Drone Deliveries: Taking Retail and Logistics to New Heights

PwC Drone Powered Solutions - Global Center of Excellence in Drone and Geospatial Technologies - has published the global report, “Drone Deliveries: Taking Retail and Logistics to New Heights,“ which explores the market potential for drone deliveries in the context of retail and logistics companies.

The report focuses on commercial drone deliveries related to B2C applications and shows that by embracing the technological and revenue-generating potential of drone deliveries, retailers and logistics companies can improve the client experience, reach new client segments, and increase the efficiency of their operations. This also presents an exciting opportunity for investors seeking further exposure to the fast-growing drone industry.

Key insights of the report

According to calculations, 14,000 daily deliveries are expected to result in 5 million business-to-consumer (B2C) drone deliveries worldwide in 2024. This number is projected to soar to an impressive 808 million within ten years.
With unit economics estimating delivery costs to be around $2 in 2034, unmanned aerial systems (UAS) offer an enticing alternative for businesses to penetrate new markets, enhance customer satisfaction, and boost profitability, particularly in areas where traditional last-mile deliveries struggle.
Along with increased adoption, the unit economics are rapidly improving – with the average unit cost per delivery currently ranging between $6 and $25. This price is expected to drop by more than 70% over the next 10 years, which will not only match traditional last-mile delivery costs, but surpass them and create an inflection point for the industry as it achieves widespread adoption.
The value of goods delivered to consumers by drones worldwide will grow by 74% on an annual basis, from $251 million in 2024 to $65,177 million in 2034.

In urban centres, near-term adoption is limited due to several unique challenges. Drone flights over densely populated areas pose increased safety risks, and there are fewer suitable landing zones and drop-off locations. Creating the necessary infrastructure, particularly on rooftops, is complex. While drones will eventually play a role in urban environments, the adoption process is expected to be slow and measured.

In contrast, suburban, rural, and remote areas are better suited for drone deliveries and are likely to see faster adoption. These regions often lack adequate delivery options due to the high costs and logistical challenges of traditional methods. Drones can bridge this accessibility gap, significantly improving service efficiency and cost-effectiveness without facing the challenges of densely populated urban areas.

Our projections suggest that advanced air mobility (AAM) of goods could serve approximately 67% of the global population, particularly suburban and rural residents, potentially substituting 389 billion traditional deliveries worldwide in 2034.

The executed analysis also reveals significant growth in drone delivery services across various sectors, such as parcel and e-commerce delivery, food delivery, and goods delivery.

There is no doubt about the commercial viability of drones as a convenient, efficient, and sustainable alternative to conventional last-mile solutions. Furthermore, numerous successful implementations into operations of B2C retailers, marketplaces, and logistic players have proved that such a delivery option not only helps with customer retention but also creates new markets, therefore expanding the addressable market of their offer and services.

This trend indicates a growing acceptance and usage of drone technology in retail and logistics, pointing towards a promising future for the drone delivery market.

Drone deliveries not only reduce operating costs and are time efficient and convenient for clients, but also significantly lower carbon dioxide emissions. One drone per year can save up to 45 tons of CO2 emissions that would otherwise be released by combustion engine vehicles. This is equivalent to the carbon storage potential of 1,800 trees.

Key elements for developing a strategic roadmap to launch and scale up drone delivery services

The strategy for drone delivery should be a critical starting point for every retail, logistics, and food and beverage business. After years of slow growth, the concept of rapid delivery using drones has now been proven viable with hundreds of thousands of deliveries worldwide, despite awaiting regulatory approval for large-scale operations. The report outlines the journey for strategic implementation of drone delivery, considering key elements required to ensure efficient operations, regulatory compliance and customer satisfaction, ultimately leading to success in the emerging drone delivery market.

1. Goods to deliver
2. Delivery area
3. Technology
4. Operating model

1. Goods to deliver

The choice of goods significantly influences the drone delivery strategy, especially the drone platform and supporting infrastructure. Food and medicine may require temperature-controlled compartments, while parcels and groceries may need larger cargo spaces. Moreover, understanding the demand for rapid delivery services of specific types of goods, in a given area is critical.

Items/types of commercial goods most suitable for B2C drone deliveries:

Food
Goods
Parcel & e-commerce
Prescription medication

2. Delivery area

However, drone delivery technology offers significant opportunities for transforming logistics, the pace of adoption will vary based on locational challenges and constraints. Selecting the right geography is crucial for initiating drone delivery and evaluating scaling potential.

The typology of areas for drone deliveries:

Urban
Suburban
Rural
Remote

A vital factor for drone delivery operations, particularly when designing the operating geography and catchment area, is also the type of housing where end consumers reside. Urban areas typically feature townhouses, condominiums, and apartments, whereas suburban and rural areas are dominated by semi-detached or detached houses. When exploring potential drone delivery locations, it's important to consider their specifics.

Understanding which stores and warehouses are suitable for drone deliveries is not a simple task. It is also essential to analyse existing locations and variables such as regulations, operations, drone platforms, environment, physiognomy, local market, and population, among other parameters.

To address this challenge, the PwC Drone Powered Solutions team introduced a tool, “PwC Drone Delivery Location Finder,” which helps identify the most suitable sites for drone delivery and explores the potential of different locations (see “How can PwC Drone Powered Solutions help you?” below).

3. Technology

Selected technology determines adaptability to different operating environments and the efficiency of the delivery process. For instance, the hardware's maintenance and operational requirements directly impact the drone delivery operations' overall cost and efficiency. Therefore, carefully considering and selecting the proper technology is crucial in shaping an effective and scalable drone delivery strategy.

The are three main types of drone platforms and six types of payload release mechanisms that are most commonly used for drone deliveries, each offering different features, capabilities, and drawbacks.

Aircraft / Platform:

Multirotor
VTOL
Fixed-wing

Payload release mechanism:

Land and drop off
Window frame
Locker
Winch
Winch with droid
Parachute

4. Operating model

Setting up processes and the required infrastructure (e.g. charging stations and maintenance facilities) significantly impacts the range, scope, and unit economics of drone delivery operations. Careful consideration and optimisation of these elements are essential when selecting the operating model and establishing a robust, scalable drone delivery strategy that can adapt to evolving market demands and regulatory requirements.

Regardless of the chosen operating model, drone delivery systems typically use one of two network configurations: point-to-point or hub-and-spoke. These configurations are adapted from traditional logistics systems to suit different areas, distances, and infrastructure.

Point-to-Point

In a point-to-point network, drones operate from multiple take-off and landing locations, allowing for direct deliveries from various points to customer-chosen destinations.

Hub-and-Spoke

With a hub-and-spoke approach, deliveries always take off from a single point (the hub), and the drone reaches its destination via an assigned air route (the spoke).

How can PwC Drone Powered Solutions help you?

PwC Drone Powered Solutions - Global Center of Excellence in Drone and Geospatial Technologies - is a trusted partner to elevate retail and logistics with drones. We bring the unique expertise and methodologies of our PwC Drone Powered Solutions team which has experience in technology, tools, regulations, operations and market sizing, to our advisory capabilities in retails and logistics.

Developing end-to-end strategies for deploying drone delivery operations

Analysing country specific regulatory and operational landscapes to determine how to comply with rules surrounding drone delivery operations

Analysing market size based on geodemographic data for specific sites, based on parameters such as the range of different delivery platforms and deployment models

Calculating the economics of implementing drone delivery operations

Selecting approaches to efficiently implement and scale up drone technology in line with companies’ ambitions and goals

Using our PwC Drone Delivery Location Finder tool to identify sites most suitable for drone delivery operations

The PwC Drone Delivery Location Finder is the geospatial tool that provides invaluable support in assessing the feasibility of implementing drone delivery services in various environments. By analysing multiple variables related to regulations, operations, drone platforms, environment and physiognomy, local market and population, as well as other parameters, the platform provides valuable insights into the potential for drone delivery across different sites, regardless of their location.

This tool allows businesses to prioritise geographies, calculate micro-market size for each point of sale, and make informed decisions about where to implement drone delivery services. The comprehensive approach ensures that businesses can address the specific needs and dynamics of urban, suburban, rural, and remote areas effectively.

Many more details exploring technical elements of how to get started with drone deliveries, an overview of operating models and unit economics, a deep-dive analysis of possible challenges presented by drone delivery operations, and potential mitigation solutions that could be transformed into development strategies are present in the published report, which can be accessed below.