Walmart Takes a Rare Lead Over Amazon

[The Bleeding Edge]( Walmart Takes a Rare Lead Over Amazon By Jeff Brown, Editor, The Bleeding Edge When I first moved to Tokyo in the mid-90s, there were so many incredible benefits to being based in Japan. From the clean and efficient public transportation systems to the bullet trains (shinkansen – 新幹線)… the food, culture, sake (nihonshu – 日本酒)… karate (空手)… and the hot springs (onsen – 温泉). But one of the things that I didn’t expect, but quickly came to deeply appreciate, was the takuhaibin (宅配便) delivery service that spanned the entire country. For just a few dollars, products could be shipped anywhere in the country and arrive the next day. And in major metropolitan areas, orders placed in the morning usually arrived later that day. Next-day service in the U.S. or other markets with logistics companies like FedEx or DHL would typically cost at least 10 times more, assuming they were even available. Even more incredible is that the cheap and efficient delivery service Yamato Transport began in the 1970s is still the leader in Japan today. Think about that. For about 50 years, Japan had cheap and nationwide overnight service… something that has only become available in the U.S. in the last several years thanks to Amazon’s incredible logistics network. The U.S. – and many other major markets – were decades behind Japan’s sophisticated logistics networks. And now that these services are available and widespread, they would be hard to live without. The time saved every week from not having to drive to stores in search of the things we need is measurable. Hours saved every week. And the convenience and friction-free nature of shopping with a business like Amazon is how it grew into a $2 trillion business. Amazon Prime’s membership – which includes unlimited shipping – has grown to about 230 million subscribers worldwide, about 170 million of which are in the U.S. The incredible success of Amazon effectively forced brick-and-mortar giant Walmart to enter into the e-commerce and logistics business to stay relevant to customers. The healthy competition has been a major win for consumers. And deliveries will soon get even faster due to some recent regulatory approvals. Introducing the 30-Minute Delivery Service Within the last month, Amazon received approval from the Federal Aviation Administration (FAA) to operate its [Prime Air]( drone delivery service beyond the visual line of sight (BVLOS). This is a big deal considering both Amazon and Walmart had been required to have visual spotters to operate their drone delivery services. Naturally, that doesn’t make any sense if a human spotter/operator has to be present for drone delivery of packages. It is more costly and less efficient than just delivering by truck. But this was required to prove the safety of the technology, its operation, and the underlying technology to avoid any obstructions like planes, helicopters, buildings, radio towers, powerlines, etc. Source: Amazon With the beyond-line-of-sight approval from the FAA, Amazon will be expanding its delivery area in College Station, Texas, where it has been testing Amazon Prime Air for the last few years. The ultimate goal is to be able to exceed the incredible delivery services in Japan. Amazon wants to be able to deliver a wide range of common household items, food items, and prescriptions… in 30 minutes or less. Missing an ingredient for dinner? Just order it on Amazon and it will arrive in no time. The goal is to have these battery-powered drones deliver 500 million packages a year by the end of this decade. This makes perfect sense in the suburbs and rural areas where homes have lawns, and the population is less dense. Not only will deliveries be fast and cheap, but they’ll also be more cost-effective for companies like Amazon and Walmart. Walmart’s “Partner” Approach Speaking of Walmart, as of last month, it has been offering its drone delivery service to as much as 75% of the greater Dallas Fort Worth population. It actually has a larger geographic delivery footprint than Amazon right now, though it’s still in the early days of rolling out the service. Walmart’s strategy, however, has been different than Amazon, which has built its autonomous drone technology in-house. It chooses to work with several drone companies to test out the technology and evaluate each company’s technology in early deployments. Shown below is a Walmart drone delivery from [DroneUp]( – one of Walmart’s technology vendors. For a delivery fee of $3.99, customers can order “tens of thousands” of products up to ten pounds and receive them in “as little as 30 minutes.” Source: Walmart Walmart also received approval from the FAA to operate beyond visual line of sight, enabling the company to dramatically expand its drone delivery network. Walmart announced that by the end of the year, it will have 34 drone delivery sites able to reach as many as 4 million U.S. households across Arizona, Arkansas, Florida, Texas, Utah, and Virginia. Walmart believes that with this expanded network, it will be able to deliver more than 1 million packages a year using drones. Another partner of Walmart is [Wing]( a subsidiary of Alphabet (Google). Wing has already delivered more than 350,000 packages in the Dallas Fort Worth area for Walmart. As we can see below, its delivery mechanism is different than Amazon or DroneUp. It delivers the package via a tether that lowers the package to the ground. Source: Wing The third major partner of Walmart is [Zipline](. And it now has two different battery-powered drones for package delivery that are quite different in their delivery mechanisms. Zipline’s original technology is shown below on the right. It’s a fixed-wing drone that looks more like a mini airplane. It simply drops its package from the bottom of the drone with a parachute to soften the impact. This is designed for more rural areas where less precision is needed for delivery. Source: Zipline Zipline’s newest drone shown on the left also uses a tether. But it differs from Wing in that it lowers a second battery-powered drone with a propeller on the back for precise landing control. This comes in handy, especially when it's windy outside. We can see it in action in the short clip below. Source: Zipline These latest developments are the most concrete signs that we’re nearing more widespread commercial use of drone deliveries… Delivery Drones Are Here Amazon chose to spend billions building its own drone hardware and software to enable Prime Air… whereas Walmart smartly worked with leading technology companies in the space, enabling it to evaluate several different approaches in multiple markets. This is an impressive win for Walmart, which currently has a significant lead over Amazon in terms of geographic coverage, homes reached, and technology adoption. This comes after decades of trying to catch up with Amazon and its e-commerce business. While drones zipping around above our homes will certainly be a bit annoying at times, they won’t be as noisy as a truck driving up to our front doors. Plus, if the electricity used to charge the battery-powered drones is from clean energy, deliveries will be emission-free and also reduce overall logistics traffic for last-mile deliveries. And, of course, it will be remarkably convenient for us to have that important item we need delivered at the last minute… when we don’t have the time to run out and go shopping. As these drones become fully autonomous in the coming months – and further regulatory approvals follow from the FAA and other airspace regulators worldwide – hundreds of millions of delivery drones will be employed globally to improve last-mile deliveries. And that means a massive opportunity for semiconductor, camera, and electronic component manufacturers that make autonomous delivery drones a reality. [Brownstone Research]( Brownstone Research 55 NE 5th Avenue, Delray Beach, FL 33483 [www.brownstoneresearch.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. 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