Walmart’s drone delivery partner, DroneUp, has announced plans to shutter 18 delivery hubs in Arizona, Utah, and Florida, and instead focus on further refining the program in the Dallas-Forth Worth (DFW) metro area. Some 70 DroneUp employees are expected to lose their jobs because of the move.
DroneUp, which is partly owned by Walmart, began service in Phoenix, Salt Lake City, and Tampa (as well as Orlando, Dallas, Richmond, Virginia) in 2022. It had previously launched a similar operation in 2021 in Walmart’s home state of Arkansas. The service was billed as the first “large-scale” drone delivery network in the U.S. Walmart expected the service to expand to 34 sites by the end of that year, delivering up to a million packages annually to as many as 4 million U.S. households. With it, you’d be able to order virtually anything that Walmart carries—”If it fits safely, it flies,” DroneUp CEO Tom Walker told Axios at the time—and have it delivered via drone between 8am and 8pm for a $4 fee.
Drone delivery has proven itself a hit with customers, especially in the DFW area. Walmart expanded its service area in that region in May, boasting that it could deliver packages to 75 percent of DFW residents (around 1.8 million people). Walmart has also partnered with Alphabet subsidiary, Wing, as well as Zipline for deliveries in the DFW region over the past three years.
“Customers will have access to a broad assortment of items from Walmart available for delivery to their home in just minutes,” Prathibha Rajashekhar, SVP of Innovation and Automation at Walmart U.S., told Forbes in May. “Drone delivery is not just a concept of the future, it’s happening now and will soon be a reality for millions of additional Texans.”
However, the success found in DFW was nowhere to be seen in Phoenix, SLC, or Tampa. Those three operations were too small to maintain, DroneUp CEO Tom Walker told Axios. Drone delivery needs to operate at scale to be profitable, he explained, revealing that each airborne delivery costs Walmart $30. The company is trying to get that down to around $7 per flight, on par with ground-based deliveries. The decision to shutter operations in those three locations leaves DroneUp with just a 15-store service footprint: 11 Walmart stores in DFW, 3 in Bentonville, Arkansas near Walmart’s corporate offices, and a single one in Virginia Beach, where DroneUp is headquartered.
Walmart’s struggle with drone deliveries is common for the industry. Its rival, Amazon, has been developing drone delivery technology of its own for more than a decade and still hasn’t progressed past initial trial stages.
Source: Axios
