Google is set to bring another disruptive change to the way people receive products these days. According to Reuters the company will start delivering products to consumers via drones from sometime in 2017. The company is expecting to kick off its commercial delivery business in 2017 through Project Wing – the initiative to deliver packages through robot aircraft.
David Vos, the leader of Project Wing, said Alphabet Inc. (NASDAQ:GOOGL) – the company which owns Google now – has already engaged Federal Aviation Administration (FAA) and other stakeholders to set up low altitude Air Traffic control system for drones. The system will use the internet and Cellular technology to control and coordinate unmanned aerial vehicle flights at attitude under 500 feet.
Google is working on the Project Wing for the few years. It was, however, August last year when the company demonstrated the first field test of its most viable prototype in Australia.
Is Drone Delivery Disruptive Enough
The world is heading towards robotics era. Tech giants are making a gargantuan investment in R&D of Unmanned Arial Vehicles (UAV), also known as Drones. Till date it was used only for the military and defense purposes, but with the evolution in technology, companies have started exploring the commercial usage of drones that could be the next billion-dollar industry. Sensing the industry trends, in 2014, FAA had relaxed the norms for the commercial use of drones.
This has resulted in a massive boost to the overall commercial drone industry. The global drone market is expected to reach $5.59 billion by 2020, growing at a CAGR (Common Annual Growth Rate) of 32.22% between 2015 and 2020. The growth is largely propelled by the increase in demand from the media and entertainment industry, which are trying to reach every corner looking for content in no time.
The Retail industry, however, is complimenting the drones the most. For both the industries, offline and online, delivery is still a big challenge and a sizable part of its revenue is being invested in optimizing delivery processes. That’s why delivery drones are being considered as the next revolution in the Retail Industry. Global retail sales are expected to reach $22.82 trillion this year and online will account for 7.3% of that. By 2019, the contribution of online will be increased to 12.4% as the sales will zoom to $28.5 trillion. Supply chain accounts for one-fourth (avg.) of the total operational cost in any retail company. With the rising demand of delivery executives by eCommerce companies, the cost is shooting further with a rapid pace at every six months.
Drone Delivery is purported to be the best answer to the rising cost of product delivery. it also helps retailers to optimize their delivery processes and allow them to offer few-hour delivery or same day delivery at economical cost.
Google Is Not Alone In the Race
Google is not alone in the race of drone delivery. Besides many other local players, Amazon, Walmart & Alibaba are the top players intend to deliver packages through drones in the future. Both, Amazon and Alibaba, have already tested their drone delivery system to stay ahead in the competition.
Top companies are taking two different approaches; Google is, apparently, trying to incubate the whole drone delivery ecosystem while Alibaba and Amazon are eyeing on drone delivery system to improvise their delivery arm. Earlier reports claim that Google Drones would be used for disaster relief including medical supplies. But, analysts believe Google will not be limiting its drones only to these activities. Instead of joining B2C market by itself, the company may offer drone delivery system, powered with Google Map, as a service to large retailers and corporate houses, a model which is quite similar to Android.
By integrating Google Map with drone services Google could offer a comprehensive solution to retailers and urge them to stay focused on their core competencies. The advanced level of drones that doesn’t need any human intervention can easily leverage on intelligence derived from Google Map.
But Why is Google apparently more interested in offering Drone delivery as service? The answer lies in the two simple statistics: The retail industry is largely dominated by non-tech savvy offline retailers. Nearly 90% of retail sales are taking place offline and most of these large retail shop owners are trying to compete with discount-driven online stores, without willing to own the tech infrastructure.