports our trading partners and their customers,” the spokesperson told Sourcing Journal in an emailed statement.
The company hopes its new model, called the Ecosystem Platform, could be the path for DroneUp’s future expansion and retail collaborations. The company spokesperson said the platform, which expands the company’s capacity by allowing pickup and drop-off at and from retailers, could “reshape the last mile of delivery.” The company remains committed to its goal of expanding nationwide and will “rely on a larger workforce in roles that depend on what regulators allow and what partners and their customers need.”
Even if Walmart abandons drones, it will continue to offer express delivery in Phoenix, Salt Lake City and Tampa. This program allows customers to receive deliveries in less than two hours.
While Walmart made plans to close other locations, it has brought in other partners to support its Dallas-Fort Worth ambitions. The company announced in January that it had teamed up with drone providers Wing and Zipline to improve operations there.
At the time, the company said the expansion would enable Walmart to deliver to 75 percent of the metropolitan area’s population via drone. By January, Walmart and its partners had successfully completed more than 20,000 drone deliveries for a variety of items.
Walmart also has partnerships with other drone companies, such as Flytrex, with which the company has been conducting pilot deliveries in Fayetteville, North Carolina, since 2020. So far, despite its focus on Texas, Walmart has not announced any plans to end that partnership.
Amit Regev, chief product officer and co-founder of Flytrex, said the company will continue to work with its partners on efficiency and costs as technology evolves.
“Many drone delivery companies focus on developing sophisticated and advanced drones, but this often results in overly complex and expensive models that drive up the cost per delivery – mainly due to inefficient operating modes, but also due to the high amortization costs of drones,” Regev told Sourcing Journal. “To create a truly affordable drone delivery system, a more holistic and streamlined approach is essential. This includes developing simple, purpose-built drones optimized to address the unique operational challenges of on-demand delivery services.”
Walmart’s biggest competitor, Amazon, has Prime Air drone delivery stations in College Station, Texas, about 180 miles south of Dallas, and in Tolleson, Arizona, just west of Phoenix. The company announced earlier this year that it would shut down its drone operations in California. It also plans to move its drone operations to larger Amazon distribution centers to make a larger number of products available for same-day drone delivery.
