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Last-mile Delivery Automation
Overview
How droids, drones, and ADVs automate last-mile delivery
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.
Industry Updates
Market Sizing
The US LMD Automation market could reach USD 1.6 billion–2.4 billion by 2028
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Use cases
Last-mile delivery (LMD) automation solutions are adopted across a handful of industries, particularly the consumer discretionary and industrials sectors. This specifically includes retailers and restaurants under consumer discretionary as well as logistics companies in the industrials sector.
Food and beverage deliveries have seen relatively high adoption (primarily catered to by droids) in campuses and specific city areas, as they offer a cost-effective and convenient delivery option. Meanwhile, mail, parcel, and grocery deliveries have also benefited from LMD automation, as it helps organizations reduce energy consumption and emissions while boosting customer experience through reduced delivery costs and times. Medical deliveries, which are time-sensitive, have also used LMD automation, capitalizing on the speed and efficiency of drones.
We have identified key LMD automation use cases below.
Market Mapping
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 expansion-stage companies operating in the industry, while most are ideation or minimum viable product-stage 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, Amazon, Zipline, Matternet (joint UPS and Ameriflight operations), and Flytrex, securing commercial deployment permits in the US, as of March 2024. The droids segment also has a relatively moderate number of startups, with many being go-to-market-stage companies, as the segment faces less tight regulations for commercial deployments. In contrast, the ADV segment faces tighter regulations akin to those governing autonomous cars, resulting in a further scarcity of expansion-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 and Walmart strategically operate across multiple segments, leveraging in-house technology or forging partnerships.
ADVs
Droids
Drones
The Disruptors
The LMD Automation market is largely led by disruptors offering droid- and drone-based deliveries. However, from a segmental perspective, the ADVs segment, which has the least number of disruptors, has been the most attractive segment for investors, as it requires higher funding for complex product development. Startups in the ADV segment have raised USD 2.7 billion in collective funding, largely led by early-stage startup Nuro (as of March 2024). Furthermore, Nuro is, by far, the most well-funded company in the industry and the ADV segment, with USD 2.1 billion in funding raised (as of March 2024).
The drone segment has the highest number of distributors of any segment, with players having collectively raised USD 1.5 billion (as of March 2024). Zipline leads the segment in terms of funding, with USD 821 million raised (as of March 2024). Most of these companies are yet to reach commercial-scale operations, with only Zipline operating as a growth-stage business. Other prominent startups in the space include Matternet, Flytrex, and Flirtey, which are all in the early stages of operations.
A considerable number of disruptors cater to the droid segment as well, exceeding cumulative funding of USD 700 million (as of March 2024). Starship Technologies, with USD 287.7 million in raised funding (as of March 2024), is the most prominent startup in the droid segment and one of the first companies to commercially test a working droid.
Funding History
Competitive Analysis
Incumbents
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, and 3) Walmart, Ocado, and UPS partnered with startup companies for tech development and deployments of LMD automation methods including ADVs.
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.
Notable Investors
