What retailers can learn from Walgreens’ drone delivery pilot

New pharmacy drone programs could be a wake-up call to retailers to begin preparing for store-to-door delivery

November 26, 2019
Bloomberg / Contributor / Getty Images News

Retailers have long talked of the potential of drone delivery. Now it's a reality.

In early November, working with CVS and with FAA approval, UPS completed the United States’ first commercial drone deliveries of prescription medications direct to consumers.

And in another first in September, Walgreens began working with Alphabet’s Wing to use drones to deliver 100 different products from store to door in a program it’s piloting in Christiansburg, VA.

With nearly 80 percent of the US population living within five miles of its stores, Walgreens sees big opportunity in the future of commercial drone delivery, says James Cook, JLL’s Americas Director of Research, Retail.

While widespread autonomous delivery isn’t happening in the immediate future, the Walgreens-Wings and CVS-UPS pilot programs should be a wake-up call to retailers to begin preparing their staff and their properties for aerial store-to-door delivery.

“The worst thing a retailer can do is read about this news and then do nothing,” Cook says. “There’s a real first mover opportunity here.”

Why retailers should prepare

Commercial drone delivery en masse is a question of when, not if. But getting this right—that is, successfully delivering products to consumers efficiently—won’t happen overnight. Even if they break even on their pilot programs, Walgreens and CVS have still got a head-start on competitors.

While major retailers have been closely watching the progression of commercial drone delivery, few have developed real strategies, according to Cook, who says they have two major reasons to act sooner, not later.

The first is institutional experience. Retailers’ core competency isn’t operating fleets of autonomous drones, so they need to develop partnerships with third-party drone operators and build the internal expertise required.

“Finding a drone fleet operating partner isn’t a decision you make on the fly,” says Cook. “It’s a new world. It’s possible the first fleet’s drones won’t work as promised. It makes a lot of sense to work out those kinks in the first inning or two.”

The second is infrastructure compatibility.

“Big box stores could use their rooftops as de facto heliports,” says Cook. But converting roofs, or parking lots, into safe, practical and efficient sites for drone delivery doesn’t happen overnight. Preparing retailers’ physical infrastructure—let alone getting permit approval to build it— takes years of advance preparation.

“If I were a major retailer, I’d be seriously evaluating how future-proofed the physical infrastructure of my suburban stores are,” he says.

Eyes on the prize

It’s no accident that Walgreens is piloting drone delivery in Christiansburg, a 20,000-person town about 30 miles outside the city limits of Roanoke, which has five times the population.

With fewer people per square mile, and more single-family homes (and lawns), the suburbs offer an easier, safer place for retailers to start commercial drone delivery, Cook says.

It’s why retailers with large presences in the suburbs have the most to lose early on from sitting on the sidelines now.

However, the biggest long-term opportunities for retailers lie in major metro areas, which have more consumers per square mile and better economies of scale.

These areas also tend to have the most expensive real estate, says Cook. In recent years, increasing expectations around faster delivery times have driven retailers to build warehouses closer to consumers in space-constrained, high-priced urban areas.

But drone delivery in cities enables retailers to use warehouses farther from the urban core without sacrificing speed.

For example, instead of leasing warehouse space in New York, drones allow retailers to deliver to the same consumers from less expensive warehouses across the river in New Jersey.

“This is a no-brainer,” says Greg Matter, Managing Director, JLL, who co-leads JLL’s urban logistics practice. “The last mile comprises over half of total shipping costs. Here’s the single best way to dramatically cut into that.”

Roadblocks — or airblocks

While these early pilots are promising, drone delivery has hurdles to overcome before it’s broadly adopted.

The proliferation of drones in the sky necessitates a safe way of managing their flight paths, Matter says. However, there’s no currently no widely tested and accepted drone-traffic control system.

Another question mark is how, with the prospect of hundreds, if not thousands, of drones flying overhead, local authorities will manage the potential noise. And even if retailers perfect their own infrastructure, that of the homes and apartments they deliver to is out of their control.

 “Landing on large lawns or open spaces in the suburbs presents less of a challenge than the daunting task of delivering to homes in densely packed cities,” Matter says. “The changes on the way won’t just force a rethink among retailers and industrial occupiers — apartment owners are going to start rethinking their roofs.”