What do Amazon.com, Inc. (NASDAQ:AMZN) and Domino’s Pizza, Inc. (NYSE:DPZ) have in common? Both companies will now deliver food to your door in Seattle and Los Angeles, after the former company expanded its AmazonFresh grocery deliveries to only its second metropolitan area. Beyond that, there isn’t much similarity between the two companies — yet. However, in a few years, the men and women who schlep the hot pizza or cold produce to your door in hopes of a decent tip might just be replaced by unmanned drone helicopters.
Surprisingly, Domino’s Pizza, Inc. (NYSE:DPZ)’s jumped on this delivery trend first, but you can be sure that an online sales powerhouse like Amazon.com, Inc. (NASDAQ:AMZN) will be all over drone shipments as soon as possible.
Pie in the sky
Domino’s Pizza, Inc. (NYSE:DPZ)’s UK arm teamed up with the very obviously British creative agency T + Biscuits to develop a fascinating demo video of a “DomiCopter” taking to the sky with a piping-hot pie:
There are some caveats, of course — for one thing, the eagle-eyed viewer will notice that one pizza goes in but two come out — but the promise of unmanned delivery has been one of the most interesting possibilities of civilian UAVs ever since the machines began moving beyond the battlefield. I’ve been discussing this possibility for over a year — one of my top tech trends for the next five years (starting from 2012) was the proliferation of autonomous systems, including automated delivery bots, and this is certain to happen quickly once UAVs gain commercial operating clearance in the U.S. around 2015 or so.
There’s a reason Amazon.com, Inc. (NASDAQ:AMZN) delivers groceries in only two metro areas after more than 15 years in operation, and those reasons are more or less the same that keep the radius of pizza deliveries so narrow. Deliveries cost money — even if a pizza franchisee offloads the responsibility of vehicle upkeep to its drivers, there’s still the matter of salaries and any potential liability issues, and the wider the range, the less efficient the driver. The costs of shipping can be even higher for Amazon.com, Inc. (NASDAQ:AMZN), which charges up to $10 for grocery deliveries in Seattle — and that doesn’t even touch on Amazon’s margin-slaughtering Prime subscription service.
If you don’t think that Amazon.com, Inc. (NASDAQ:AMZN), Domino’s Pizza, Inc. (NYSE:DPZ), and virtually every other company that makes money from shipping something to your door will eagerly switch over to UAV delivery at some point in the not-too-distant future, let’s do a little bit of hypothetical calculation.
Let’s say that all a delivery-based company pays for at present is the cost of a driver’s salary. Amazon’s total costs for FedEx Corporation (NYSE:FDX) or United Parcel Service, Inc. (NYSE:UPS) to get a package from Point A to Point B can add up on a Prime subscription, but for simplicity’s sake let’s focus on its grocery business right now. (FedEx founder Fred Smith has been talking about using unmanned cargo freighters for the air-bound leg of a package’s journey for at least four years now — former Wired editor and current robotic start-up honcho Chris Anderson reported as much on his blog in 2009 — so he clearly sees value in delivery automation as well.) I’ll return to package delivery a little further on, but the pizza comparison will be fairly easy to make, because the economics are fairly straightforward, and you’ve already got the picture of a little robot-transported pie in the sky stuck in your head anyway.
Let’s say that the driver’s salary is about $8 an hour, but the costs of maintaining a UAV are half that on an hourly basis. Even if a company buys its UAV outright, tacking on (and this is a very rough estimate) $25,000 in purchase costs instead of contracting with a UAV specialist, the long-term cost advantage of UAV delivery becomes very compelling very quickly, especially if a UAV provides just one delivery per hour as an advantage over its human peer.