DRONE ON (AND ON)

In an earlier blog we examined the developments by Amazon in particular with regard to introducing more innovative mechanisms by which to deliver items to its customers. Instead of simply relying on traditional tools such as mail, it has been actively testing out drones as a quicker and more modern means of delivery.

At first glance it appears to be veering a little towards surrealism and science fiction: the notion of hundreds of small drones winging their way around cities, towns and villages conjures up apocryphal visions of air congestion, collisions and mayhem. I thought it might be opportune to see if Amazon has made any further advances with its experimentations and to assess the response of authorities world-wide.

Let’s briefly summarise the proposed strategy by Amazon.

It plans to fly unmanned and battery-operated drones within a range of several miles of an individual distribution centre. They can fly up to a maximum speed of around fifty miles, carry a package of up to five pounds and they promise to deliver a package within thirty minutes of receiving an online delivery.

They presumably anticipate that this will prove, in the longer-term to be a potential game-changer in the relentless quest for competitive advantage in the customer order delivery space. This has relevance given the numerous alternative approaches that supermarkets and other retailers have adopted to try and overcome major and challenging hurdles such as traffic congestion in major cities. A good example of this phenomenon is London. It is estimated that it takes longer now for vehicles to manoeuvre their way around that metropolis than it did fifty years ago.

We should be careful in this discussion not to dismiss such developments as being surreal and idealistic. We should not lose sight of the bigger picture: that retailers in particular consciously seek to drive improvements in overall supply chain efficiencies and in terms of quick response to the perceived demands and expectations of their customers.

It is not just an “Amazon phenomenon” either. Other large operators such as Walmart in the USA, Alibaba in China and DHL in Germany are actively experimenting or actually using drones across many aspects of their respective supply chains.

It is not just companies wither who are embracing the use of drones.

According to Ken Long, research manager at the Freedonia Group, “The consumer market will remain a key driver of overall sales growth for drones, fuelled by technological advances that are making drones easier to fly, and by the reduced cost and improved capabilities of key subsystems, which are helping to make drones more affordable to the average consumer.” (http://blog.marketresearch.com/the-demand-for-drones-in-the-retail-sector)

We are witnessing consumers in general using drones to capture better and more creative photography shots, getting better pictures at sporting events and so on. Specific sectors such as real estate have also latched onto the concept to get more attractive shots of properties that are going to go on sale.

Such developments outside of the retail sector would appear to strongly support the view that in the near future we will be inundated with drones and they will become a way of life for us.

However we have to consider the likely responses of governments and policy-makers to such a development. What is happening in this respect you might ask?

The issue of safety would appear to be at the core of policy in the UK. Amazon are presently testing out drones in Cambridge and the Civil Aviation Authority (CAA) are willing to take an open-minded view during these experiments because they argue that there are a number of economic benefits likely to accrue. Current regulatory policy means that drones are banned from flying within fifty metres of a building that is not owned by the operator and within 150 metres of a built-up area. Likewise the drone must be in sight of the operator at a maximum distance of 500 metres and a maximum altitude of 400ft. Some prosecutions have taken place – mainly to do with individuals operating drones. We can see that there is a considerable gap between what the current regulations allow and what Amazon is contemplating with regard to deliveries of items to its customer base in the UK.

Amazon Prime Air (to give it its correct title) has run into major legislative problems in the USA. There, the government stipulated that each drone must have its own pilot and stay within sight of the pilot. This would raise serious questions about the economic viability of the Amazon proposed model.

There is no doubt that major retailers such as Amazon and Walmart can wield enormous power and influence with respective governments and we should not assume that potentially restrictive legislation will necessarily close the door to the use of drones as a delivery tool.

Amazon is proposing that a drone airspace should be created within a zone of between 200 to 400ft in the air and that the drones should be equipped with anti-collision technology. They also advocate the development of air corridors.

We have previously discussed other potential problems such as safety (what is the possibility of some of the drones falling out of the air?), the invasion of privacy (the possibility of drones constantly hovering and passing by the window of your eight floor apartment?) and the uses which terrorists could potentially make of drones (probably doesn’t bear thinking about). In the latter case proprietary software designed by retailers such as Amazon should prevent an infiltration by terrorists of their technology. However it does not necessarily prevent them from buying drones on the general market and using them for nefarious purposes.

So what can we say about the future potential of drones?

Some commentators argue that the power and influence of key players such as Amazon and Walmart will inevitably shape governments and policy-makers to allow them to introduce drones as a viable mechanism for delivery. This may be exacerbated if there is a possibility that taxes and other indirect income can be generated from some form of collaboration with such companies and organisations.

Others argue that the present difficulties and hurdles are largely insurmountable and will make for operational problems. This will inevitably make them less viable and too costly if they are to comply with potentially restrictive legislation.

One interesting bystander in this discussion does not appear to feature however: the customer!

To the best of my knowledge there is no evidenced-based research in the public domain to provide any indication as to how shoppers feel about the proposed use of drones as a delivery mechanism. There is a potential opportunity here for some research. I am not convinced that there would be a high level of demand for such a service. Apart from obvious issues such as security and privacy, would you or I be prepared to pay the cost of receiving such a service? Clearly it would depend on what the fee would be?

Let’s continue to revisit this topic and I will address it in another blog at the appropriate time.

 

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