Amazon.com Inc founder and CEO, Jeff Bezos teased delivery by drones in December 2013 with 30 minutes drone delivery service. Sadly, nobody has seen any of those “octocopters” picking up parcels from FBA centers and delivering them on the doorstep of customers. The reason for the unrealized drone delivery service is not that Bezos doesn’t have drones that can at least pick up parcels, fly, and drop them. The problem is that the FAA is cautious about allowing drones flying over the airspace—a reasonable concern post 9/11.
However, Amazon has had enough of the U.S. governments delay tactics. Breaking news has it that the firm is working with the U.K. government to test deliveries by drones.
Amazon takes its drones to the UK
Amazon and the British government’s Civil Aviation Authority will commence testing on drone delivery technology. The Civil Aviation Authority is the equivalent of U.S. FAA and Tim Johnson, policy director at the CAA observes that “We want to enable the innovation that arises from the development of drone technology by safely integrating drones into the overall aviation system.”
During the testing, the CAA and Amazon will want to see how drones perform when they are out of the line of sight of operators. They’ll want to see how drones are able to identify and avoid other flying bodies and stationary objects in different weather conditions. The test phase will also provide insight on the number of drones that an operator can successfully fly and control simultaneously.
The deal between Amazon and the CAA might encourage the FAA to make a decision in support of testing delivery by drones in the U.S. Amazon has been forging alliances with regulators in other countries when it became clear that the FAA was erring on the side of caution. The firm has R&D operations for developing a drone delivery technology in Australia, the Netherlands, Canada, and Britain.
Cost cutting is the reason behind Amazon’s love for drones
Jeff Bezos likes to fly things—he owns a private spaceflight firm called Blue Origin. He is also trying to conscript an army of drones to deliver goods for Amazon. However, his interest in drone deliveries is not fueled by a desire to make a splash in the news or a love for aviation. Jeff Bezos seem to believe that drone deliveries might be a smart way to cut costs and increase profitability.
The firm spends a lot of money to use the services of logistics companies such as FedEx, UPS, and DHL among others. In 2015, the firm’s net shipping costs reached $5B for the first time and the firm must own its delivery network if it plans to stay in business profitably. A huge difference exists between how much Amazon collects from customers as shipping fees (many items have free shipping) and the amount of money the firm actually pays to ship those items.
In Q4 2015, the firm reported shipping revenue of $2.33B but it actually spent $4.17B to get shipments out of its store. For FY 2015, the net shipping costs increased by 19% from $4.2B in 2014 to $5B. Jeff Bezos doesn’t mind running at a loss to grow the business but shareholders want to see a proactive effort to cut costs as much as possible.