China’s epidemic could give rise to the drones.
Contagion fears and quarantines make deliveries costly and tricky for Alibaba and others. Reducing human contact might help. Just as past crises spurred technological developments, the latest outbreak should give automation a boost.
Millions in China are stuck at home since the Lunar New Year holiday in late-January. Efforts to contain a new coronavirus, which killed more than 560 people, triggered city-wide shutdowns, travel restrictions and self-seclusion.
With retailers from Apple to Starbucks closing stores across the country, food delivery, e-commerce and grocery apps in theory stand to benefit. During the holiday week, postal deliveries were up substantially from last year’s festival period, Bernstein analysts note.
Despatching people to drop off prepared and unprepared food amid an epidemic poses challenges. To ease customer fears of contracting the virus from potentially infected drivers, takeout apps run by Alibaba and rival Meituan Dianping offer “contactless delivery”, where couriers leave food at designated pickup spots. With fewer people willing or available to deliver, labour costs are bound to rise. Investors are worried. Meituan shares, for example, are down 11% since January 15.
Drones may be one solution. As early as 2013, Amazon boss Jeff Bezos unveiled ambitious plans to use unmanned aerial vehicles to bring down costs and cut delivery times. In China, dronemakers from DJI, the upstart last valued at $15 billion in 2018, to the recently-listed EHang are growing fast. Alibaba and rival JD.com are experimenting with aerial deliveries. Both are rolling out high-tech upgrades across their logistics networks, including automated warehouses.
Technical and regulatory hurdles hampered progress for drone deliveries. Companies and governments may now be prepared to invest more and accelerate approvals. Consumer habits could change, too.
The 2003 SARS outbreak hastened online shopping in China. JD founder Richard Liu said the virus forced him to close brick and mortar stores and pivot online. Japan’s most popular chat app, Line, was inspired by the Fukushima nuclear accident in 2011.
Drones could be next to be nudged by a crisis.