Last-mile delivery (LMD) covers the process of transporting products from a distribution center—usually a retail store or warehouse—to the end consumer. This process has become increasingly automated due to the introduction of robots and autonomous vehicles into the supply chain, allowing companies to distribute goods with reduced labor and costs while improving efficiency.
Developments in autonomous delivery have brought these once-futuristic methods much closer to becoming a commercial reality. Today, droid makers largely commercialize their tech targeting food deliveries. Autonomous delivery vehicle (ADV) developers target grocery and heavier parcel deliveries, while drones are mostly trialed for time-critical cargo deliveries.
The demand for autonomous delivery methods can be attributed to several factors, most notably the significant cost savings that they offer to retailers, logistics, ecommerce, and delivery companies. With the ability to reduce labor and transportation costs, these cutting-edge technologies have quickly become go-to solutions for organizations seeking to optimize their bottom line. Furthermore, consumers' expectations of faster delivery also play a significant role in pushing last-mile delivery automation forward.
Startups dominate the LMD Automation space across all three segments (i.e., ADVs, droids, and drones). None of the segments are matured, with only a couple of growth-stage companies operating in the industry, while most are seed or pre-seed companies.
Drones is the most commonly targeted segment with most incumbents and disruptors within LMD Automation. However, the segment is still in its nascent stages, with just a few companies, such as Alphabet, UPS, Amazon, Zipline, Matternet, and Flytrex, securing commercial deployment permits in the US, as of November 2023. In contrast, the ADV segment faces tighter regulations akin to those governing autonomous cars, resulting in a further scarcity of growth-stage companies. The ADVs segment also has relatively fewer incumbents and disruptors comparatively.
While it is uncommon for startups to operate in multiple segments of the LMD Automation industry, incumbents, on the other hand, exhibit a distinct divergence in this approach. For example, incumbents like Alphabet, Walmart, and Hyundai strategically operate across multiple segments, leveraging in-house technology or forging partnerships.
The incumbents in the LMD Automation space largely operate either by developing their own technology (mostly tech companies) or partnering with startups in the space for tech development and deployment (mostly retailers and some logistics companies).
Many retailers and logistics companies face the need to outsource most of the development process to third parties, as they lack the required skills and expertise for full in-house development. For instance, 1) Amazon outsourced US drone development to third-party suppliers; 2) Yum! Brands acquired Dragontail Systems to develop its own drone-based delivery solutions, 3) and Walmart, Ocado, UPS, and FedEx partnered with startup companies for tech development and deployments.
Even though many disruptors actively engage in developing delivery droids, it is noteworthy that Amazon and FedEx both abandoned their attempts to develop droids, citing the programs’ inability to meet expectations. FedEx shifted its focus toward partnerships in alternative segments, while Amazon continued its in-house drone development efforts.