Instant delivery of online orders via drones may sound like a science fiction novel, but the industry is realistic and booming. Over the last three years, there have been over 660,000 commercial drone deliveries to customers, excluding countless test flights to develop and prove the technology (exhibition).1 As of early 2022, it is estimated that more than 2,000 drones are delivered daily worldwide. Growth is accelerating weekly, with deliveries expected to reach nearly 1.5 million in 2022, from just under 500,000 in 2021. All of this is done without the full approval of the regulatory agency, but is usually a very specific constrained application.
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Today’s drone deliveries cover a wide range of products, from vaccines, medicines and blood transfusions to pizza, burgers, sushi, electronics and toothpaste. Leading companies in this area include Antwork, Flytrex, Manna, Matternet, Skyports, Swoop Aero, Wing and Zipline. These and other drone delivery companies have received over $ 1 billion in disclosure funding over the last decade, contributing to the strong growth of the industry. Drone delivery is not capital intensive due to the smaller size of the aircraft and the technology on the market compared to commercial aviation. Due to these relatively low barriers to entry, more than 100 companies are currently competing in this segment.
Drone delivery is quite advanced, but we believe that three catalysts will determine the future trajectory of this sector.
1. Regulation
Ultimately, the regulatory environment determines the size and scope of the drone’s delivery operations. Regulations specify the types of operations allowed, such as parameters related to geographic and airspace, time of day, and flight requirements. All of these factors can have a significant cost impact. For example, regulations may require one operator for each drone, or allow one operator to control more than 12 drones. This choice is important because the operator-to-drone ratio is one of the most important cost factors. Regulations also determine drone airworthiness requirements, and guidelines can potentially increase costs and delay large-scale operations.
2. General acceptance
Gaining public trust and acceptance of drone deliveries is essential, and the early signs are positive. A survey of more than 4,500 people in six countries found that drone deliveries were very positive.2 Nearly 60% of respondents said they would use the drone delivery service today if it was available in their area, while only 16% said they wouldn’t. It was a ratio of 3.5 people. (The remaining 27% were ambiguous.) Recruitment can vary between neighborhoods, depending on various factors such as population density, geographic location, and local weather conditions.
3. Cost
If all other factors are equal, consumers will prefer delivery at the lowest cost. This presents some challenges as other innovative delivery options such as electric vehicles, self-driving cars, and ground robots continue to fall in cost as they mature.
We are in a critical period in the drone delivery industry. The volume has increased dramatically in recent years, but the future path is not yet clear. Regulation, customer acceptance, and cost all determine whether the industry reaches the potential for disrupting global logistics or remains confined to isolated applications.
Salina Carter A functional and insight analyst at the Waltham office in McKinsey, Massachusetts. Tear Johnston A knowledge expert in the Denver office Stephen Liddell Senior Functional and Insight Analyst in the Munich office, Robin Riedel Partner of the San Francisco office Leonard Tusch I am a member of the Cologne office.
1 The number of deliveries represents the number of parcels delivered, not the total number of items in the parcel.
2 Countries include Brazil, China, Germany, India, Poland, and the United States