Amazon to expand drone deliveries to 500 U.S. cities

Millions more people may be able to get smaller, lightweight Amazon AMZN-T packages delivered by drones by the end of the year under a plan the company announced Wednesday to expand the airborne shipping to suburban areas in nearly 500 U.S. cities.

Customers could receive the drone deliveries in as fast as 30 minutes, Amazon said in a news release. The drones can carry packages up to five pounds.

The plan will intensify the battle between Amazon and Walmart to provide consumers with the fastest delivery times. Both giants rely on a mix of drones and drivers to deliver everything consumers have ordered.

The goal is not necessarily about cutting costs by replacing drivers and trucks – and drones that can only carry one package at a time would have a hard time doing that. But instead, these companies are using drones as one tool to help keep customers happy with quicker deliveries, banking on a faster delivery system attracting more shoppers.

Amazon’s plan would expand its drone delivery operation more than sixfold nationwide into hundreds of new communities, including the Chicago, Atlanta, Cleveland and Boise metro areas. The drones will primarily fly in the suburbs well away from skyscrapers and major airports that could cause problems. Each drone site serves multiple cities in a metro area, and Amazon would not say exactly how many new sites it is planning to begin flying from.

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Hundreds of thousands of packages have already been delivered by Amazon drones this year, but even after this expansion drones will still only handle a fraction of the hundreds of millions of package deliveries each year. In addition to only being able to carry five pounds, the drones Amazon builds face countless challenges from tree cover to landscaping and inflatable pools that can make it hard to find a good drop zone.

There are also regulatory hurdles to overcome in every community where Amazon wants to set up operations. Noise concerns also pose a potential challenge.

“It’s still an experiment. It’s still in test and learn mode,” said Sucharita Kodali, who is a retail analyst with Forrester.

More than two decades have passed since Amazon founder Jeff Bezos first described his vision for drone deliveries in an interview on “60 Minutes,” which shows how hard it has been to develop the service, get all the needed approvals and prove the concept works.

Kodali said Amazon’s expansion plan “does seem aggressive but remember that lots of the 500 may be small towns located close to one another. The coming soon list is actually only a handful of metro areas. Also ‘launching’ in a town doesn’t mean they are getting any meaningful sales.”

Walmart already offers drone delivery at more than 75 stores across Arkansas, Florida, North Carolina, Georgia and Texas, but the core part of its network relies on drivers to bring orders directly from its stores to customers. The retail giant said earlier this year that it planned to expand drone delivery service to 150 more stores in partnership with Wing, a division of Alphabet, to give it 270 drone delivery locations by 2027.

Walmart declined to comment on Amazon’s announcement Wednesday because it came one day before the company was scheduled to report earnings.

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Initially, consumers might order something delivered by drone because they are curious about it, but it’s not clear how often they will continue to use the service, and Amazon is still working out the economics, Kodali said.

The service will be free for Amazon Prime members who are ordering more than US$50 worth of goods, but smaller orders will cost members US$2.99. Non-members will pay US$4.99 for drone delivery.

Prime members get free deliveries while non-members pay a flat fee if the shipment is under US$35 for standard delivery or up to US$12.99 for same‑day shipments when available.

Kodali said drones could prove more useful for certain lightweight deliveries that are needed urgently like prescription medications.

DoorDash and other delivery companies also are experimenting with using drones to deliver foods and other goods.

Amazon’s CEO Andy Jassy told shareholders in his annual letter in April that the company has learned a great deal by flying drones in 11 sites across Arizona, Florida, Kansas, Louisiana, Michigan, Nebraska, and Texas. In each location, the drones launch from an Amazon warehouse and cover about 175 square miles, so it takes multiple drone launching locations to serve a large metro area.

“Prime Air now has a design that’ll scale, plans to serve communities with 30 million customers by year-end, and expects to deliver half a billion packages by the end of this decade (with an aim to deliver inside 30 minutes),” Jassy wrote.

Amazon is also continuing to invest in its warehouses, smaller fulfilment centres closer to customers and its fleet of trucks as the company competes to deliver packages within minutes or hours instead of just days.

It’s not clear that drone delivery is cheaper than trucks at this point because a team of people is needed to make drone delivery possible and those people might even earn more than a truck driver since they may have to be licensed drone pilots.

Amazon is already certified by the Federal Aviation Administration and the company has been awarded waivers to fly drones beyond the line of sight of the pilots. Amazon has invested in safety measures to help drones avoid collisions with anything else in the sky while they are making deliveries.

The federal government has proposed a rule that would allow more drone operators to fly beyond the horizon, but that hasn’t been finalized yet.