Amazon Drones Could Provide Delivery For As Little As $1
By Christine Kern, contributing writer
Report suggests drones could drastically reduce delivery costs for Amazon.
Last month, the FAA issued a new ruling that give Amazon permission to fly drones for delivery service, with a host of restrictions, clearing the way for outdoor drone delivery testing. The ruling came after Amazon threatened to take its drone development abroad.
And the ruling could mean some big financial savings for the e-retail giant.
As Bloomberg reported, according to a 2014 study by the New York-based financial research company ARK Invest, the cost of such deliveries could be as little as one dollar. This is just a fraction of the cost of current delivery costs. The report also suggests deliveries might arrive in as little as 30 minutes.
Amazon currently charges $7.99 for one hour delivery of thousands of products in many cities via its Prime Now program, according to The Examiner.
Basing the study on the existing technology and prices, ARK estimated it would cost Amazon $100 million to buy the drones and another $300 million to use them for delivering 400 million orders annually.
Tasha Keeney, an ARK Invest analyst who wrote the report, explained, “The breakthrough is the value that drones offer customers, in terms of the cost and the convenience.”
Amazon would also face upfront costs of thousands of operators, each capable of monitoring multiple drones simultaneously, to ensure safe takeoffs and landings, according to the study, which included the personnel cost in its calculations. The study also calculated that most of the drone flight would be automated, and that each package weighs up to 5 pounds within a 10 mile delivery radius.
Not everyone is convinced of the super power of drones, however. Matt Pillar, editor-in-chief of Integrated Solutions for Retailers expressed concerns over the widespread adoption of drones in an editorial last year, stating “retail delivery drones won’t get off the ground this decade. When drones do commercialize, their use will decidedly not be led by retail. Aerial photography, entertainment, and recreation? Yes. Parcel and pizza delivery? Not for a long, long time, and especially not in my neck of the woods.”