Walmart and Zipline Bet Your Next Grocery Run Will Arrive by Drone

Walmart announced on November 5 a deal with Zipline, the South San Francisco drone company, to add 300 new drone delivery sites. Zipline raised $1.5 billion the same day at a $21.5 billion valuation. Groceries lowered by tether into backyards are moving from a handful of test towns into the daily routine.

• Walmart has completed more than 2 million drone deliveries since it began working with Zipline in 2021.

• Zipline's median October order arrived 19 minutes after checkout, and bakery orders took 10 minutes.

• The $1.5 billion round was led by Paradigm, WCM Investment Management and Layer Global.

• Uber is targeting one million daily deliveries with Zipline by 2029.

• Walmart says about 90 percent of Americans live within 10 miles of one of its stores.

Drone delivery is leaving the test towns

Drone delivery is evolving from a pilot program into a service you find at the store. Walmart already calls its effort the country's biggest retail drone delivery program. The multi-year deal with Zipline adds 300 locations and allows for further expansion.

Walmart has not said which cities are next or when. It now runs about 21 sites with Zipline, a good number of them around Dallas-Fort Worth. Zipline reports more than a million deliveries in that area this year alone.

Walmart's online business gives the drones ample cargo. US e-commerce sales rose 24 percent in the second quarter, and deliveries from local stores rose 43 percent. Stores that also serve as small warehouses suit a short-range drone well.

Keller Cliffton, Zipline's chief executive and co-founder, framed the deal in Walmart's announcement as the next step for a partnership that began five years ago:

Walmart is not putting all its eggs in one basket. It also works with Wing, the Alphabet drone company, which has its own plans to expand at Walmart stores.

How does a drone drop off your groceries?

The drone never lands in your yard. Zipline's home delivery drone hovers about 330 feet up and lowers the order in a small pod on a tether before heading back. The pod comes to rest in a driveway, front yard or backyard.

Orders are placed in the Walmart app or on Walmart.com, or in Zipline's own app. If the address on file is in range, drone delivery appears as an option at checkout. Customers can follow the order in flight.

The range of products is broad, but the basket is not. Walmart says tens of thousands of items qualify, from snacks to batteries to medicine. The drone is for a few things at a time, not an entire weekly shop.

The flights have federal approval. Zipline holds air carrier credentials from the Federal Aviation Administration and is cleared to fly beyond a pilot's visual line of sight. It began service in Austin, Texas, last month.

Why speed is the selling point

Walmart measures the wait in minutes, not hours. Drone orders can arrive in as little as 30 minutes, and small ones even faster. Zipline's median October delivery took 19 minutes from checkout.

That speed changes what people order. A forgotten ingredient, a sick child's medicine or a dead phone charger no longer means getting in the car. Walmart now sells a ladder of same-day options, from 30-minute and one-hour delivery to three-hour and scheduled windows. Drones sit at the fastest, smallest end of that ladder, built for a few items needed right away.

Melanie Millsap, a mother of four in Royse City, Texas, put it plainly in Walmart's announcement:

Restaurants are seeing the same pull. At restaurants that have used Zipline for months, its share of delivery revenue rose from 10.8 percent in March to 34.9 percent in October. Zipline says that was new sales, though the figures come from a select group of partners.

Who is paying for all those drones?

Investors are underwriting the scale-up. Paradigm, WCM Investment Management and Layer Global led the $1.5 billion round. Fidelity, Uber, Tiger Global, J.P. Morgan, ARK Invest and Salesforce Ventures also joined.

For Uber, it is more than a check. Zipline deliveries will be built into Uber Eats, first in markets where Zipline already flies and then in new cities.

The valuation jumped quickly. Zipline was valued at $7.6 billion in January after raising more than $600 million. The new round puts it at $21.5 billion, less than a year later.

Zipline says the money will go to growing US manufacturing, new hires and a national delivery network. It is also working on a next-generation aircraft designed to fly higher and more quietly while carrying heavier orders farther.

Zipline started with medicine, not snacks

Zipline flew blood and medical supplies in Africa long before it carried groceries. The company says it makes a delivery somewhere in the world every 15 seconds and serves more than 5,000 hospitals and health facilities. In the US, it works with health systems including Mayo Clinic and Cleveland Clinic.

Medical drones are also gaining ground in big cities. Sparknify reported last month that Matternet drones began carrying children's lab samples from London's Great Ormond Street Hospital, cutting urgent delivery times by up to 90 percent. The same aircraft logic, short hops and small payloads, now applies to a carton of eggs.

What could Walmart's drone bet mean for shoppers and neighbors?

The most likely near-term change is that drone delivery stops being a novelty. If Walmart and Zipline open even part of the 300 sites next year, millions more households would see a drone option at checkout. Uber's target of one million Zipline deliveries a day by 2029 shows the scale the companies have in mind.

Competition is pushing the same way. Amazon plans to offer Prime Air drone delivery in nearly 500 US communities by year's end, up from about a dozen locations. Wing works with Walmart, DoorDash and Lowe's. Shoppers may soon pick one drone service over another the way they now pick delivery apps.

Neighbors will have their say. Residents of Westborough, Massachusetts, resisted a proposed Amazon drone site over noise, safety and zoning. Amazon withdrew its application on October 30 and plans to submit a revised one. Federal approval of a drone operator does not oblige local towns to accept where hubs go.

Noise and privacy are the issues most likely to slow rollouts. A drone over a backyard every few minutes is different from a van on the street. Zipline says it has adjusted its flights to reduce noise and is building a quieter aircraft, but every town will make its own call.

Silicon Valley can relate to this story. Zipline is based in South San Francisco, and its rise shows how hardware, autonomy software and logistics can add up to a consumer habit. Founders building sensors, batteries, air traffic software and quieter propellers now face a large and growing market.

Cost is still an open question. Walmart has not said what drone delivery will cost shoppers in new markets. If fees stay low, drones are well placed to win small, urgent orders that would otherwise go by car or van.

Five things will show which way this goes.

1. The first cities Walmart and Zipline name for the 300 new sites.

2. Whether Zipline's next-generation aircraft flies in US neighborhoods next year.

3. Uber Eats orders delivered by Zipline drones in its first markets.

4. Local votes on drone hubs after the Westborough dispute.

5. Delivery fees for drone orders as service reaches new metro areas.

So the next time you run out of milk, the store may come to you from 330 feet up.

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Questions & Answers

Q1: Will Walmart and Zipline drone delivery cost more than ordering groceries through a regular delivery app?

Walmart has not published drone fees for its new markets, so the true cost will show at checkout. Shoppers already run into hidden charges on many apps, as the Olo app's push to end menu markups showed. The surest test is the final total, not the listed fee.

Q2: Should I worry about privacy and noise if Zipline drones start flying over my neighborhood?

Zipline says it adjusts flights to keep noise down and is building a quieter aircraft, but towns such as Westborough have still resisted drone hubs. The question of who is watching from above came up before with police drones that reach 911 calls before officers.

Q3: I run a small bakery in the Bay Area. Is drone delivery worth trying once Zipline and Uber reach my area?

Zipline says the median bakery order reaches customers in 10 minutes, and its restaurant partners grew their delivery sales. Drones work best for light, quick orders. Bay Area bakeries are already competing for attention, as Levain's planned Santana Row shop shows.