A Love Letter to Drone Delivery - Growth Enablers and Challenges
Innovations and Technological Advancements in Delivery
Thank you to everyone for reading and sharing in your networks. If you want to learn more about how we at SkyTrades are helping to answer the question, Where is my flying car? email me jonathan@skytrades.io - enjoy this weeks newsletter.
Why are the Drones Grounded?
Last Mile Delivery and the Rise of E-commerce
The global last mile delivery market, valued at $152 billion in 2022, is poised for significant growth, projected to reach $288.9 billion by 2031, with a compounded annual growth rate (CAGR) of 8.13% from 2022 to 2031. Last mile delivery, the final phase in the transportation process, involves transporting goods from a central hub or warehouse to the ultimate destination. This crucial stage focuses on expediently delivering items to customers while optimising company expenditures. Notably, last mile delivery accounts for over 50% of the overall shipping costs and is predominantly utilised in sectors such as food, e-commerce, retail, and pharmaceuticals. The rise of internet usage, coupled with the expansion of the e-commerce industry, has spurred the demand for online shopping, necessitating enhanced and efficient methods of product delivery to the end consumer.
The Parcel Delivery Industry in the United States
The parcel delivery industry in the United States has witnessed remarkable growth, with an annual volume exceeding 20 billion parcels and generating over $200 billion in revenue. This surge can be attributed to the exponential rise of e-commerce, a trend amplified by the impact of the pandemic.
Consumer Expectations and the Need for Efficient Delivery
Online shopping has become increasingly prevalent across various sectors, with clothing, household items, groceries, cleaning supplies, and electronics emerging as the top categories for digital purchases. The convenience of shopping from the comfort of home, combined with the allure of ‘free’ shipping, has driven 77% of consumers to opt for online channels. Time-saving benefits and doorstep delivery have become decisive factors in purchasing decisions.
Looking ahead, e-commerce sales are projected to continue their upward trajectory, estimated to account for 21.8% of total retail spending by 2024. This emphasizes the growing importance of seamless and efficient delivery options that align with evolving consumer expectations.
Meeting the Demand for Speed and Reliability
To meet the demand for speed and convenience, a significant portion of consumers are willing to pay for expedited delivery services. Approximately 41% are ready to invest in same-day delivery, while an additional 24% express a willingness to pay a premium for deliveries within a one- or two-hour window of their choice. This preference for prompt service extends to Amazon Prime users, who prioritise unlimited free delivery, with 72% emphasising the significance of shipping benefits.
Challenges persist in meeting consumers' expectations for swift and reliable delivery. While over 50% of retailers offer same-day shipping, a significant gap remains, as more than 75% of consumers express a desire for this service. Furthermore, disruptions stemming from supply chain issues encounter low forgiveness rates, with only 20% of consumers willing to overlook such challenges. With the growing desire to drive a sustainability agenda the Venn diagram of fast delivery and sustainably, starts to eliminate the more traditional modes of transportation.
The Rise of Online Food Delivery in the United States
In addition to parcel delivery, the United States boasts the second-largest online food delivery market globally, with revenues estimated at $185 billion in 2022, and projections indicating a climb toward the $400 billion mark by 2027. The pandemic again significantly accelerated demand, resulting in intense competition between major players in the domestic market. As of February 2023, one company held a dominant 65% share of the online meal delivery segment.
Customer Preferences and Industry Challenges
Consumer frustrations include long delivery times and delivery charges. The availability of multiple delivery apps and the search for affordable options contribute to customer promiscuity in selecting services. While growth opportunities abound in the online food delivery market, companies face challenges such as intense competition, evolving consumer preferences, and the pursuit of profitability in a challenging economic landscape. One of the major overheads for all delivery players is the cost of transportation.
The Power of the Trucking Industry
The trucking industry in the United States is a powerhouse, moving about 72.5% of America's freight by weight and earning approximately $875.5 billion in revenue per annum. U.S. trucks transport a staggering c.11 billion tons of freight, facilitated by a fleet of about 4 million semi-trucks. This appears out of kilter with the current need for sustainable modes of delivery and reducing road deaths.
Navigating Growth, Challenges, and the Future
The delivery landscape in the United States and globally is marked by exponential growth driven by e-commerce. Consumers' emphasis on convenience, speed, and reliability has prompted companies to enhance their delivery services. The reliance on last mile delivery, the rise of online shopping, and the pivotal role of the trucking industry underscore the need for efficient transportation systems and innovative solutions to ensure seamless delivery operations.
As the industry continues to evolve, companies that adapt, optimise efficiency, and embrace technological advancements will be poised for success. Transportation is one of the biggest cost items in need of change for delivery, from food to medicine and organs, it can be truly life changing if we get it right.
The Drones Promise
Drones can revolutionise last mile delivery. They can bring clean, efficient, and timely transportation of goods. Last-mile delivery makes up nearly half of the total cost of shipping so bringing drones into the system can benefit everyone.
"For example, delivering that hamburger helper via a drone versus someone getting in their car and driving...potentially saves the lives of children getting hit by cars," - Abigail Smith, Deputy Executive Director of the FAA's Unmanned Aircraft Systems (UAS) Integration Office
It is not the lack of technology to allow drones to fly that is preventing mass drone delivery. Drones can fly.
The air rights owners are the key to making this happen, relying on governments and regulators will mean stagnant growth and miss-aligned incentives. Without the air rights owner the (non-military) drones promises remain elusive at best.
At SkyTrades we are solving the problem and bringing the air rights owners into the eco-system to help drone companies deliver on their promise, support property owners rights, grow businesses and make all our lives better.
Volocopters Air Taxi
Among the array of eVTOL (electric vertical takeoff and landing) aircraft showcased at the Paris event, Volocopter's VoloCity stood out as a remarkable two-seat, multi-rotor eVTOL. Making its debut in the flying display at Le Bourget, it was the sole eVTOL to participate in this year's program, impressing spectators with a six-minute airborne demonstration. Volocopter emphasized its aircraft's low noise levels, a crucial factor for the public's acceptance of urban air mobility (UAM).
Joining Volocopter in the dedicated exhibition hall were various other manufacturers, including Archer, Ehang, Joby, Overair, Supernal, and Wisk Aero. Volocopter, known for conducting the world's first crewed flight of a multicopter in 2016, unveiled its VoloCity model for series production in 2018. With 18 fixed-pitch propellers and corresponding electric motors arranged above a circular beam structure, the VoloCity aims to reach speeds of 90-120 km/hr and cover distances of 35 km. To facilitate operations, nine lithium-ion battery packs will be exchanged and slow-charged in a specially designed 20ft charging container after each flight.
Volocopter is actively working towards obtaining EASA type certification, with test flights anticipated to continue until Spring 2024, followed by the commencement of commercial services in Paris during Summer 2024. Paris is set to become the first European city, and potentially the first globally, to offer public eVTOL flights within this timeframe. In collaboration with partner Group ADP, vertiport construction will commence in the upcoming summer and be in full operation by late 2024. Additionally, during the Paris Olympics, five to ten Volocopter aircraft will fly specific routes, including three connection journeys and two round-trip tourist flights, with one of them landing on the Austerlitz barge on the River Seine.
Volocopter aims to gain significant insights into the market through these initial routes, allowing the public, partners, and stakeholders to become familiar with this new mode of transportation. While initial passenger flights will be subsidised, Volocopter envisions that the cost per passenger per KM will decrease to €3-4 once the next generation of vehicles, capable of accommodating three or four passengers, becomes viable.
Japans Flying Car
In a collaboration, Japanese automaker Suzuki Motor Corp and SkyDrive Inc, a pioneering firm in the field of electric vertical take-off and landing (eVTOL) aircraft, have joined forces to manufacture "flying cars" in central Japan. The production of these eVTOL aircraft is scheduled to commence next year at a Suzuki Group factory. To facilitate this endeavour, SkyDrive will establish a subsidiary solely focused on aircraft production, while Suzuki will provide support in various areas, including talent acquisition. This partnership stems from an agreement signed between the two companies in 2022, outlining their shared commitment to the design, development, and marketing of flying cars. SkyDrive, headquartered in Toyota, Japan, boasts key shareholders such as Itochu Corp, NEC Corp, and an Eneos Holdings Inc subsidiary. SkyDrive has made progress in its flying car ventures, with manned testing of the SD-03 model initiated in 2020 and plans to introduce the larger SD-05 model by 2025.
The Personal Flying Car
McClic, the Monaco aerial photography and drone show company, has successfully conducted test flights of its innovative MC One personal eVTOL. This advanced transportation device, resembling a futuristic coaxial octo-copter, features a drone-style flight control system that automates most flying tasks, including balance and wind adjustment. The design allows individuals to operate the "flying car" with minimal training, generating significant interest. With a weight of approximately 353 pounds and a maximum speed of 50 miles per hour, the human-sized drone offers up to 25 minutes of flight time on a full battery charge. McClic has already begun accepting orders for the MC One, with deliveries scheduled for next year, albeit at a price point of $150,000. The 2023 production of the MC One, equipped with a built-in ballistic parachute, has already sold out.
