Walmart and its drone delivery partner DroneUp are scaling back operations in three states to focus on perfecting their aerial package delivery service in the Dallas-Fort Worth metropolitan area.
DroneUp CEO Tom Walker told Axios that the company is closing 18 Walmart delivery centers in Phoenix, Arizona, Salt Lake City, Utah, and Tampa, Florida. These locations, part of a rollout planned in 2022 that is believed to be the first large-scale drone delivery operation in the U.S., will cease operations, resulting in 70 job losses — about 17% of DroneUp’s workforce in those cities.
Walker explained that while the closed sites provided valuable insight into consumer demand, they were ultimately too small to be sustainable. “We’re really focused on automation and a drone with higher payload capacity and longer range,” he explained. “Now is the time to focus on that scalable model.”
This brings DroneUp’s total number of Walmart delivery locations to 15: 11 in Dallas, three near Walmart headquarters in Bentonville, Arkansas, and one in Virginia Beach, where DroneUp is based.
DroneUp is also launching a new strategy that includes developing its own autonomous drone ecosystem, including an automated, climate-controlled storage locker for package handling and battery charging. The company is also introducing a more advanced drone that can travel 60 miles per hour, has a range of 30 miles, and has a 10-pound payload capacity.
However, the economics of drone delivery remain a challenge. Walker said it currently costs about $30 to deliver a package via drone, and the goal is to bring that down to under $7 to compete with ground-based delivery methods while providing a significantly faster service.
The retail giant announced plans earlier this year to expand the service to 1.8 million residents in the Dallas area, covering about 75% of the population.
“We are excited about the momentum and positive customer response we have seen around drone delivery,” Walmart said in a statement to Axios. “This service will continue to evolve as we learn more about customer preferences and drone capabilities.”
Walmart’s drone delivery efforts extend beyond DroneUp and include partnerships with Alphabet’s Wing and Zipline in the Dallas-Fort Worth area, as well as Flytrex in Fayetteville, North Carolina.
Meanwhile, Amazon is also adjusting its drone delivery plans. In April, the company announced it would shut down its Prime Air drone delivery service in Lockeford, California, an early test zone for the service. However, Amazon is opening a new Prime Air location in Tolleson, Arizona, which is expected to offer same-day deliveries to residents of the Phoenix West Valley metropolitan area starting later this year. Amazon plans to continue Prime Air operations in College Station, Texas, and open new locations in 2025.
