Walmart, DroneUp to focus on Dallas; ends deliveries in 3 US states

Walmart and its drone delivery partner DroneUp are scaling back operations in three states to focus on perfecting their airborne package delivery service in the Dallas-Fort Worth area.

Tom Walker, CEO, DroneUp revealed to Axios that the company is closing 18 Walmart delivery hubs in Phoenix (Arizona), Salt Lake City (Utah), and Tampa (Florida). These locations, part of a 2022 rollout considered as the first large-scale drone delivery operation in the U.S., will cease operations, resulting in 70 job losses - about 17% of DroneUp's workforce in these cities.

Walker explained that while the closed locations provided valuable insights into consumer demand, they were ultimately too small to be sustainable. "We're really focusing on automation and a drone with higher payload capacity and longer range," he stated. "Now it's time to focus on that scalable model."

This leaves DroneUp with 15 Walmart delivery locations: 11 in Dallas, three near Walmart's headquarters in Bentonville, Arkansas, and one in Virginia Beach, where DroneUp is based.

DroneUp is also launching a new strategy that involves developing a proprietary autonomous drone ecosystem, including an automated, climate-controlled storage locker for package handling and battery recharging. The company is also introducing a more advanced drone capable of travelling at 60 mph with a 30-mile range and a 10-pound payload capacity.

However, the economics of drone delivery remain challenging. Walker disclosed that it currently costs about $30 to deliver a package by drone, with the goal of reducing this to under $7 to compete with ground-based delivery methods while offering significantly faster service.

The retail giant announced plans earlier this year to expand the service to 1.8 million residents in the Dallas area, covering approximately 75% of the population.

"We are excited about the momentum and positive customer response we've experienced around drone delivery," Walmart said in a statement to Axios. "This service will continue to evolve as we learn more about customer preferences and drone capabilities."

Walmart's drone delivery efforts extend beyond DroneUp, with partnerships including Alphabet's Wing and Zipline in the Dallas-Fort Worth metro area and Flytrex in Fayetteville, North Carolina.

Meanwhile, Amazon is also adjusting its drone delivery plans. The company announced in April that it would be shutting down its Prime Air drone delivery service in Lockeford, California, an early testing zone for the service. However, Amazon is launching a new Prime Air location in Tolleson, Arizona, expected to provide same-day deliveries to residents in the Phoenix West Valley metro area starting later this year. Amazon plans to continue Prime Air operations in College Station, Texas, and open new locations in 2025.