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Amazon Drone Deliveries Are Almost Here

By Jeremy Bowman - Jun 6, 2019 at 12:39PM

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The e-commerce giant unveiled a new unmanned aerial vehicle on the same day it received FAA approval for drone deliveries. Here's what it could mean.

More than five years ago, Amazon (AMZN 3.66%) CEO Jeff Bezos went on 60 Minutes and showed viewers the future.

In a video clip, Bezos unveiled an Amazon delivery drone, saying the machine could carry packages of up to 5 pounds and travel up to 10 miles. The Amazon chief said the technology would be ready within five years as the company ironed out safety kinks and waited for the go-ahead from regulators.

That permission slip from the Federal Aviation Administration took a little longer than expected, but it seems to have finally arrived.

In an announcement on Wednesday, Amazon unveiled an updated version of its drone at the company's re:MARS conference and said it had gained approval from the FAA to deliver packages via drone. Amazon's victory comes just weeks after the agency granted similar approval to Alphabet's (GOOG 4.16%) (GOOGL 4.20%) Wing Aviation division to begin package delivery in Blacksburg, Virginia.

Amazon's delivery drone.

Amazon's new delivery drone. Source: Amazon.

Here come the drones

At the conference, Jeff Wilke, Amazon's CEO of Worldwide Consumer, said the unmanned aircraft can fly up to 15 miles, delivering packages of less than 5 pounds in 30 minutes or less. And the company sees the service ramping up quickly, saying, "With the help of our world-class fulfillment and delivery network, we expect to scale Prime Air both quickly and efficiently, delivering packages via drone to customers within months."

Wilke explained that the devices can take off vertically like a helicopter and can transition from vertical mode to airplane mode. The company also said the drone system was independently safe, thanks to the latest artificial intelligence technologies, and argued that it was good for the environment, as it will help customers avoid unnecessary trips to the store and reduce the need for traditional delivery from trucks.

What drone delivery means for Amazon

While Amazon has promised to be delivering packages by drone within months, it's unclear how many addresses would be eligible for such deliveries. In its statement, the company implied that a customer would need to have a yard to receive a delivery via drone, which seems to eliminate deliveries to apartments, office buildings, and potentially small houses or rowhouses that don't have an easy place to set down packages. Amazon said that its technology is capable of avoiding things like wires as a drone descends into a customer's yard, though it did not say how much or what kind of space a customer would need to receive a drone delivery, nor did it say what percentage of customers would be eligible to do so.

Still, if Amazon can execute drone deliveries the way it is promising, the technology could revolutionize e-commerce, making online shopping even faster and easier. It could put further pressure on brick-and-mortar retail, extending Amazon's lead over the competition. Not only does drone delivery promise to bring customers packages in less than 30 minutes, but it also would likely be cheaper than conventional delivery once the infrastructure is in place, as it will eliminate the cost of the driver and the fuel and other expenses of a truck. It should also provide an added benefit for communities by not contributing to traffic the way a delivery truck does.

Amazon is far from alone in pursuing drone delivery. Google beat Amazon to the punch in gaining FAA approval, and Walmart (WMT 1.97%) is also experimenting with drone deliveries both inside and outside of its stores. However, Amazon would seem to have the most to gain from the unmanned aerial vehicles.

The company already has more than 100 million consumers paying $119/year for free one-day delivery on more than 10 million items through Prime. Amazon's customers have been trained to expect faster, easier, and cheaper delivery, and drone delivery promises to achieve that in a way nothing else would seem to be able to. Even if Walmart and Google can match Amazon's technology, those companies aren't streamlined to capitalize on such an innovation the way Amazon is, which points to the e-commerce giant being the biggest winner from drone delivery.

What drone delivery will actually look like in practice still remains a mystery, but Bezos has said that 86% of Amazon's orders would be eligible since they're under 5 pounds. If Amazon drone delivery is as effective and widespread as the company hopes, it could forever change the retail industry and shopping as we know it.

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Amazon.com, Inc. Stock Quote
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Alphabet Inc. Stock Quote
Alphabet Inc.
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Wal-Mart Stores, Inc.
WMT
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Alphabet Inc. Stock Quote
Alphabet Inc.
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