Drone delivery startup Zipline to expand package drop-off across the US

Ten years ago, Amazon (AMZN) founder Jeff Bezos went on 60 Minutes to reveal a secret R&D project he declared would lead to wide-scale autonomous drone delivery capable of dropping off packages in 30 minutes.

That vision is set to become reality in 2024 — not through Amazon, but through South San Francisco startup Zipline and shifting regulations.

“This kind of automation is now going to make it possible for us to move packages in a way that is near instant and very low cost,” Zipline co-founder and CEO Keller Rinaudo Cliffton said.

With a new generation drone and more than 60 million flight hours under its belt, Zipline and partnering businesses are preparing to deploy drone technology across a handful of US cities next year, with plans to expand to 15 cities by 2025.

While drone deliveries have been occurring at a limited scale in the US for years, Zipline’s technology and rare backing from the Federal Aviation Administration (FAA) has the potential to not only expand its role in last-mile delivery but make drones cost-competitive with standard truck deliveries, according to Jonathan Geurkink, a senior analyst for emerging technology at Pitchbook.

A simulated drone delivery from Zipline. (Zipline)A simulated drone delivery from Zipline. (Zipline)

A simulated drone delivery from Zipline. (Zipline)

The FAA has long required drones to operate within the visual line of sight of human drone operators, limiting the scale of deliveries. This fall, the agency granted a rare exemption to Zipline and three other competitors, paving the way for wider use of the technology.

“For commercial drone deliveries [the FAA exemption] is everything,” said Geurkink. “I think we are at the tipping point for the market to be able to develop.”

Zipline’s latest generation drone promises near-instant delivery through an aircraft known as Platform 2. The fixed-wing flight never actually touches down during delivery but hovers 300 feet above ground in near silence. A small “droid” inside the aircraft lowers packages using a tether that allows for precise delivery onto porches, driveways, and sidewalks. The drone can travel within a 10-mile radius and carry up to 8 pounds.

Zipline’s new system also doesn’t require a warehouse to launch the drones. Each docking station can be built into any business, allowing the process to be customized for each company. The setup is intended to make adoption seamless and rapid, with deliveries estimated to be 10 times as fast as cars and trucks, according to Rinaudo Cliffton.

A Zipline delivery drone in a docking portal. (Zipline)A Zipline delivery drone in a docking portal. (Zipline)

A Zipline delivery drone in a docking portal. (Zipline)

“We can install the technology onto any wall,” he said. “Whether it is a retail store or a hospital or primary care facility or even a restaurant, in 24 hours, we can show up, install the infrastructure. Then you turn any window or hole in the wall into a magical portal.”

Nearly a dozen companies, including Sweetgreen (SG) and Cleveland Clinic, have already signed up to utilize the technology, with deliveries set to launch in 2024.

However, Zipline faces plenty of competition from Amazon’s Prime Air and Alphabet’s Wing. Geurkink said private startups have also seen an increase in valuations in more recent funding rounds, as investors put more capital behind the technology with the expectation of further easing of regulations.

That will be key to making drone deliveries cost-effective, according to a study by McKinsey. It found that labor represents up to 95% of the total cost of drone delivery given existing regulations requiring human drone observers. By taking out those observers and increasing the number of drones per operator, McKinsey found that the cost of drone delivery could equal that of current vehicle deliveries.

“For drones to become truly cost competitive across the board, operators will need to be able to shift their focus from observing airspace to operating drones, and the number of drones per operator will need to increase significantly,” McKinsey said.

With each aircraft fully autonomous and electric, COO Liam O’Connor said the absence of fuel costs associated with each delivery only adds to the benefits of aerial delivery.

For Zipline, the potential to offer wide-scale delivery in the US marks a new chapter in the company’s seven-year history. It began delivering blood and medical products in Rwanda in 2016 and has since expanded to nine countries including Kenya and Japan.

The company has completed more than 800,000 drone deliveries to date, with a delivery being completed every 70 seconds, according to Rinaudo Cliffton.

“It’s 12:01 a.m. when it comes to this kind of technology,” he said. “We will look back on it in 10 years. I’m sure so much of this will seem mind-blowing given how far the technology has evolved.”

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