Will drone delivery ever be able to establish itself in the retail world, or does the technology better suit other sectors?
In this clip from Industry Focus: Consumer Goods, Motley Fool analysts Vincent Shen and Sarah Priestley discuss the hurdles that need to be overcome if commercial drone delivery is to become a reality. From wayward dogs to inner-city landings, there is a host of problems to be ironed out before you will be picking up dance shoes outside your apartment window.
A full transcript follows the video.
This podcast was recorded on Sept. 20, 2016.
Vincent Shen: What other limitations do you think -- it seems like a really great idea in a city, getting things out really quickly, less than 30 minutes. What aren't we thinking of?
Sarah Priestley: There are a whole host of issues, especially in cities. The people that are working on this, they call this the "last 50 feet" issue. So, not only do you have problems with human interference -- we're naturally inquisitive people, and there's the suggestion that maybe they could be taken, stolen ...
Shen: They could just swat a drone like a fly.
Priestley: Exactly. You get children, animals, all those kinds of interferences that can occur. And also, you have logistical issues. Last year, in November, Amazon released a YouTube video basically showing a woman who needed football cleats, and she ordered them, and it showed you the dispatch, and it going all the way there. She put a little pad outside on her yard, and that's where the drone landed. We don't know if that's actually what's going to happen, but there needs to be some kind of identifying factor of where this is going to land. And if you live, like we do, in an apartment complex, where does the drone deliver? Is it going to be on the roof? How safe is that? There's a whole host of issues.
Shen: It's funny, we talked about last mile delivery, when we're talking about a truck. Now it's the last 50 feet when we're talking about drones. Anything else, in terms of what you see as possibly being a holdup in terms of adoption in the specific consumer retail application?
Priestley: Yeah, I think there's also going to be big argument that, how necessary is this? You have, now, Walgreens and CVS, who have a huge store footprint. They're stocking a lot of the things that formerly, you would have to make an emergency run to the supermarket for. It seems this is going to be much more niche than people are expecting, to me. I think it has much more application with things like oil rigs, parts for when big oil rigs stop pumping, and medical applications. And I think this is where a lot of other people project this to go, too.
Shen: Let's focus in on that. What examples have we seen, or, are there good examples out there that you've seen of drones working really well? People have talked about, beyond the consumer retail space, also agriculture, defense, energy, medicine. Do you have examples?
Priestley: Yeah, absolutely. There's a start-up -- I guess they're not start-up anymore, they were established in 2011 -- called Matternet, and they deliver medical supplies. They operate in Switzerland, Haiti, the Dominican Republic right now. And I'll take one example from them. In Maseru, the capital of Lesotho, which is in Southern Africa, one in four adults has HIV. Matternet's drones deliver blood samples to clinics, they deliver medicine, and they already operate in a network 1.5 times the size of Manhattan. So, it really does show you the opportunity there. But I think the biggest reason this is used is that the paved roads are scarce, and the drone network is cheaper than establishing a road network. I think the delivery cost is about $0.24 per delivery on what they operate now.
Sarah Priestley has no position in any stocks mentioned. Vincent Shen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com. The Motley Fool recommends CVS Health. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.