The media world is buzzing with the news about Amazon's (NASDAQ: AMZN ) drone delivery development dubbed Amazon Prime Air. In an interview between Charlie Rose and Amazon CEO Jeff Bezos on 60 Minutes, the world learned that Amazon's goal is to use drones to deliver orders to customers in 30 minutes -- faster than pizza delivery! Here is a YouTube video about how the service could work and extended coverage of the Charlie Rose interview on 60 Minutes Overtime.
"It will happen," said Bezos. "Next year is optimistic. Maybe more like five years." Bezos, perhaps one of, if not the, most ambitious and determined business leader of our day, relentlessly pursues opportunities on the fringes and seems much less concerned about cost than most other CEOs. Amazon invents the market and then does its best to move it, alter it, and adapt as quickly and efficiently as possible. This drone R&D news stirs thoughts of the opportunities that consumers and businesses face should the drone delivery mechanism become a viable option:
Amazon spent five years perfecting their food delivery system that's akin to Fresh Direct, Peapod, and other similar services. This summer it expanded to Los Angeles from its native Seattle. The window of possible delivery time is three hours long.
Both of my local grocery stores, Whole Foods and West Side Market, offer to deliver my purchases to my home if I don't feel like carrying them. Their delivery window is two hours, so I rarely utilize it. Milk that's two hours old isn't an appetizing prospect, though Amazon puts those kinds of items in temperature-controlled tote bags that it picks up with the next delivery. My local grocery stores don't offer that option.
With efficient packing, faster turnaround, and more precise scheduling, drones could take the place of the mammoth delivery trucks and make grocery delivery the new norm.
Prepared food delivery
In New York City, where I live, prepared food delivery is a way of life for many people. GrubHub and Seamless are lifelines. When I spent the summer in LA, I learned that prepared food delivery is a luxury and a rarity. With drones, the benefit of just-in-time prepared food could become commonplace.
The U.S. Postal Service is an iconic symbol of our country, though every year it runs a significant deficit. In 2012, it lost $15.9 billion -- $11.1 billion of that went to pre-payments on future retiree benefits. This year, the loss amounted to $5 billion. While a significant improvement in total over last year, it didn't have the retiree benefit payments concerns of 2012, and that means it's a slightly higher loss from operations.
Package and mail delivery in all forms could be made cheaper and faster with drones in a time when the federal government could use every extra dollar it can find to work on issues such as education, the environment, and health care. By extension, services like UPS and FedEx could also benefit from drone package delivery.
Humanitarian and medical supplies
As much as I love the items I order on Amazon, I rarely need them in 30 minutes. Certainly I want them faster, though it's not a matter of life or death that I get the new Malcolm Gladwell book immediately.
For items like medical and emergency supplies, we need technology like drones. Some victims of Hurricane Sandy waited days for supplies. It took a week to get desperately needed items to the Philippines after Typhoon Haiyan. Those affected by drought and famine in the developing world can go months without food, proper drinking water, and medical items.
Of course there are other complications beyond logistics such as politics, customs, and security, though logistics certainly plays a part in slowing down the process. Surely if we can eventually get a book to someone in 30 minutes, we should be able to do something to improve the distribution of humanitarian relief.
Insurance claims adjustments
Speaking of Hurricane Sandy, it took nearly a year for some victims to have the damage to their property assessed. The hold-up? There are just so many FEMA claims adjustors to go around.
Outfitted with the right technology, drones could eventually supplement claims adjustment officers. We use them to take pictures in outer space. Some schools of journalism use them now to explore areas deeply affected by environmental events. Drones can take us to places we can't go on our own, and they can get us there much faster with less expense and without sacrificing our personal safety.
Drone delivery companies
This technology also presents an interesting entrepreneurial opportunity. Amazon has the wherewithal to build its own drone delivery system. Many companies, perhaps even most, don't have the financial nor technological capability in-house to build this service.
We could see the rise of drone delivery companies and perhaps Amazon white labels its own drones for use by others, as it has with Amazon Web Services. Interesting tidbit: with clients like Netflix and the CIA, Amazon Web Services is primed to become the largest profit driver of Amazon in the not-too-distant future. Not bad for a company that started selling books online delivered to the post office by Jeff Bezos himself.
Let's face it. We've been in love with the idea of robots doing our bidding for decades. Rosie the Robot of the Jetsons, KITT from Knight Rider, and the Roomba vacuum hold a certain mystique and fascination. Make our meals, drive us around, and vacuum our homes.
But are we limiting ourselves by only seeing drones as machines that just take orders? Could we eventually send them out of the house on our behalf a la Harry Potter's owl, Hedwig? Can we take them shopping with us as a personal attaché and assistant to carry our packages, give us directions, deliver important reminders, and help us spot deals? Do they become companions in our daily lives while also providing valuable services? Never underestimate a robot.
The challenges of a drone future
Jeff Bezos made more than an announcement about his company's latest technological development. He gave us a glimpse into the future that is not only possible, but also probable. Drones have the potential to lower cost, environmental impact depending upon their power sources, traffic congestion on the ground, and delivery time windows while increasing tracking capabilities, precision scheduling, and our ability to get to places that are difficult for us to reach in-person.
However, the complications and complexities are many. Bezos himself alluded to the logistical, political, and security minefields that drone technology must cross before it can be implemented and scaled. My next Foolish piece will address these challenges in detail.
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