The retail world was given a jolt last week when Amazon announced a new delivery method: commercial drones.
While the idea seems implausible at first glance, chief Jeff Bezos spent a good deal of time on 60 Minutes explaining why the idea was fully-baked and could be operational within just a few years, regulatory issues notwithstanding.
The video below demonstrates how drones could be used to deliver products under a certain size. The idea is simple: customers within 10 miles of a distribution centre could have goods under five pounds delivered to them by drone within just half an hour.
While the proposal itself may be farfetched – or even impossible based on current regulatory limits in the United States – it’s been done before. Other businesses are working in the commercial drone industry, including at least one in Australia with an idea to deliver textbooks via drone.
But the drone announcement underlines there is still a problem in actually delivering products to customers.
Investments in parcel lockers by Australia Post and private entities has made some headway in solving the problem, but there is still an issue of distance. While the Amazon drone program would solve the issue of time – getting product within a certain amount of time – it doesn’t solve the issue of distance.
If a customer is at work, they don’t want to wait until the weekend to pick up a product because they weren’t at home. Drones don’t solve that.
They are, however, the next step in what some other companies such as eBay have been trying: real-world delivery within an extremely short amount of time.
So will drones represent a revolutionary next step in making real-world deliveries emulate instant digital distribution? Or are they just a gimmick?
The retail delivery problem
At the Online Retailer conference in August, TZ Limited chief executive Mark Bouris stood in front of a crowd and demonstrated the company’s main new product – a parcel locker. Using a code delivered by text message the user was able to retrieve his package.
It’s fairly simple stuff, but TZ and Australia Post have spent significant amounts – (Post has spent over $2 billion alone) through investments in parcel lockers, and they aren’t the only ones.
Online retail has created a distance problem. The huge amount of parcels being sent through traditional post means the odd package or two can’t make it to the workplace anymore – employers are getting sick of them. But they can’t be sent to the home, either – especially if the products are too bulky.
Buyers who return home late then have to wait until the weekend to pick them up from an appropriate postal facility. It’s a problem, and the backlog is causing logistics issues for Australia Post.
Sales like this week’s Cyber Monday event only make the growing number of deliveries harder to handle.
It’s no surprise, then, that businesses have started developing new types of innovative delivery methods.
This is yet another example of how modern digital habits are seeping back into bricks and mortar retail. The expectation among consumers is that products should be available at their homes within the shortest amount of time possible – instant gratification is in demand, both on and offline.
In the United States, eBay’s “Now” service has started spreading across the country, including in major cities Chicago and Dallas. The product offers delivery within one hour, using couriers travelling on foot and bikes. Wal-Mart and other larger retailers have been dabbling in the trend, but it isn’t just retail – car service Uber works on a similar model.
This isn’t even a new concept – it dates back to the do-t.com boom. Urbanfetch in 1999 was built on the idea of having products delivered within an hour in New York and London.
Drones, then, are simply an extension and the latest iteration of that demand for instant delivery. The promise – of products within just half an hour – will no doubt spur the retail industry on to improve their own delivery methods, whether or not the drones ever take to the sky.
Drones are everywhere
For a larger retailer such as Amazon, there are obvious advantages in using drones.
The technology is relatively cheap, and the cost is fairly low compared to delivery through standard means, such as trucks or couriers. There are obstacles, most of which are regulatory – the Federal Aviation Authority currently doesn’t allow the flight of commercial drones in American airspace.
However, Amazon’s announcement isn’t the first commercial exploration of drones.
In Australia, textbook retailer start-up Zookal has already experimented with drones for delivery. Given commercial drone use in Australia is already permitted, the initiative faces fewer hurdles than Amazon, (and perhaps provides some extra incentives for Amazon to open a distribution centre in the country as well).
In Germany, a music festival has already experimented with drones in delivering beer to patrons while on the ground.
What does this mean for retailers?
Amazon’s announcement has no practical ramifications, either now, or any time soon. There are too many technical and regulatory hoops to jump through before drones even have a chance at entering the mainstream market.
But the announcement does reflect a growing hunger among customers for instant delivery. While retailers may not be able to create logistics solutions on their own, they should nevertheless be aware of the increasing demand.
Just as digital change is creating pressure on businesses to innovate and stay ahead online, offline solutions are just as important. Amazon’s announcement once again shows digital strategy and normal business are not two separate tracks – they’re one and the same.