Amazon's Next Potential Game Changer: Drone Deliveries

1. Introduction

On August 31, CNBC reported that Amazon (AMZN) has received federal approval to operate a fleet of delivery drones. With this move, the company follows UPS and Alphabet’s (GOOGL, GOOG) Wing, which had already received FAA approval for their drone delivery operations.

When announcing the quarterly figures for Q2 2020, Alphabet’s CEO Sundar Pichai mentioned that Alphabet-owned Wing has started delivering library books to students in Virginia.

In the context of the FAA approval for its Prime Air delivery drone fleet, David Carbon, vice president of Prime Air, stated the following:

“We will continue to develop and refine our technology to fully integrate delivery drones into the airspace, and work closely with the FAA and other regulators around the world to realize our vision of 30 minute delivery.”

Just recently, Amazon has invested several billion dollars to shift from two-day to one-day delivery. With the use of drones, the delivery time is targeted to be reduced to up to 30 minutes. At least, this is the company’s vision.

As you can imagine, the FAA approval for Amazon’s delivery drone fleet represents a true milestone, not only for Amazon but for delivery services, logistics and human life in general.

In this context, it is also noteworthy that Walmart (WMT) announced on September 9 that it will also test using drones for deliveries.

In general, drone deliveries are not a distant vision, but a reality in China, for example. Especially in rural areas of China, which are difficult to reach, orders are already being delivered via drones, according to several reports.

In the following, I would like to discuss the opportunities and risks for Amazon and its shareholders in connection with the use of drones as delivery items.

Furthermore, in the subsequent section, I will evaluate why the

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