Drones deliver time savings to customers, new revenue to businesses
September 16, 2020
One of the most obvious arguments for drone delivery is that its speed and convenience save time and effort for consumers: The ability to have a cup of coffee or over-the-counter medication delivered on demand in minutes can transform the occasional hassle of obtaining small necessities into a seamless part of everyday life.
That appeal can translate to new revenue for businesses, especially if drone delivery can enable them to deliver orders more quickly or reach customers they wouldn’t otherwise. Meanwhile, shifting deliveries from gas-powered vehicles on the road to electric ones in the air could relieve traffic congestion and reduce emissions.
But there are only a handful of drone delivery services around the world, and they haven’t been operational long enough to substantiate advocates’ predictions.
A new economic impact study from Virginia Tech helps attach some numbers to hours saved, revenue earned, and tons of carbon dioxide diverted. A research team led by Sarah Lyon-Hill, a senior economic development specialist in the Office of Economic Development, and Kimberly Ellis, an associate professor in the Grado Department of Industrial and Systems Engineering, modeled various ways that a simulated drone-delivery service might affect three representative U.S. cities: Christiansburg, Virginia; Columbus, Ohio; and Austin, Texas.
Lyon-Hill and her team had previously studied the economic impact of drones at the state level, and they’re currently researching their effects on the workforce. For this case study, they tightened their focus to individual cities and broadened the scope to a wider set of interrelated impacts — on consumers, the business community, the environment, and vulnerable populations.
“We wanted to ask, when are the instances that drone delivery would make the most sense?” Lyon-Hill said. “Like any other technology, it’s not the solution to everything: There are some instances where it’s very appropriate to use it and other instances where it isn’t. So where are those areas where it could fill in the gaps?”
Including Christiansburg in the mix gave the team a running start: the town is home to a drone-delivery service launched last fall by Wing, an offshoot of Google parent company Alphabet. Wing, which funded the study, is a longtime partner of the Virginia Tech Mid-Atlantic Aviation Partnership (MAAP), an FAA-designated drone test site. The Christiansburg delivery service began as part of Wing’s collaboration with MAAP under a federal drone-integration program that pairs drone companies with local governments and other partners. Having access to a city where drones are already running deliveries gave the team valuable context for their study, and informed their approach to all three metro areas.
Austin, Christiansburg, and Columbus vary in size and population density, but they’re all growing cities with lots of single-family homes and suburban sprawl that separates clusters of restaurants and stores from residential neighborhoods: exactly the kind of urban geography where drone delivery could dramatically simplify everyday errands.
Lyon-Hill and her team built models for each city, drawing on data on consumer habits and business performance and dozens of interviews with business owners and government officials. Meticulous data collection and sophisticated methodology yielded a remarkably detailed study, which, unlike most other work in this area, focused on how drone delivery could affect a community in the relatively near term.
Their models projected consumer behavior over the first five years after the introduction of a hypothetical drone delivery service, generating estimates for how much time customers would save, how much additional revenue businesses could earn, and reductions in traffic and carbon emissions.
They found that by the end of five years drone delivery could reach about half of the residents in each city; depending on their shopping habits, the service could save them anywhere from dozens to hundreds of hours per year. Over the five-year period, retail stores could see an uptick in sales between 50 and 165%. Restaurants would benefit even more, with sales growth between 121 and 250%. (The greatest gains would go to limited-service restaurants, which already do a brisk business in delivery and takeout.) Each year, swapping car trips for drone deliveries could cut out up to 294 million miles of road travel and 114,000 tons of carbon dioxide in a single metro area.
When metrics were compared across the three cities, Austin usually came out ahead — it’s larger than Christiansburg and less densely populated than Columbus, qualities that add up to lots of people living far away from the things they want to buy.
Lyon-Hill and Ellis also looked at other, less obvious ways drones could benefit communities — for example, in large cities like Columbus and Austin, the service could improve access to prescription medication for around 20,000 people, with downstream impacts on individual and public health.
“At the test site we spend most of our time immersed in the technical aspects of drone operations — how to make sure they’re safe, how to conduct them efficiently, how to deploy all the technology needed to support them,” said Mark Blanks, the director of MAAP. “It’s easy to get lost in those details. To see a study like this, that spells out the economic and social benefits this technology can bring to communities, reminds us why we do the work we do.”
How these advantages will play out in any given city, Lyon-Hill said, depends on numerous factors including its residents' habits and preferences, the needs of local restaurants and retailers, and whether there are pressure points in commerce or access that drone delivery could help relieve.
“The question is, what kind of impact do you really want to have?” she said. “In some metro areas, there are pockets where a high percentage of people don’t have access to a vehicle. Having a service like drone delivery at a reasonable price could be a phenomenal help for lower income populations. That could be preventive healthcare; that could be nutritious food.”
The case study was already well underway when COVID-19 shifted Americans’ shopping habits and strengthened the argument for drone delivery. When Christiansburg businesses began to shut down in mid-March, Wing’s orders spiked and the company launched partnerships with several new local merchants. If some of that elevated demand survives after the pandemic recedes, which Lyon-Hill suspects it will, the benefits the team calculated based on pre-COVID assumptions will probably be even greater in a post-COVID world. “People have gotten used to it,” she said. “There are businesses that weren’t delivering before, and now they are.”
Regardless of the degree to which drone delivery is adopted in any particular city, Lyon-Hill said, she hopes that the study will help articulate the potential benefits of a technology that’s still, in most places, largely theoretical.
“I hope that we can build a better bridge between drone companies and local governments,” Lyon-Hill said. “Studies like this can encourage that dialogue, encourage companies and communities to work together so that the technology can be most effective for everyone.”
The Office of Economic Development is a department of Outreach and International Affairs.