Instant deliveries of your online order via drone may sound like science fiction, but the industry is real and booming. Over the past three years, there have been over 660,000 commercial drone deliveries to customers, not including the countless test flights to develop and prove the technology (Exhibit).1 As of early 2022, we estimate that more than 2,000 drone deliveries are occurring each day worldwide. The growth rate is accelerating every week, and we project that there will be close to 1.5 million deliveries in 2022 as a whole, up from just under half a million in 2021. And all of this without blanket regulatory approval but typically leveraging exemptions for very specific and constrained applications.
Today’s drone-deliveries cover a broad range of goods: from vaccines, medical supplies, and blood transfusions, to pizza, burgers, and sushi, to electronics, to toothpaste. Leading companies in the space include Antwork, Flytrex, Manna, Matternet, Skyports, Swoop Aero, Wing, and Zipline, to name a few. These and other drone-delivery companies have received more than $1 billion in disclosed funding over the past 10 years, contributing to the industry’s strong growth. Compared to commercial aviation, drone delivery is less capital intensive because of the smaller aircraft sizes and commercially available technology. With such relatively low barriers to entry, over 100 companies currently compete in this segment.
While the progress for drone delivery has been substantial, we believe that three catalysts will determine the sector’s trajectory going forward.
Ultimately, the regulatory environment will determine the scale and scope of drone-delivery operations. Regulations dictate the type of operations allowed, including parameters related to geographic areas and airspace, times of day, and the conditions required for flight. All of these factors can have a large impact on costs. For example, regulations may require one operator for each drone or allow a single operator to control a dozen or more drones—and this choice is significant, since the operator-drone ratio is one of the most important cost drivers. Regulations also determine airworthiness requirements for drones, and the guidelines could potentially increase costs and delay at-scale operations.
2. Public acceptance
Gaining the public’s trust and acceptance of drone delivery is essential, and the early indications are positive. We conducted a survey of over 4,500 people across six countries and found that most viewed drone delivery in a highly favorable light.2 Nearly 60 percent of respondents said they would use a drone-delivery service today if it were available in their area, compared to only 16 percent who said they would not use the service—a ratio of 3.5 adopters for every non-adopter. (The remaining 27 percent were ambivalent.) Adoption is likely to differ across neighborhoods depending on a variety of factors, including population density, geographic location, and local weather conditions.
Consumers will favor deliveries with the lowest cost if all other factors are equal. That may present some challenges, since other innovative delivery options, including electric cars, autonomous cars, and ground robots, will continue to decrease in cost as they mature.
We are at a critical time in the drone delivery industry. Volume has grown dramatically in recent years, but the path ahead is not yet clear. Regulations, customer acceptance, and cost will all determine whether the industry reaches its potential to disrupt global logistics or remains limited to isolated applications.
Sarina Carter is a capabilities and insights analyst in McKinsey’s Waltham, Massachusetts office, Tore Johnston is a knowledge expert in the Denver office, Stephan Lidel is a senior capabilities and insights analyst in the Munich office, Robin Riedel is a partner in the San Francisco office, and Leonard Tusch is a fellow associate in the Cologne office.
1 Number of deliveries represents number of parcels delivered, not total number of items within the parcels
2 Countries included Brazil, China, Germany, India, Poland, and the United States