By Andy Serwer
America's introduction to the drone-delivery business can be traced back to a single, high-profile, high-drama orchestration. It was Sunday night, Dec. 1, 2013, when Amazon.com's then-CEO Jeff Bezos ushered 60 Minutes' then-correspondent Charlie Rose into a nondescript conference room promising him a big surprise. Behind the door -- ta-da! -- revealed for the first time were a pair of Amazon Prime Air drones. "Oh my God!" cried Rose when he laid eyes on the octocopters. "I don't want anybody to think this is just around the corner," Bezos said to Rose. "But could it be four, five years? I think so."
Instead, it has been 11 years and counting, and still Prime Air and its competitors aren't much further along with drones than Tesla and Alphabet's Waymo are with driverless cars -- which is to say still mostly in the testing phase.
And yet writing off drone delivery would be shortsighted. Billions of investment dollars are at work, huge strides have been made, and the business is just now taking shape -- ironically, perhaps, just as drone-sighting hysteria seems to be in full force. "There's going to be a huge transformation toward automated, zero-emission logistics," says Keller Cliffton, CEO of Zipline, founded in 2014 and now the leading drone-delivery company by miles flown. "It's very obvious that whoever succeeds will be one of the largest companies on Earth -- bigger than United Parcel Service and FedEx combined."
Hyperbole aside, the drone ecosystem writ large now includes everything from hobbyists and high school drone clubs to real estate agents' beauty videos, to companies inspecting power lines, to terrifying military operations. Then there's drone delivery, which, to most of us, still smacks of sci-fi, like the pizza delivery in Steven Spielberg's 2018 movie Ready Player One. In fact, today drones are delivering medicine, sundries, snacks, and takeout food in dozens of countries.
According to PwC, drones are completing about 14,000 deliveries a day globally, or a total of five million-plus in 2024, moving $250 million of goods. In 10 years, PwC estimates, those numbers will soar to 800 million deliveries a year, with a value of $65 billion.
In America, drones are now touching down in Dallas/Fort Worth; College Station and Denton, Texas; Pea Ridge, Ark.; Christiansburg, Va.; and Fayetteville, N.C., as well as in Silicon Valley, Salt Lake City, and Phoenix. Service in Columbus, Ohio; Jacksonville, Fla.; Cleveland; Detroit; Seattle, and more should be up and running soon.
As for the mystery drones said to be flying over New Jersey and other states, the drone companies mentioned here say that if these are rogue drones, they don't belong to them. It's possible that ensuing anti-drone sentiment could impinge drone delivery through tighter federal regulation or municipalities banning drones outright, as recently happened temporarily in New Jersey and New York.
Amazon, with all of its resources and after years of effort, isn't the alpha dog here. In fact, drone delivery is evolving into a multibillion-dollar game of 3-D chess with players like Amazon, Alphabet's Google, and Walmart. Start-ups like Zipline, DroneUp, and Matternet, delivery services like DHL and DoorDash, plus restaurant chains such as Wendy's and Panera Bread are also moving pieces around the board.
Perhaps most significantly, drone delivery is another front in the battle between the nation's biggest retailers, Amazon and Walmart, both of which are stepping up drone operations. "We want to be delivering 500 million packages annually across the globe by drone by the end of this decade," an Amazon spokesperson told me. As for Walmart: "With over 4,600 stores located within 10 miles of 90% of the U.S. population, Walmart is uniquely positioned to execute drone deliveries at scale," a company spokesperson emailed.
Let the games begin!
Zipline, the subject of a case study at Harvard Business School, has almost 100 million miles flown, though the majority of them have been in Africa -- Rwanda, in particular -- delivering blood and medical supplies, which has served as a valuable proving ground for Zipline. Other drone companies have also chosen to develop in more regulation-friendly countries before opening for business in the U.S.
Now, Zipline is looking to deploy in some half-dozen metro areas in the U.S., where it has already completed 1.3 million commercial deliveries. It has operations in Salt Lake City, Dallas, and Pea Ridge, Ark. -- the last location being a partnership with Walmart, located 10 miles northeast from Walmart's headquarters in Bentonville.
Behind the Pea Ridge Walmart, I watched the Zipline drone team load deliveries onto drones. Favorite items include rotisserie chicken, ice cream, beverages, and fresh produce. Zipline drones can carry up to four pounds and typically deliver within 15 miles away from the store, zipping around at 65 miles an hour, ranging as high as 300 feet. In this generation of Zipline's aircraft, orders are dropped by parachute. Zipline says its drones haven't caused any injuries or fatalities, and that even doggy drone anxiety is overstated.
With its next-generation drone, which Zipline is testing at its dreamy oceanside ranch in Half Moon Bay, Calif., orders will be lowered by a tether from a height of some 300 feet. Zipline's drones can receive orders from businesses like restaurants and retailers via a window -- like those used for drive-through takeout -- with a chute going up to a launchpad.
Walmart also has partnered with DroneUp and in Texas with Alphabet subsidiary Wing, founded in 2012, which has made over 350,000 deliveries of everything from library books to hot coffee in the U.S., Europe, and Australia. "In Dallas, we're working with Walmart on its drone-delivery aspirations, which are to cover more than 70% of the overall metroplex," says Nate Milner, Wing's head of strategy and operations. "Next year, we're going into Charlotte, where we did research and found that 84% of North Carolina residents would be interested in ultrafast grocery delivery."
What about the competition? "It's not a winner-take-all industry," Milner says. "More drone providers going live is truly a good guy for our business. It just provides more visibility and highlights drone delivery."
"There is basically unlimited demand for automated logistics," says Zipline's Cliffton. "When people look at Zipline, I think there's always that question about two of the biggest companies in the world, Amazon and Google, trying to do what Zipline does. I always assumed we would be a fast follower to Amazon. Amazon has spent many billions of dollars on that effort, and Zipline is about 10,000 times their scale." Amazon didn't respond to a request for comment on these points.
Drone delivery is a particularly complex endeavor. Imagine building a system that allows a drone -- controlled by software, not a joy stick -- to navigate through all kinds of weather, dodging wires, hills, buildings, and yes, increasingly other drones, and then land a package on a target the size of a picnic table.
"It's a little bit harder than people were expecting," says Cliffton. "I can buy a drone off the shelf and duct-tape a Snickers bar to the bottom and manually fly it two miles. But there's a big difference between that and building a system that can fly 100 million miles autonomously, 24/7, 365 days a year. It's like SpaceX. Everybody thought it was impossible, and then, once SpaceX was landing rockets, nobody else could do it. In other words, this stuff is difficult, and then when you do it, it's hard for others to catch up."
Cliffton says big isn't always beautiful when it comes to innovation. "There's this idea of 'resource curse,' which is that sometimes more resources are bad," he says. "Sometimes too many people, too much money, means that you're not as desperate. You're not as focused on building the minimum viable product and then getting it out into the real world and learning by doing." Has Amazon tried to buy Zipline? "Obviously, I can't answer that question," he says. "They know all about Zipline."
Zipline is competing against the giants, but it's hardly a wide-eyed naif. The company -- which was most recently valued at $4.2 billion -- has raised over $500 million in seven rounds from the likes of Fidelity, Temasek, Andreessen Horowitz, and Sequoia Capital. High-powered venture capitalists and Bono are on its board.
Zipline's tie to Sequoia speaks to the company's origin story as well as to Keller Rinaudo Cliffton's personal journey. Or, as he was known growing up, Keller Cliffton Rinaudo, his birth name. Keller tells me that when he and his wife, Steph, whom he met in a climbing gym in San Francisco in 2012, married, they decided to take the last name Cliffton together to honor Keller's great-uncle Cliffton, a pilot who was shot down in the Pacific theater in World War II -- and because they met on a cliff.
A scrappy, iconoclastic, world-class rock climber, Cliffton is both an unusual sort and a prototypical, archetypal Silicon Valley founder/CEO. Graduating from North High School in Phoenix ("a bad high school" rife with "physical violence," he says), Cliffton worked full time for minimum wage at a California-style foodery called La Grande Orange Grocery & Pizzeria. "Keller marched to his own drummer," says his father, William Rinaudo Phillips, a trial lawyer, in an interview. "He was extremely curious, a huge reader, and seemed pretty impervious to peer pressure." On a last-minute whim, Cliffton applied to Harvard University and was accepted.
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December 26, 2024 00:30 ET (05:30 GMT)
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