Autonomous delivery’s viability grows

The COVID-19 pandemic could be the catalyst for widespread adoption

As consumers demand more convenient fulfillment while technology improves and costs fall, the prospect for autonomous delivery is growing. The implications of the COVID-19 pandemic could create a perfect storm of factors that finally make things like drones and delivery robots ripe for adoption.

“The pandemic has increased the viability of autonomous delivery,” says Michael Ramsey, vice president and analyst who covers the automotive industry and smart mobility at Gartner. “It’s one more box that they can check for in saying ‘this makes sense.’”

No one is certain what the “new normal” will look like, but many agree that greater social distancing could be a part of our future. Fewer people in stores, more use of online ordering and the desire to increase contactless fulfillment will increase the viability of autonomous robots. While many retailers have been looking to robots to address what they see as a temporary issue, many analysts believe long-term behavioral changes in consumers could make autonomous delivery a permanent fixture in the retail world.

Retail use cases

Nuro autonomous vehicle
Walmart is testing the use of Nuro self-driving robots to deliver groceries.

A recent report by Research and Markets found the global autonomous last-mile delivery industry is projected to grow to $76 billion by 2030, due to technological advancements in delivery vehicles and the surging demand for fast delivery.

Many large retailers are testing some form of autonomous delivery. Walmart and The Kroger Co. are both testing the Nuro self-driving robot to deliver groceries. The compact vehicle operates like a small, driverless car with four cargo holds and can transport everything from groceries and food to retail products and dry cleaning.

Retailers are testing drones and aerial robots as well. Walgreens announced last fall it was testing on-demand delivery service with Alphabet’s drone concept Wing in Christiansburg, Va. The retailer could be well-positioned to use drone delivery service because nearly 80 percent of the U.S. population lives within five miles of a Walgreens, the same range of Wing’s drone.

CVS, with UPS, plans to begin offering prescription drug delivery via drone to a retirement community in Florida. UPS also announced a partnership with drone startup Wingcopter to develop a new fleet of drones that could transport a variety of goods over long distances. And, in late March, Amazon hired a former Boeing executive to manage the Prime Air drone business, a sign many analysts take as a big step toward making the idea a reality.

“Autonomous delivery technology is rapidly developing,” says Gary Silberg, partner and head of automotive at KPMG. “Many of these technologies use underlying deep learning software and lidar, radar, cameras, ultrasonic and sensor fusion to gather data, know where they are going and when to turn left, right or stop. They’re getting better and smarter.”

As the technologies and AI algorithms have been improving, costs have been declining, Silberg says. For example, while lidar units used to cost $85,000, they can now be found for well under $10,000. As that trend continues, the return on investment is growing more attractive, especially for retailers such as grocers where continuous and repetitive deliveries could help them achieve economies of scale on their investments.

“If you are delivering the same groceries day after day and the number of these routes, you can amortize all these costs over a vehicle and it can become profitable,” Silbert says.

No-contact fulfillment

The COVID-19 pandemic could more quickly lead the retail industry to autonomous deliveries. Due to stay-at-home restrictions, consumers increased their use of online and delivery channels in March and April 2020. Many retailers like Best Buy and Target have expanded curbside pickup features that enable consumers to order and retrieve purchases without exiting their vehicles. The trends are all paving the way for fulfillment concepts that distance humans from the equation.

“It’s a massive area and massive economic opportunity,” Silberg says. “COVID-19 has just accelerated it.”

Chinese ecommerce giant JD is also exploring the potential to expand drone deliveries in the wake of the pandemic. The company said in a blog post that its drones have played an important role in the fight against the virus, delivering necessities to Chinese consumers and helping several major cities provide protective measures. JD noted that drones and autonomous delivery robots cannot only drive results without the risk of human contact but also help enterprises improve efficiency and reduce cost.

Starship Technologies autonomous delivery vehicle
Starship Technologies has seen a rise in demand for its small robot delivery services since the pandemic started.

Starship Technologies, which offers small robot delivery services in more than 100 cities around the world, has seen a large rise in demand since the pandemic started, says Vice President of Marketing Henry Harris-Burland. While the robots were a convenience for many retailers and consumers, they have now become a necessity in many neighborhoods.

Since its founding in 2014, the vehicles have made over 100,000 deliveries. “Many people now don’t even have many options to get groceries right now. They’re self-isolating and can’t go out if they’re vulnerable, elderly or have health conditions,” Harris-Burland says. “We’re proud we can be part of the solution providing contactless delivery to people.”

Long-term behavioral changes

Despite the promise of new deployments and further adoption of autonomous delivery vehicles, challenges remain. While most states have put in place some kind of regulations to test autonomous vehicles, few have formalized regulations for widespread deployment in real-world applications, making it difficult for the technologies to be rolled out nationwide.

“There are no federal guidelines, so each state has been making their own rules, which creates a lot of ambiguity and cost,” Silberg says. “I think we ultimately need at least some level of regulation or guidelines on that, but the devil is in the details.”

Ramsey notes there are still ROI issues with many small delivery vehicles; the presumption is they cannot move as quickly as humans, nor can they always deal with things like uneven sidewalks, obstructions or odd entrances to doorsteps or apartments. A bigger issue is that many robots in use still require consumers to physically retrieve deliveries. So, while grocery and small food deliveries can work now, there remains a big gap in how many other deliveries can be made, especially when the person isn’t at home. “How do we solve the last 50 feet of delivery? They’re in sort of this middle area,” Ramsey says.

More promising applications are in the “middle mile” where the autonomous technology works hand-in-hand with a human, Ramsey says. The United States Postal Service has investigated whether its next generation vehicles might employ this kind of technology, where the vehicle drives around and the person jumps out and makes deliveries. As the need for such services grow, companies are trying to refine how these robots work in the real world and how they can overcome remaining obstacles, address regulations and make the ROI work.

Looking at health care, where some robots are already being deployed in hospitals and might soon be used to provide COVID-19 tests, could provide some guidance. “The COVIC pandemic actually adds a new purpose to the autonomous which hadn’t been there before,” Ramsey says, “and it actually might give us some reason to move forward.”

Related content

Blog
 
Stories around retail industry insights, trends and transformation.
Read more
How food shopping might change after the pandemic
 
Shopper habits could change permanently.
Read more
Through the retail lens: Social marketing and retail
 
Jeremy King talks COVID-19’s impact on consumer sentiment and social media marketing.
Read more