Droids Versus Drones: The Battle of Ecommerce Deliveries

Retail sales in the US grew 1.5% in 2015 to USD 4.71 trillion, from USD 4.64 trillion in the previous year, as reported by InternetRetailer.com, after factoring out foodservice sales and sales at restaurants and bars. Online sales accounted for 7.3% of the total retail sales in 2015, up from 6.4% in 2014. E-commerce sales rose 14.6% over 2014 to reach USD 341.7 billion in 2015 on a non-adjusted basis.

What is interesting to note among all these statistics is that ecommerce accounted for 60.4% of the total retail sales growth. The growth of ecommerce and of omni-channel retail, which includes stores that sell online as well as via brick-and-mortar outlets, has meant that delivery, and especially last-mile delivery, has become an important component of the costs of these retail stores.

Last-mile delivery is the delivery of the purchased goods from the retailer’s hub to the customer’s house, and accounts for 30% to 40% of the cost of delivery. There are a variety of options available, such as traditional parcel delivery services, the retailer’s own delivery trucks, third-party logistics providers who use software to fine tune the entire process, accurately tracking and delivering the goods using the fastest route possible, and delivery by third-party companies that provide pre-qualified drivers, who pick up and deliver packages, much like a passenger taxi. However, all these methods remain expensive. Now, companies are testing new options, such as drones and droids. Which one will become the new delivery standard?

Amazon’s Prime Air drone project sent the e-commerce world into a tizzy. The drones, which can carry up to five pounds for fifteen miles at speeds of up to 60 miles per hour, are still in the testing phase. According to an article on Bloomberg, “Gur Kimchi, the Amazon executive in charge of its Prime Air drone project, says they considered delivery robots and driverless trucks too. But Amazon decided drones were a better bet.” “The other options cannot guarantee very fast, very economic and very safe delivery,” Kimchi said. Drones, he said, could serve a range of rural, suburban and even urban environments, while delivery robots worked best only in urban areas. And autonomous trucks or delivery drivers only end up adding to the already congested roads, Kimchi noted.

According to integrated marketing solutions provider, IMS Results Count, drone deliveries will cost $1 per package, or $0.10 per mile, making them cost-effective, as compared to last-mile deliveries using human drivers. However, drones also have safety concerns. The Federal Aviation Administration recorded 1,200 incident reports in 2015 of drones flying too close to passenger airliners, five times the 236 incidents recorded by the FAA in 2014, according to statistics published by Bloomberg in April 2016. The FAA is still formulating the rules that drones like the ones planned by Amazon will have to obey. Currently, drones can be used for commercial photography or for mapping on land surveys.

A company called Starship has created a droid that weighs less than 35 pounds and travels slowly. According to an April 2016 article on The Denver Post, the droid, which travels on sidewalks and hence will be easier to get approval for, has already travelled more than 1,900 miles in Britain, Germany, Belgium, Estonia and the US, and there are plans for the droids to cover more than 50,000 miles in 2016.

The droids have been tested in all weather conditions, snow, slush, ice and rain. Starship claims that its droids can hold three bags of groceries, travel four miles an hour on sidewalks, and break even with about fifteen deliveries a day, at a cost of between $1.40 and $4.20 per delivery, and a three-mile radius for delivery. The Starship droids might be in use by e-commerce retailers later this year.

Drones may be expensive to make compared to droids, but have lower costs of delivery per mile. Drones are yet to get regulatory approval, while droids may be out in use later this year. Droids are slower than drones, and can’t travel on roads, only sidewalks. While droids could crash into people or children on the sidewalks, the potential for harm is less than that of drones colliding with aircraft in the sky. While droids are good for city suburbs, drones can be used in big cities, and in rural areas.

Basically, both will probably be used, depending on the delivery destination and relative costs, as both have their own advantages. However, regardless of which technology is used to make the delivery, in the absence of the right logistics partner or software, problems of translating orders into successful sales will continue, say experts at Key Software Systems. The need to monitor, track and assess in real time is what will ultimately drive the success of e-retail.