Amazon to test drone delivery service in India?

Global online retailer Amazon could be set to test a drone delivery service in India, according to a reports from the country today.

Citing sources close to the situation, Indian business newspaper the Economic Times reported that trials will take place in Mumbai and Bangalore as early as October this year – in time for the Hindu festival, Diwali.

It comes after Amazon CEO Jeff Bezos first announced in December 2013 that the business was looking at how aerial vehicles could be used to deliver products to customers within 30 minutes of them placing an order.

The comments were made on the CBS '60 Minutes' show, with Bezos saying Amazon Prime Air – as it would be known – could only be operated in the US if the Federal Aviation Administration changed current air traffic restrictions. The regulations are not quite so clear cut in India and, if today's report is true, and Amazon has not confirmed it is, the company may be set to embark on a journey that brings this new fulfilment method to life.

Deepanshu Mandlekar, a retail analyst at Planet Retail, who is based in Mumbai, told Essential Retail he was encouraged to see Amazon considering India as a test-bed for drones, but warned that the company will face security challenges from local authorities. Mumbai-based pizza outlet, Francesco's Pizzeria, used drones to delivery pizza earlier this year, but was apparently immediately hit by "regulatory walls".

"We feel, launching this service won't be a cakewalk for Amazon," explained Mandlekar.

"Getting the required security clearances from local authorities is going to be a major concern for Amazon."

Multiple challenges exist over how a drone-led delivery system would operate and, and Mandlekar suggests that the overall cost – including fuel, maintenance and depreciation value of drones – means traditional courier services will be cheaper and, potentially, more favourable for shoppers.

"Drone flying within cities looks good in theory but in reality, it may face challenges related to communication, navigation and there is a possibility it can crash into a building," the analyst noted.

"Regulatory clearances aside, Amazon will have to also ensure the safety of both the package as well as everything else in its flight path. And considering terrorist threats and other dangers associated with this mode of delivery, Amazon will have to wait till some legal framework is in place."

India's online retail market has huge growth potential, and a joint report released this month by trade association Assocham and research company comScore suggested that eCommerce penetration is growing at a rate of 15% each year. Flipkart and its recently acquired Myntra business reportedly attracted 26 million unique visitors in 2013, while Jabong and Amazon were the second and third most visited sites in the country, respectively.

Amazon is looking to drive investment in the Indian market, and recently revealed it is putting $2 billion into building infrastructure and increasing sales in the country. Whether drone technology is part of this strategy remains to be seen, and the wider retail industry are following developments, some with their tongues firmly in cheek, it would seem.

Miya Knights, senior research analyst, EMEA, at IDC Retail Insights, argued that there are still a number of unanswered questions about use of drones in the delivery process, including safety aspects and whether it is something consumers actually want.

"Will parcels drop out of the sky in the vicinity of the shopper or their address, and how will they confirm delivery?" said Knights.

"Signing for a parcel is not an option here. While the industry is likely to keep a close eye on how these tests go, most retailers will sensibly wait to see if Amazon can prove whether drone delivery really is possible, convenient and cost effective, or whether it is just a gimmick designed to raise Amazon's profile in this particular market."

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Planet Retail

IDC Retail Insights