Consultant’s Insight: Walmart limits drone deliveries to Dallas-Fort Worth area

Walmart is learning that last-mile drone deliveries are more expensive than its traditional last-mile service. [caption id="attachment_69752" align="alignright" width="211"] Cathy Roberson, Cargo Facts Consulting senior consultant and Air Cargo Next columnist[/caption] While the retailer has invested in both, Walmart is now reducing its drone delivery operations to focus on the Dallas-Fort Worth area. Earlier this year, Walmart announced its plan to offer drone delivery to up to 75% of the Dallas-Fort Worth population. "This expansion will bring the ultimate convenience of drone delivery to communities across the DFW area,” Prathibha Rajashekhar , senior vice president, innovation and automation, at Walmart U.S., said in a statement. “Customers will have access to a broad assortment of items from Walmart available for delivery to their home in just minutes,” according to the statement. The drone delivery expansion is “included stores across more than 30 towns and municipalities in the DFW metroplex, marking the first time a U.S. retailer has offered drone delivery to this many households in a single market,” it said. The deliveries will be powered by Alphabet subsidiary Wing and South San Francisco-based Zipline , approved by the FAA to fly their drones without a dedicated observer being able to see the drone, known as beyond visual line of s ight . “Drone delivery gives customers an even faster delivery option, getting items to them in 30 minutes or less, and some deliveries can happen as fast as 10 minutes," according to the retail giant. Cost challenges However, speed is coming at a higher cost to Walmart than first anticipated. Virginia Beach, Va.-based drone delivery provider DroneUp announced it would be ending Walmart's drone del ivery service in three states and closing 18 delivery hubs in Phoenix, Salt Lake City and Tampa. “Drone delivery today isn't sustainable,” DroneUp Chief Executive Tom Walker told various media outlets. “It costs the company about $30 to deliver a package by drone. The goal is to get that cost below $7, which is close to ground-based delivery, but much faster.” Walmart charges $3.99 for drone deliveries that meet the weight requirements of up to 10 pounds, according to a company release in May 2022 So, what does this mean for the drone delivery market as a whole? "The drone delivery industry is at a pivotal moment where the focus is shifting from regulatory approvals to achieving true commercial viability,” Yariv Bash , chief executive and founder of Israeli drone delivery company Flytrex , told Air Cargo Next. “Walmart's decision to halt DroneUp services highlights the need for a robust system that both meets regulatory standards and delivers on the promise of cost-effective and scalable operations. “You can't deliver groceries in a Bentley — it's simply too expensive,” he said. “The key to the industry's future success lies in creating solutions that are more affordable and efficient than existing alternatives." Amazon drops in By focusing on the Dallas-Fort Worth area, Walmart is probably looking to perfect the service and, in particular, lower the cost so that it can be replicated elsewhere, much like what it has done with its more traditional last-mile delivery options. "Having a short last mile is an important component in e-commerce and having stores able to deliver what historically would have been an e-commerce order or a food delivery order, or the combination of the two, is really helping the brand," Walmart U.S. President and Chief Executive John Furner told analysts in February. The company is also focusing more on Dallas-Fort Worth as a competitive move against Amazon . Amazon in May announced that the FAA had given Prime Air additional permissions that allow it to operate its drones beyond visual line of sight. This enables Amazon “to now serve more customers via drone and effectively expand and scale our drone delivery operations," according to a company blog post. Amazon noted that it plans to expand its delivery area in College Station, Texas, less than three hours from Dallas-Fort Worth.

Consultant’s Insight: Walmart limits drone deliveries to Dallas-Fort Worth area

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