Marketing Projects

Delivery Drones Paper

Disclaimer: This was a paper I wrote the first semester of my freshmen year, the reference list must have been in another (now lost) document.

Executive Summary

In today’s society, there is an ever increasing desire to buy more products. This desire goes along with immediate satisfaction. Currently, when people order online, they select their shipping time, paying more to have it as fast as possible. Usually, the fastest option is next day delivery. For small to medium sized objects, this runs about fourteen dollars. The world is about to experience a drastic change in shipping with the arrival of delivery drones.

Delivery drones are the future. Inefficient and inconsistent shipping has long been a problem. Drones making doorstep deliveries will change how America shops. Drones will be able to deliver packages swiftly and cost-effectively, which will make online shopping more popular. These drones use batteries or electrical propulsion systems to power themselves. In combination with a computer, this makes drivers obsolete, contributing to the drone’s efficiency.

Having them be unmanned contributes to the lower cost of using drone delivery. Without having to pay for drivers, shipping is less costly. These lower costs benefit both consumer and seller. They will lead to substantial economic growth.

They will solve a lot of our current shipping problems. These problems include slow shipping and expensive shipping. In order for drones to be able to solve these problems, a few things are needed. Deregulation is the first. It is getting in the way of innovation and beta testing. Another problem is safety. Since the drones are unmanned, there is room for a technical error. This could lead to two drones crashing together, a drone crashing into a small plane, or it falling from the sky. Some of these worries could be eliminated by protected airspace; so currently there are people fighting for this.

Investing in drones would be a very smart move. They will transform shipping and shopping.  As drones take over the market, delivery trucks will become less and less important. This leads me to suggesting investing in drones and batteries, and slowly moving away from oil and trucks.

Introduction

Drones are the latest revolution in transportation. Cars and trains allowed us and our belongings to move around the country and astonishing rates. Planes allowed us to get overseas faster than ever imagined. Now, drones have the capacity to modernize shopping. First, online shopping came about. Today, we have delivery drones. Delivery drones have the capacity to modernize online shopping. A drone is an unpiloted aircraft. These drones would be able to make deliveries quickly and efficiently. It is now up to the innovators working on this project to find a way to make this safe and usable for commercial use. Delivery drones are for the 21st century, what trains were to the 19th.

Background

A drone is also referred to as an unmanned air vehicle; UAV. Inside of the drone is a data link that is capable of transferring information to a computer that guides the drone. There is also a computer within the drone that collects data a pilot would normally sense and inputs this information. They are powered by an electrical propulsion system. The larger ones use systems similar to that of a helicopter. They use GPS technology to find their destination. Their on board computers are used to communicate with other drones, sharing information about air traffic, weather, and the presence of humans or animals. The drone will then find a landing spot that is out of the way, stable, and free of debris through it’s sensors. The drone will then return to the warehouse.

Drones will soon be the fastest way to deliver goods. It is Amazon’s goal to make deliveries within 30 minutes or less. This would be possible by having drones that can fly 100 miles per hour departing from Amazon warehouses centrally located all over the country. Currently, most deliveries are made by truck. Trucks average 55 miles per hour, and are restricted by traffic and the inefficiency of roadway systems. Drones will not have the roadway restrictions, so they will be able to take a more direct path to their location.

Drones save all kinds of costs. The biggest thing is that they do not require a driver. That will save hundreds of thousands of dollars. Another cost saver is that because they are faster and can take better routes, they use less money for the delivery.

Drones for commercial use will have a large economic impact. It is projected that they will account for $82.1 billion in job creation and economic growth. (Harford, 2014)It is projected that 70,000 new jobs will arise in three years of Unmanned Aircraft Systems Integration. 100,000 new manufacturing jobs will be available within a decade of drones becoming commercially available. (Deen, 2015) The $82.1 billion in economic benefits will occur between 2015 and 2025. Politics, labor markets, and the private supply chain will change the aviation industry in the coming years to accommodate these drones; stimulating this projected economic growth.

Currently, the biggest obstacle to delivery drones is the regulations the Federal Aviation Association, FAA, has implemented. Amazon says that the regulations will hinder innovation. They appear to be right, as currently research is limited due to the regulations. Deregulation is possible as currently at the Lone Star test site, the agency is helping to establish rules, regulations, operating procedures, and air traffic control operations for the air space that the drones will occupy. Amazon thinks that about 200 feet of protected air space is needed to make sure the drones are safe. The FAA has yet to agree to this. There is a strong basis for this possibility as during the Air Commerce Act of 1926 and the 1938 Civil Aeronautics Act says that “the United States Government has exclusive sovereignty of airspace of the United States”. (Blitz, 2015) The Court declared that “airspace a part from the immediate reaches above the land, is part of the public domain.” (Blitz, 2015) This is contrary to what the public believes. The Roman law maxim cujus est sojum ejus est usque ad coelom is still a very popular belief. It roughly translates to mean whoever own the soil owns to heaven above. The happy medium seems to be when navigable airspace is part of the public domain. This navigable airspace is defined as the airspace above the ground that the landowner cannot occupy or use in connection with the land. A large worry is that hacking or jamming could be frequent. There are many things that can happen to corrupt or interrupt the data link. A burst of static from a lightning strike or another radio signal on or near the date link frequency for the drone can over power the drone control signal. If this were to happen, both ends of the data link would need a strategy to re-establish their communication. If that is not possible; the drone would need to be able to go in an autonomous state and return to the warehouse. This is what is needed for drone deliveries to be successful.

There are many areas that these drones will benefit. Broadly, they will benefit ecommerce, agriculture, medical, and disaster relief. In regards to the retail industry they will be a huge benefit to online shoppers. This is why Amazon is so excited about developing this technology. Being able to get a purchase within thirty minutes will increase the incentive to online shop. This will in turn increase the demand for online shopping and raise retailers, such as Amazon’s, profits.

Within the retail industry; there will be a variety of uses for these delivery drones. Online stores can use them to get merchandise to the customers, and physical stores can use drones to deliver merchandise in replace of consumers having to take it home themselves. This would be especially helpful to buyers with small cars, that live in a city, or the elderly who might have a harder time. An avenue within this that drones would be especially helpful for are the consumer’s who live in rural areas. Many delivery trucks will not or can not easily get to these places. Delivery drones should all but eliminate this problem.

The benefit of drones to ecommerce is immense. As delivery becomes faster more consumers will choose to shop online. The reduced prices associated with the delivery drones will be passed onto the buyer. This will make online shopping even more attractive than it is now.

The future of drones is very promising. Two of the United States’ largest companies are involved in drones. Amazon is working on Amazon Prime Air, and Google is working on Google Project Wing. The first drone to deliver medicinal supplies was successful in Virginia in the summer of 2015, making the company Flirtey able to beat Amazon and Google up to air. (Beeche, 2015) Amazon has been successfully testing and deploying their drones in the United Kingdom. They are hoping to implement their thirty minutes or less delivery in the United States sometime between 2016 and 2018. Switzerland has started using drones to deliver parcels sent by mail. Drones will most likely be used for delivery in the United States by 2017. These drones will most likely be widely used for delivery by 2020. Also, by 2020 there is projected to be about 20,000 unmanned air vehicles flying through the air. (Moskvitch, 2015)

Implications

Delivery drones will have a huge impact on society. When polled thirty-three percent of online shoppers are open to using drones to speed up the delivery of their orders. (Mehra, 2015) As drones become more common and legal for commercial use, that number is expected to go up dramatically. Being able to click the order button and have it at your door in under an hour will change the attitudes people have. It will now be easier than ever to justify shopping online versus going to an actual physical store. This will lead to an overall increase in consumption. It is possible that shopping will no longer be an outing with friends. Rather, it will be something done alone at home. It is also possible, that instead of getting together and going shopping, everyone gathers around with their computers and browses online. If the demand for online shopping keeps increases, the demand for retail stores will decrease. If this happens enough, it is possible that retail stores will cease to exist. This would have a huge impact on society because companies will no longer need to pay overhead for stores, spend money on store fronts, pay workers, or have to take as much theft into account. This would be a big loss for society though, because it would cut thousands of jobs.

The general consumer will win in this situation. Prices will go down for a variety of reasons. A major reason is that shipping will be faster when using a delivery drone, so the cost of buying the product will be less. Another reason is that over time, if the store finds it can hire less people or starts shutting down stores, prices will go down again. Shipping will be faster, and this is a major convenience to the consumer. Now that shipping can be done faster and for less money, there are more choices in where a product can come from. Now instead of having to pay exuberant fees to ship something from another country, it will be only a fraction of the price. While great for the consumer, this will come at a cost for others.

Unemployment will be helped and hurt by the emergence of delivery drones.  A large growth in employment is expected when drones become widely available. This new sector will have jobs in manufacturing, controlling, new technology for engineers and technicians to work on, and much more. While all of these new jobs are being created, others are disappearing.

Delivery workers will be at a disadvantage. They will slowly become obsolete. They will have to change jobs all together or move into a new sector of delivery; such as loading the drones. That job will be over crowded because everyone that used to have a job loading a delivery truck will now want a job loading the drone. These drones will make some jobs obsolete.

While it is true that consumers will be winning in this situation, it is also true that in other ways, the general public could be losing. There will now be a large increase in air traffic. This could easily lead to an aviation accident. It will become less safe for small, privately owned planes. If one of these drones hits a small airplane, it would be enough force to greatly hurt both and cause them both to crash. It is also possible for the drone to have a failure or malfunction and crash to the ground. If this happens, it could land on a house, a person, or in the road causing a car accident. Many people could be hurt by a simple malfunction.

There are numerous possible markets for drones. The biggest is delivery for stores. Online stores can use them to get merchandise to the customers, and physical stores can use drones to deliver merchandise in replace of consumers having to take it home themselves. This would be especially helpful to buyers with small cars that might not have room for their family and their purchases. It would also be helpful to people who do not have a car, such as people who live in the city. It can be very hard to take purchases on the bus or subway and this would alleviate the problem. Their other option would be paying for shipping, but for most purchases that would be more expensive then its worth. Drone delivery would change that. An avenue within this that drones would be especially helpful for are the consumer’s who live in rural areas. Many delivery trucks will not or can not easily get to these places. Delivery drones should all but eliminate this problem. A third market that drones can improve is disaster relief. It can be very hard to get supplies into these areas, but it will be much easier for a drone to. Also, it can take a long time for trucks to reach these areas. Drones will greatly help bring relief to these areas. Drones’ efficiency will make them very versatile.

Investment Advice

Drones are a great investment. The first legal drone delivery was in Virginia in 2015, delivering medical supplies. This industry has already started and is going to continue to grow. People are coming to get drones, instead of the drone makers having to go to the companies and convince them of the drones’ usefulness. This shows that there is a high demand for this product. Any product that has a high demand and is going to stay around is good to invest in. As it becomes the more popular option for getting products to the buyer’s house, delivery trucks will become obsolete. I would suggest investing in drones from the start. This is something that is already getting underway, and will continue to grow. Amazon and Google are both large companies that are interested in drones, as seen by their development of Amazon Prime Air and Google’s Project Wing. These drones are being used in many different markets, but they will especially be popular as a delivery vehicle. Investing in battery companies is also a good idea. These drones are battery operated and will become even more important than they are now. I would suggest investing in battery companies when drones have taken over 30 percent of the market. On the flip side of this, I would suggest selling any shares of truck delivery companies. These companies will start to lose business and may eventually completely go out of business. These shares should be sold when delivery drones have taken over 60 percent of the market. At this 60 percent mark is when I would also suggest selling 50 percent of oil stocks. People will be using less oil themselves, and the truck companies will be using less as well. With delivery by drone taking the place of someone going to a store, the gas that would have been used then, was saved, and it will be longer till that tank needs to be refilled. This will lead to less and less oil being used over time.

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