Amazon Launches First Delivery Robot, Scout

On Tuesday (August 6), Amazon (NASDAQ:AMZN) announced that Scout, its delivery robot, will begin dropping off packages to customers in Southern California.

After beginning pilot testing in January in Snohomish County, Washington, Amazon will launch its robot delivery service for Amazon Prime members between Monday and Friday during the day.

The rollout will be for customers requesting same day, one day or two day delivery. Packages will be delivered by a small number of robots accompanied by a chaperone. During delivery, the chaperones will be available to answer questions from pedestrians in addition to monitoring ongoing deliveries.

The extension into Southern California’s Irvine area is part of Amazon’s field testing for Scout. Delivery testing in Snohomish County examined how the robots navigated through various distractions and obstacles and collected reactions and input from individuals in the neighborhood.

According to Wired, Amazon has been investing extensively into “last mile” delivery solutions for years. The last mile, arguably the most important step in the shipping process, is when goods are transferred from the transportation hub to the customer’s final delivery destination.

Last mile delivery has become increasingly significant for a number of reasons. Retailers must compete to meet ecommerce consumers’ demands while maintaining cost-effective methods for product returns, sorting and inspections. Amazon has dominated this field in recent years, harnessing its highly integrated omnichannel ecosystem to deliver on same day delivery promises.

To help meet this demand, Scout has emerged in trial phases. Amazon says that it has made thousands of deliveries so far with Scout in 2019.

However, Amazon is relatively late with its entry to the robot delivery market. As noted by Wired, companies have been launching automated delivery technology as early as 2014. San Francisco- and Estonia-based Starship has developed a similar looking delivery robot, with six wheels and comparable dimensions. Starship robots can deliver items within a 4 mile radius. In addition, Wired states that Kiwi and Marble have been providing robot delivery services since 2017.

That said, as the ecommerce industry expands, the future of the parcel delivery market will have far-reaching implications, which means perhaps Amazon isn’t late to the party after all. The market is expected to reach US$343 billion by 2020, and the industry is contending with a changing landscape in consumer demands.

While consumer behavior changes, businesses are adapting to these new trends. Zebra Technologies conducted a worldwide study in 2018 in which 66 percent of respondents said that automation is disrupting the “on-demand” economy.

At the same time, 89 percent of participants said that ecommerce is influencing higher investment as companies turn their focus to improved delivery processes. “Droids,” or robot-like autonomous vehicles, are projected to increase by 78 percent by 2028 for shipping purposes.

There are a few challenges facing the small robots. For example, they face a higher likelihood of overheating and catching on fire than electric vehicles. Additionally, daily navigation may pose a challenge for them due to the complex nature of the sidewalk.

“Roboticists consider roads to be relatively ‘structured’ environments—they’ve usually got stoplights and neat lanes and signage. But sidewalks are pure chaos,” Wired reported.

Another conundrum could be whether the investment in robots is, in fact, worth it. Robots are still unable to climb stairs, or open a gate.

“It’s a market that has yet to be validated. You’ve seen a lot of startups working on this, but I think there’s always been this question of whether it’s going to make economic sense,” Brian Gerke of Open Robotics told Wired. “It’s tough to beat the capabilities of a person who goes around doing that last-mile delivery.”

All that being said, Mordor Intelligence estimates that the autonomous delivery robot market will grow at a compound annual growth rate of 49.5 percent between 2019 and 2024. Despite current low adoption, Mordor highlights how robots will likely have a growing impact in sectors including hospitality, healthcare and retail — making this niche market of robotics a potentially interesting play for investors.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.