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Parcel Drone Delivery Should Supercharge Ecommerce

According to ARK’s research, with regulatory approval in the US, an Amazon drone could deliver a package today profitably for $0.90 in less than a half hour, cutting the cost of domestic shipping by roughly 90%. Given frictionless and inexpensive delivery, consumers would likely buy many more goods online. ARK illustrates that parcel drone delivery could boost ecommerce’s share of retail sales from 13% today to 75% by 2030. Without drones, ecommerce could settle at just over 50% of retail, as shown below.1

ARK Invest Parcel Drone Delivery Ecommerce

ARK expects inexpensive parcel drone delivery to change consumer shopping behavior dramatically. Free shipping promotions tend to increase the size of orders.2 Indeed, with free two-day delivery, Prime customers spend more than double on Amazon than non-Prime customers.3 If drones are able to deliver packages in 30 minutes or fewer for less than $1, as we believe is likely, the shift to online shopping should accelerate.

Pending regulatory approval, revenue from parcel drone delivery could total $400-500 billion by 2030, as shown below.4 Parcel delivery revenues are roughly $280 billion today, at roughly $4 per parcel.5 ARK believes that as drone deliveries decrease shipping costs, delivery volumes should increase thanks to rising ecommerce sales and consumers preference for quick, inexpensive shipping. It’s possible that some heavier packages today will be split up into lighter loads to facilitate drone transport. While many companies like Alphabet, Rakuten, JD.com, and/or carriers like DHL and UPS should be beneficiaries, Amazon could take disproportionate share with free drone deliveries to both Prime Subscribers and customers signing up for home drone surveillance services.

ARK Invest Parcel Drone Delivery Revenue

While autonomous cars fall under state authority in the US, drones face more onerous federal regulations.6 In response, companies like Amazon and Google have resorted to trials in more friendly regulatory regimes like those in the UK, Canada, the Netherlands, and Australia. Chinese authorities have been even more friendly to drone trials. JD.com, for example, has been testing drones for several years in more than 100 villages in rural China.7 In addition to safety considerations, companies experimenting with drones face concerns about noise pollution.8 That said, based on recent approvals,9 the US is making regulatory progress, perhaps out of fear of being left behind technologically.

Other beneficiaries of the shift to drone delivery services should be mapping providers and drone hardware providers. Third party companies like Airmap could partner with regulatory authorities to offer digital infrastructure and traffic management services to drone delivery service operators. Out of the roughly half a trillion that ARK estimates for drone delivery revenues in 2030, mapping providers could potentially garner 5%,10 or $26 billion, as shown below,11 while the drone hardware market scales to $30 billion.12

ARK Invest Parcel Drone Delivery Revenue and Sales

Finally, the convenience and cost effectiveness of drone delivery could expand total retail sales. Consumers probably will purchase goods online more often, perhaps multiple times a day, if they don’t have to leave their homes, exacerbating the struggles of shopping mall owners. Parcel drone delivery services should be most impactful in rural and suburban neighborhoods, in contrast to autonomous taxis, which ARK expects to be most prevalent in urban areas. While ARK has analyzed the market for parcel delivery, autonomous food delivery should also be an excellent use case for drones. Drone delivery could reshape the shopping and eating experience completely around the world.

  1. Certain of the statements contained in this item may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
  2. https://www.researchgate.net/publication/227442405_An_Empirical_Study_of_the_Impact_of_Nonlinear_Shipping_and_Handling_Fees_on_Purchase_Incidence_and_Expenditure_Decisions
  3. https://www.businessinsider.com/amazon-prime-customers-spend-more-than-others-2018-10
  4. Certain of the statements contained in this item may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
  5. Note that last mile is some subset of this market and parcels include packages weighing up to 70 lbs. Source: https://www.pitneybowes.com/us/shipping-index.html
  6. https://www.constructiondive.com/news/faa-regulatory-delays-hamper-drone-expansion/543137/
  7. https://www.economist.com/business/2018/06/09/how-e-commerce-with-drone-delivery-is-taking-flight-in-china
  8. https://slate.com/technology/2019/05/delivery-drones-amazon-google-noise-buzzing.html
  9. https://mashable.com/article/google-wing-drone-delivery-faa-approval-us/
  10. A rough estimate based on ARK’s conversation with third party service providers for autonomous vehicles and drones.
  11. Certain of the statements contained in this item may be statements of future expectations and other forward-looking statements that are based on ARK’s current views and assumptions, and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.
  12. Assumes drones have a 3 year life and can deliver 20-30 packages per day.


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