In this episode of Yahoo Finance series NEXT, Yahoo Finance reporter Akiko Fujita visits San Francisco startup Zipline to get a first-hand look at how delivery services are being automated with drones.
The vision of drone delivery has been around for years, with Amazon (AMZN) being one of the first to launch its drone delivery program “Prime Air” in 2013. What has kept the industry from scaling up to widespread use? Regulation.
In the race to deliver at new heights, the FAA has granted Zipline a rare exception to fly drones beyond the visual line of sight. With commercial drone deliveries projected to exceed 1 million by the end of 2023, Zipline plans to lead the way introducing drone technology to as many as 15 cities in the US across healthcare, restaurants, and retail by 2025.
Zipline expects to reach these goals with the company’s Platform 2 aircraft – a drone designed to seamlessly integrate into business operations while delivering with precision. From heights up to 330 feet, the drone drops a "droid" with packaged goods weighing up to eight pounds anywhere from your doorstep to sidewalk in a matter of minutes.
Drone delivery could be introducing a new accessibility to delivery services with retailers lining up to utilize the technology. Sweetgreen (SG), Pagliacci Pizza, and Mendocino Farms are early restaurant adopters. Zipline has also lined up a slew of clients in the health and wellness space, including GNC, Michigan Medicine, Intermountain Health, and MultiCare Health System.
As more companies adopt the technology, delivery on wheels may be a thing of the past.
For more on our NEXT series, click here, and tune in to Yahoo Finance every Monday at 10 a.m. ET.
Video Transcript
AKIKO FUJITA: Autonomous drone delivery could finally be coming to your front door. New technology and shifting regulations are shaking up an industry that processes 21 billion packages each year.
KELLER RINAUDO CLIFFTON: In 24 hours, we can show up, install the infrastructure, and then you turn any window or hole in the wall into a magical portal.
AKIKO FUJITA: One company leading the way, marking the first autonomous flight without a human observer, a feat made possible with a rare exemption from the FAA. All of this in a race to bring you your food and medicine at a lower cost and faster pace.
I'm Akiko Fujita here in Half Moon Bay, California. And this is what's next in drone delivery.
[MUSIC PLAYING]
- Bunch of Zipline 604 in 3, 2, 1. Presss this button.
AKIKO FUJITA: Oh, whoa!.
45 minutes outside of San Francisco, Zipline co-founder Keller Rinaudo Clifton is taking drone delivery from this--
KELLER RINAUDO CLIFFTON: Back spinning the propeller. There's a delivery.
AKIKO FUJITA: --to this. Zipline's latest drone known as Platform 2 never actually touches the ground. It hovers 300 feet above in near silence. The droid Insight makes the drop to secure delivery.
KELLER RINAUDO CLIFFTON: We're lowering this we call the droid. The droid is what's controlling its position in x and y-axis, and then delivering in a very, very precise, gentle, and silent way directly to a customer's home. This is 24 donuts that we can actually load here if you like.
AKIKO FUJITA: It's quite the order.
KELLER RINAUDO CLIFFTON: Yeah. So why don't you do two of them, and I'll do two. But you can fit them in there exactly.
AKIKO FUJITA: Close it off.
KELLER RINAUDO CLIFFTON: And we can close this exactly. You click a button on an iPad and it's automatically shipped.
AKIKO FUJITA: It's a vision the world first heard about from Jeff Bezos.
JEFF BEZOS: These are effectively drones, but there's no reason that they can't be used as delivery vehicles.
AKIKO FUJITA: Zipline first began drone deliveries in 2016, building a vast network for medical supplies in Rwanda. Today, they're delivering one package every 70 seconds.
- Launching Zipline, 1 to 3. 3, 2, 1.
AKIKO FUJITA: Now, the company's making history. In November, Zipline became the first aircraft to fly beyond the visual line of sight autonomously. It came after the FAA granted zipline and three other firms a rare exemption, removing a long standing rule that required drones to operate within sight of drone operators.
JONATHAN GEURKINK: I think for commercial drone deliveries, it's really everything. If you want to have lots of deliveries and really make a business out of this, you know how many operators are you going to try to have chasing drones around here and there. So it really is kind of the tipping point for this market to be able to develop.
AKIKO FUJITA: In fact, labor makes up roughly 95% of existing drone delivery costs. Take out human observers and McKenzie says, you've got a reliable and cheaper alternative to standard delivery vans.
KELLER RINAUDO CLIFFTON: Having an automated system that can deliver those things in a way that is 10 times as fast and half the cost is going to seem so incredibly obvious.
AKIKO FUJITA: So I'm thinking about what is available to customers today. You've already got same day delivery. You've got a DoorDash, Grubhub, any food delivery within an hour.
KELLER RINAUDO CLIFFTON: Within an hour, exactly.
AKIKO FUJITA: What does this give us?
KELLER RINAUDO CLIFFTON: So this gives you really within 5 or 10 minutes. We call it instant delivery today. But an hour is actually pretty slow. You kind of see the inevitable march, right?
This idea of using a human driving a 3,000 to 4,000-pound gas combustion vehicle to deliver something that weighs 5 pounds, it will seem crazy that we solved the problem in that way. It will be very, very obvious to people that this is a problem that requires a level of scale and automation and zero emission technology that can only really be executed like this.
AKIKO FUJITA: Zipline's new system doesn't require a warehouse to launch the drones. Each docking station can be built into any business, so it's customized for each company.
KELLER RINAUDO CLIFFTON: We can install the technology onto any wall. So whether it is a retail store or a hospital or primary care facility or even a restaurant, in 24 hours, we can show up. Install the infrastructure. And then you turn any window or hole in the wall into a magical portal.
This is a prototype version. This is a tester of the dock. So this black dock you see there is what the actual zip can dock into and out of when it's picking up a delivery.
AKIKO FUJITA: That's intended to make adoption seamless. Each aircraft can travel within a 10-mile radius and carry up to 8 pounds-- the equivalent of two medium pizzas and a soda. The company has already signed nearly a dozen partnerships with deliveries set to land in 2024.
CALSEE HENDRICKSON: So you could compare this to something like an autonomous vehicle that's on the road today, but we fly through the air.
AKIKO FUJITA: Zipline faces plenty of competition with Amazon's Prime Air and Alphabet's Wing attempting precise, on-demand delivery. There's also a handful of other startups looking to race ahead with renewed interest from venture capital.
It's here inside Zipline's factory, where we get a glimpse of just how the company hones its craft.
LIAM O'CONNOR: This whole system is designed in a modular fashion. This is something that really helps us ensure that we are able to have an incredibly high reliability service.
This is testing a very key part of our next generation system. This wire has to be able to descend 100 meters and carry the weight of the smaller aircraft, plus the payload that's inside of it all the way down and all the way up.
AKIKO FUJITA: I've heard the company say many times that you're looking for dinner plate precision.
LIAM O'CONNOR: Yes.
AKIKO FUJITA: Why is that important?
LIAM O'CONNOR: There are many different sources of obstacles in backyards. What we're aiming for is plus minus half-meter accuracy. And what that means is that anyone who has even a narrow walkway leading up to their house has a place that we can deliver to.
AKIKO FUJITA: The mics attached to the wing are key to safety. They serve as listening devices for any interference in the air.
What do you use this tight space for?
LIAM O'CONNOR: Yeah. So we are inside of a wind tunnel we've been developing this microphone technology that allows us to listen for other aircraft and avoid them.
AKIKO FUJITA: That's critical because air traffic control doesn't have the network and technology to track drones in real time yet. Zipline manages their own fleet. The company plans to introduce its drone technology to as many as 15 cities in the US by 2025. By 2026, Zipline hopes to expand across the country.
KELLER RINAUDO CLIFFTON: We're just at the beginning. I mean, you're seeing, you know, it's 12:01 AM when it comes to this kind of technology. We will look back in 10 years, and I'm sure so much of this it will seem mind blowing given how far the technology has evolved.
