2016 AD: Drones with Wheels Spotted Delivering Groceries & Parcels on Sidewalk
The Future of Last-Mile & Starship Technologies
If financing and having a big name investor are measurements of success, then Starship Technologies (Starship.xyz) is winning in the digital convergence.
The Wall Street Journal reported a $17.2M seed round and backing from the maker of Mercedes-Benz, Daimler AG in January 2017.
Starship Technologies, started by the founders of Skype, has developed a ground delivery robot, intended for last-mile delivery of groceries, parcels and your Amazon package.
The robots have an effective range of 3 miles (5km), which they traverse at an average speed of 6 MPH (10 KPH). Weight of most packages is not an issue (four out of five packages ordered through Amazon weigh less than 5 lbs) and the cargo compartment can carry the equivalent of three grocery bags.
Progressive governments on the local and national level have welcome Starship Technologies with open arms. Foreseen benefits include the reduction of traffic, increased convenience and choice for customers and businesses alike. The company has deployed its’ ground based drone in the UK, Switzerland, Estonia, Germany and has recently reached agreements to deploy pilot projects in California and Washington DC.
The last-mile delivery space has largely gone unchanged in past decades, leaving the space ripe with opportunity for change. With last-mile accounting for over 50% of the cost of shipping, start-ups, investors and incumbents alike are excited about transformation in an otherwise mundane industry. In addition to a large market size approaching 70B+ EUR (~75B+ USD), even ‘established’ markets such as the USA & Germany are experiencing growth in high single and low double percentage points.
With parcel couriers struggling to find drivers and an ever-increasing portion of the working population shifting to working in the gig economy, Starship Technologies is setting itself up to provide a valuable service to an industry hungry for growth and with increasing lack of manpower (perhaps due to grueling and monotonous aspects of work). Furthermore, ground robots will not get sick, demand wage increases or join unions and will not mind working long days and nights, setting up for control or perhaps decrease of last-mile costs and increasing reliability of delivery, especially around the holidays.
Outside of technology, other risks include political and regulatory issues including labor & automation, safety & security, as well as well developed infrastructure with sufficient capacity (e.g. sparsely used sidewalks in residential suburbs), and educating and convincing customers of established industries into the ways of the future. B2C and B2B options present various opportunities and challenges.
There is demonstrated risk of stand-offs with other sidewalk users.
In the competitive landscape of drone delivery, Starship Technologies has positioned itself to reach market quicker in certain markets such as the USA, as airspace regulations create hurdles for early and quick adoption for aerial drone delivery. However, in the absence of regulatory hurdles, the author perceives ground and aerial delivery as complementary, as opposed to competing services due to performance differences – package size & weight vs. urgency & range of delivery. Daimler, beaten and perhaps embarrassed by newcomer Tesla and other start-ups in creating the future of ground vehicles, has bet on quite a few horses in the last-mile space, including investment in aerial drone delivery leader Matternet (mttr.net;full disclosure: author previously worked for Matternet).
Since the author could not find details on the business model of Starship Technologies, below are a few business model possibilities:
- Hardware / margin business model. In a world of ‘former’ hardware companies (e.g. Dell, GE etc.) evolving into services, analytics & IIOT companies, it is difficult to see Starship Technologies simply selling hardware to parcel delivery companies or directly to businesses
- A service offering to delivery businesses such as parcel & courier companies or directly to businesses (e.g. physical or e-commerce stores)- by offering a level of reliability to their customers may work well. Starship Technologies could effectively position itself as the supplier of ground last-mile delivery service to current parcel & courier companies
- Become a vertically integrated hardware and service provider – while grueling from all and any aspects, the combination of the right technology, vertical integration and finding the right focus and market could lead to a compelling proposition that others would struggle to catch up to
In any of the above and all other cases, Starship Technologies is winning in transforming the future.
Looking forward to what 2017 will bring to our sidewalks (and skies ;)).
McKinsey. Parcel delivery: The future of last mile. Joerss, Schröder, Neuhaus, Klink, Mann