Mayday for DroneUp: Delivery Plans Lose Altitude

DroneUp, a once-promising drone delivery startup, is facing turbulent skies as it scales back operations and grapples with internal challenges. According to Axios, the company is ending drone deliveries in three states, including 18 drone delivery hubs.

Update 8/18: DroneUp responded. See below.

A source familiar with DroneUp’s operations, speaking to DroneXL on condition of anonymity, claims that the startup is struggling with what they describe as poor management, employee mistreatment, limited access to drone hardware, and financial difficulties. These allegations have not been independently verified by DroneXL.

Walmart Partnership Hits Headwinds

DroneUp’s partnership with retail giant Walmart is taking a nosedive as they shut down 18 delivery hubs across Phoenix, Salt Lake City, and Tampa. This move results in 70 job losses, representing about 17% of DroneUp’s workforce. The company’s operations will now be limited to just 15 Walmart locations, primarily focused in the Dallas-Fort Worth area.

Tom Walker, CEO of DroneUp, explained the shift: “We’re really focusing on automation, and a drone with higher payload capacity and longer range. Now it’s time to focus on that scalable model.”

Economic Turbulence

The current cost of drone delivery is proving unsustainable for DroneUp, with each package delivery costing around $30. The company aims to slash this to under $7 to compete with ground-based delivery while offering faster service.

“If we achieve the delivery cost point that we’re targeting, then it will no longer be something that people want, it’ll be something that they demand,” Walker stated, hinting at the company’s ambitious goals despite current setbacks.

Internal Strife and Hardware Woes

DroneXL has received information from an individual with direct knowledge of DroneUp’s situation. This person, speaking on condition of anonymity, alleges a concerning picture of the company’s internal state. They describe what they characterize as poor management and employee mistreatment within the organization.

The source, claiming to be a former employee, also reports alleged difficulties in fundraising. Additionally, they claim that the departure of Watts Innovations has purportedly left DroneUp with very limited access to crucial drone hardware, potentially complicating its operational capabilities.

DroneXL has not independently verified these allegations. We are reaching out to DroneUp for comment and will update this article with their response if and when we receive it.

Walmart’s Recalibration

While DroneUp struggles, Walmart is recalibrating its drone delivery strategy. The retail behemoth plans to expand drone delivery to serve 1.8 million residents in the Dallas area, covering about 75% of the population. However, Walmart is diversifying its partnerships, working with Google-backed Wing and Zipline alongside DroneUp.

A Walmart spokesperson reportedly commented, “This service will continue to evolve as we learn more about customer preferences and drone capabilities. Our drone delivery program is still a pilot and by focusing our efforts in Dallas-Fort Worth, we can learn more about the potential to scale this innovative delivery option for Walmart’s customers.”

Industry-wide Turbulence

DroneUp’s challenges reflect broader industry difficulties. Even tech giant Amazon recently announced the closure of its drone delivery service in California, indicating that the path to widespread drone delivery may be more complex than initially anticipated.

DroneUp’s response

We had reached out to DroneUp for a response and a spokesperson for the company shared the following:

“Layoffs are an unfortunate part of a business that is literally defining its own industry. 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. 

The lessons we have learned in the last several years has 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.

It remains our ambition to grow DroneUp, nationwide. 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.”

DroneXL’s Take

The turbulence facing DroneUp underscores the significant hurdles in making drone delivery economically viable and operationally feasible at scale. The focus on the Dallas-Fort Worth area by both DroneUp and Walmart could prove crucial in refining the technology and operations, but it also highlights the need for a more concentrated approach in the drone delivery sector.

As the industry continues to evolve, we’re likely to see more consolidation and strategic pivots. The challenges faced by DroneUp serve as a cautionary tale for the consumer goods drone delivery industry. It also emphasizes the need for robust business models, efficient operations, and strong partnerships to weather the complex regulatory and economic landscape of this emerging technology.

Photo courtesy of DroneUp