On-Demand Drone-based Logistics Service | Drone Startup Ideas

This 1001 startup idea from YoStartups is to create an On-Demand Drone-based Logistics Service connected through a series of docking stations across the city. This service will enable quicker last mile deliveries by deploying drones to address the demand for faster and cheaper deliveries.

 

Market Definition for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

According to reports published by Mckinsey, the cost of global parcel delivery is EUR 70 billion excluding pick-up, sorting and line haul and is growing at 7 to 10% in mature markets like Germany and USA, and almost close to 300% percent in developing markets such as India. The most substantial growth is expected to be in B2C e-commerce segment that accounts for almost 50% 0f market share. The last mile delivery takes upto 50% of the total parcel delivery costs.

As last mile delivery costs are majorly driven by high labor costs that vary from country to country, it makes almost impossible for the incumbents to come up with a formula to reduce losses due to their sheer size and the explosive growth. The most promising solution so far has been the use of drones for last mile delivery as they will have fixed operating cost and low maintenance. They can make hyperlocal deliveries faster and economical.

 

Competitor Analysis for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

Matternet

Matternet is a Swiss startup building a complete automated ecosystem of aerial logistics comprising of three parts; drones, docking stations and cloud-based software to operate and control the drones on pre-planned routes. It is currently being used to pick up blood samples and transport them between hospitals in Lugano, Switzerland. Matternet is certified by Swiss Federal Office of Civil Aviation (FOCA) to operate drones during both day and night autonomously. They have tied up with Swiss Post who will be their logistics partner to provide drone-based delivery and pick up as a service.

Amazon Prime Air

E-commerce giant Amazon wants to use drones to safely deliver packages in urban environments in 30 minutes or less. They are using multiple sensors on the drones for them to sense and avoid obstacles. They have finished successful trials in the UK and are planning to deploy drones based on regulatory approvals.

 

Pain Point and Target Audience for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

In the urban environment, time lost due to traffic congestions and gridlocks slows down productivity. KPMG estimated that an average city in the USA spends about $1.67 per transit trip (excluding revenues) and average cost per km of transit route is around $24.70,

these costs are passed on to the end customers. We also see big transport vehicle being used for even a single delivery; these practices make the whole process of last mile delivery inefficient and time-consuming. In a survey, McKinsey estimated that up to 27% of respondents claim that they preferred not to buy items online due to the long delivery times and over 25% percent of the respondents surveyed were willing to pay a premium for instant delivery services.

That target audience for this startup are the e-commerce websites, third-party logistics service providers, Quick Service Restaurants, etc.

 

Value Proposition for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

Drone-based solutions can provide on-demand pay as you go solutions, which can be built and operated at a fraction of the costs. Matternet estimated that the cost of transporting a 2kg package over 10 km was just 24 cents. Mckinsey also estimated that drone-based deliveries have a 40% cost benefit in urban areas and almost upto 90% cost benefit in rural areas over conventional delivery methods. With 2%-5% being the current industry operating margins, this can significantly benefit the incumbents even if they pass upto 50% of the savings realized to customers offering cheaper deliveries.

The Drones bypass entirely traffic gridlocks and congestion reducing the transit time for critical goods. Drones also eliminate human transporters and reduce the number of vehicles on the road used for transport services, freeing up workforce to be utilized for other productive jobs.

 

Business Model for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

The proposed business model for this startup idea by YoStartups can work on two revenue models;

1. The startup can provide Drones as A Service (DRAAS), where the startup will charge one-time implementation fee for onboarding the client. Once the implementation is through, the startup can charge the client for the number of flight–hours just like any other commercial airline service.

2. In the second model, the startup can develop the complete end-to-end Drones Logistic system and sell it to logistics providers who can run the drones on their own. The startup can later charge for the subscription to the cloud-based software required to run the drones.

 

Way to Market for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

The way to market for this startup idea from YoStartups is that the startup can pick up off-the-shelf proven drones from companies like DJI or JD.com and customize it to the end-user requirements.

After the necessary modifications are made to the hardware, the startup will have to build a cloud-based software that can be used to plan flight maps on pre-planned routes.

Once the hardware and software are integrated together, the startup will have to run a pilot with end-users like e-commerce websites, third-party logistics providers, food delivery services.

 

Key Milestones for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

Within the first quarter of launching the startup, the startup will have to start building and customizing drone prototypes capable of carrying various payloads but are modular enough for quick repairs and replacements. The drones will be equipped with multiple sensors to determine flight paths to avoid obstacles and return to nearest docking stations in case of failures.

The second and third quarter will be for building front-end application that can handle pick-up and delivery request from interfaces like mobile phone apps and web. The software should also be able to schedule drone delivery and pickups and access control mechanisms for the customer to pick up their consignment on delivery.

The fourth quarter can be utilized to run pilots with logistics service providers, e-commerce sites and food deliveries who will be the ultimate end users. Once the pilot program is complete, the startup can launch the final product commercially.

 

Investment needed for Prototyping of 1001 Startup Ideas – On-Demand Drone-based Logistics Service

The proposed startup can raise upto 120K from drones focused accelerators like Qualcomm Robotics Accelerator powered by TechStars, Reimagine Drone, or Pitney Bowes Accelerator.

All the funds raised will be for prototyping hardware and software only. No funds should be apportioned to salary or office rentals.

 

Team Capability for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

The team should comprise of members experienced in developing the software and hardware required for running the flight operations smoothly. They will need a full stack software engineer to code the front end software on React and Angular with experience on Phyton and SQL.

Hardware engineer who can program, design, and test the all-weather all-terrain hardware and compatible software required for the Drones.

A software engineer who can design flight paths to avoid obstacles, design behavioral pattern algorithms and use big data to ensure the accuracy of the flight trajectory.

Care should be taken by the team to ensure that the final product is safe to use autonomously and redundant enough to avoid any possible catastrophes.

 

Investors/Expert Take for 1001 Startup Ideas – On-Demand Drone-based Logistics Service

Drones are slowly finding ways to be more useful in day-to-day life despite all the controversies surrounding them. The costs to operate drones are coming down as adoption rates are growing steadily due to applications in e-commerce, agriculture, aerial mapping, surveillance and the most crucial humanitarian aid.

The current regulations will need to change significantly to address the liabilities for damages caused by drones; countries are coming up with Unique ID for drones for better tracking and accountability. In India, the civil aviation ministry has already come out with a policy regarding the commercial use of drones assigning each of them a unique identification number and categorizing no-fly zones for drones.

However, the startup will have to start operations in mature economies like Germany, US, and Europe where labor costs are significantly higher to enhance their value proposition as part of their Go to Market Strategy.

In case you are looking at scaling or launching  a venture on similar lines, you can apply for our virtual acceleration program Excelrate on our website, Yostartups.com, Yostartups’ Excelrate program will help you in streamlining and structuring your startup idea. We have limited scholarships and discount packs for deserving startups, depending on the strength of your application, you may qualify for a discount.

 

Tarun Kumar

YoStartups is a Pre Accelerator and it empowers entrepreneurs to propel their business ideas into successful ventures. Yostartups’ core mission is to take the message of entrepreneurship to 1 billion people globally by 2020, as on date Yostartups reaches out to over 100 million people globally through its direct and indirect channels.

 

*Any information given in the article does not constitute any warranty of marketability or fitness for a particular business idea for any market or industry segment. It is the readers’ sole responsibility to further research and assess the market opportunity.
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