Walmart halts delivery drones in Utah

Walmart and drone delivery partner DroneUp are ending delivery in Utah to focus on perfecting the service in the Dallas-Fort Worth area.

Why it matters: Instant drone delivery only makes economic sense if it can be done at scale, and Dallas is emerging as the capital of drone delivery in America.

Context: Walmart launched drone delivery in Herriman and Lindon in late 2022.

• For a $3.99 fee, customers living within a mile of a store could get products flown to their homes in under an hour.
• Cookies and cream ice cream, a 2-pound bag of lemons, rotisserie chicken, Red Bull and paper towels were among the most commonly flown items.

Between the lines: DroneUp CEO Tom Walker tells Axios the services in Phoenix; Tampa, Florida and the Wasatch Front provided valuable lessons about consumer demand but were too small to be sustainable.

• "We're really focusing on automation, and a drone with higher payload capacity and longer range," he said. "Now it's time to focus on that scalable model."
• Earlier this year, DroneUp, which is partially owned by Walmart, unveiled a proprietary autonomous drone "ecosystem" that Walker says will revolutionize last-mile logistics.

Zoom in: It includes an automated, climate-controlled storage locker where drones can pick up and drop off packages and automatically recharge their batteries between deliveries.

• The drones fly autonomously, monitored by a human operator in a central operations center.
• DroneUp is also introducing a more advanced drone that travels 60 mph, has a 30-mile range, and uses a claw-like grabber to lift packages up to 10 pounds and store them safely inside its belly.

By the numbers: It costs the company about $30 to deliver a package by drone, Walker says. The goal is to get that cost below $7, which is close to ground-based delivery, but much faster.

• "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," he said.

The big picture: Walmart earlier this year announced plans to expand drone delivery to 1.8 million residents in the Dallas area , covering about 75% of the population.

• It's partnering with Google-backed Wing and Zipline in addition to DroneUp, and is integrating the option for drone delivery into the Walmart app.

Go deeper: Walmart cutting prices as inflation slows

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