Layoffs, cutbacks strike Walmart-affiliated drone delivery company

Not everything is rosy in the land of drone delivery. DroneUp, which is a U.S.-based drone delivery service backed by retail giant Walmart, announced significant layoffs and operational cutbacks. The DroneUp layoffs comes as the company faces challenges in financial sustainability.

As first reported by Axios, DroneUp spends about $30 to deliver a package by drone. Though the company has goals to get prices down to about $7 (that’s more akin to ground-based delivery), even that’s a tough sell among customers who expect free delivery.

Given those financial challenges — as well as regulatory hurdles and infrastructure limitations — DroneUp made the move to lay off about 70 employees, which amounts to about 17% of its staff.

With that, the company is also ceasing its operations in all states outside of Texas for now. That includes closing drone delivery hubs in Phoenix, Salt Lake City and Tampa.

“Layoffs are an unfortunate part of a business that is literally defining its own industry,” according to a statement provided to The Drone Girl by DroneUp. “Like so many innovators before us, the decision to automate often leads to similar circumstances but we acknowledge that this is a difficult time, especially for those with whom we’ve parted ways. While we are deeply grateful for their service, DroneUp remains committed to a strategy that supports our commercial partners and their customers.”

What’s next after the DroneUp layoffs?

For now, DroneUp will focus its efforts purely on Texas, where it runs flights out of select Walmart stores in the Dallas area. (Zipline and Wing, two other drone delivery companies, also work with Walmart in Texas).

DroneUp has differentiated itself from competitors like Wing and Zipline with unique hardware and software. That includes its proprietary software called Uncrew, which helps manage multiple missions in one go.

DroneUp uses a unique technology called the autonomous Ecosystem to drop off and pick up packages. Ecosystem operates like a series of mailboxes around a region. With it, retailers can drop off a package into a giant box the size of a few humans. On top of it, the drone can automatically grab that package and fly off to another station. From there, a receiver would arrive at their nearest Ecosystem station and pick up their package.

It’s certainly a different system then one that competitors follow (which often entails dropping packages directly into customers’ yards. But, it signals that DroneUp is still investing in new technology — and open to innovating on new strategies.

“The lessons we have learned in the last several years have informed a strategy to reshape the last mile of delivery with DroneUp’s Ecosystem platform that is economically feasible for sellers and scalable for buyers,” according to a statement from DroneUp.”

Though DroneUp is laying off a solid chunk of its team — which now totals 418 people according to a CNBC report, the company still has bigger visions. In fact, its CEO Tom Walker said DroneUp has goals to hire even more people than it laid off.

Regulatory challenges to blame for DroneUp layoffs?

The big hurdle before DroneUp can hire more staff? Many experts — and DroneUp itself — point to regulatory issues.

“The drone delivery industry is at a pivotal moment where the focus is shifting from regulatory approvals to achieving true commercial viability,” according to an email to The Drone Girl from Yariv Bash.

Bash is the CEO and founder of Flytrex. Flytrex is another drone delivery company that primarily focuses on food deliveries via drone.

“Walmart’s decision to halt DroneUp services highlights the need for a robust system that both meets regulatory standards and delivers on the promise of cost-effective and scalable operations,” he said. “You can’t deliver groceries in a Bentley. It’s simply too expensive.”

The Federal Aviation Administration (FAA) has imposed significant regulatory challenges that have limited the widespread adoption of drone delivery. These regulations, while designed to ensure safety and prevent accidents, have also created barriers for drone delivery companies. Strict rules governing flight operations and airspace restrictions (such as flights over people) have made it difficult for companies to scale their drone delivery services beyond limited areas.

Additionally, the FAA’s approval process for new drone models and technologies can be time-consuming and costly. All that further hinders innovation in the industry.

The FAA has made some strides to remove those barriers. Perhaps not coincidentally, most of those strides are happening in Texas, the lone state where DroneUp continues to operate. In fact, just last month, the FAA authorized commercial drone flights without visual observers in the same Dallas-area airspace. That’s a first for U.S. aviation.

But the authorizations exclude DroneUp. Instead, the specifically include the two competitors, Wing and Zipline, allowing them to deliver packages while keeping their drones safely separated using Unmanned Aircraft System Traffic Management (UTM) technology. In this system, the industry manages the airspace with rigorous FAA safety oversight. 

What hope is there for drone delivery ahead?

Those DroneUp wasn’t included in the approval done in July, it does signal some movement for drone delivery. If Wing and Zipline can get such approvals, surely other companies can.

And DroneUp is counting on it — so much that they intend to hire bigger and better (when they can).

“It remains our ambition to grow DroneUp, nationwide,” according to a DroneUp statement. “Doing so would rely on a bigger workforce in roles that will be defined by what regulators permit, and what partners and their customers need.”

Ideally that’ll happen sooner rather tha later. In fact, the FAA said it expects initial flights using UTM services to begin in August. The FAA added that it intends to issue more authorizations in the Dallas area soon. 

And in a similar vein, the FAA is currently close to releasing what’s called “the Normalizing UAS BVLOS Notice of Proposed Rulemaking (NPRM).” This would enable drone operators to expand operations beyond what their eyes can say. The FAA says that document is on track for release later this year.

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