Walmart, DroneUp End Delivery Partnership

First reported by Axios and confirmed to FLYING by a Walmart spokesperson, the world’s largest retailer has ended its contract with the drone delivery firm. In addition, Walmart, which as recently as June made an undisclosed strategic investment in the company, is no longer a DroneUp investor.

DroneUp did not respond to FLYING’s request for comment.

Despite its name, DroneUp does not actually build or sell drones. Rather, the company supplies all of the infrastructure—from autonomous loading, delivery, and flight planning systems to winches and batteries—required to keep a drone delivery operation humming. Its hardware is designed to be installed directly on third-party drones and at customers’ stores, allowing them to deliver food, groceries, retail items, and even medical supplies.

DroneUp first caught the eye of Walmart in 2020, when the companies partnered to deliver COVID-19 test kits in New York and Nevada. The retailer deemed the trial successful enough to warrant an investment the following year.

Since then, the partners’ network has grown quickly. At the peak of their reach in 2022, they delivered more than 6,000 items out of 36 DroneUp hubs stationed at Walmart stores in seven states. And despite a few layoffs in 2023, DroneUp added to its offering with the rollout of a fully autonomous, end-to-end drone delivery system.

In August, though, the firm cut about 17 percent of its headcount. It also ceased service with Walmart in Phoenix, Salt Lake City, and Tampa, Florida, leaving it with just 15 hubs.

Walmart said it will continue to develop drone delivery even without DroneUp.

“We are excited about the momentum and positive customer response we’ve experienced around drone delivery,” the company said in a statement shared with FLYING. “This service will continue to evolve as we learn more about customer preferences and drone capabilities, and by focusing our efforts in Dallas-Fort Worth, we can learn more about the potential to scale this innovative delivery option for Walmart’s customers.”

Walmart’s partners in Dallas-Fort Worth—Zipline and Wing, the drone delivery arm of Google parent Alphabet—have the potential to be decent stand-ins for DroneUp. Both companies have introduced autonomous ecosystems for their own drones, including landing pads and package loading and delivery systems. With those developments, the massive retailer is getting more than just aircraft from DroneUp's competitors.

To boot, both Zipline and Wing have FAA authorization to manage their own airspace in Dallas-Fort Worth with agency oversight—a historic approval that is allowing them to fly more freely than other drone operators.

Walmart’s reversal deals a blow to DroneUp. But like Zipline and Wing, the firm is an FAA-approved Part 135 air carrier, so it can offer potential customers the advantage of starting service quickly.

At the same time, DroneUp is contending with a problem faced by many in the drone delivery industry: unit economics. Put simply, it’s too expensive to deliver by drone. DroneUp CEO Tom Walker in August told Axios it costs the firm about $30 to deliver a single package. The goal, Walker said, is to get that down to about $7.

Walker’s rationale for downsizing operations in Phoenix, Salt Lake City, and Tampa was that those services were too small. With the world’s largest retailer no longer a customer, that uphill battle becomes steeper.

Like this story? We think you'll also like the Future of FLYING newsletter sent every Thursday afternoon. Sign up now.