Amazon Prime Air — the Company’s Drone Delivery Program — Faces Headwinds
Key Takeaways
- Two high-profile executives have reportedly left Amazon Prime Air
- The drone delivery program, once the cause of much fanfare, is struggling
- Amazon still beat analyst predictions in Q2
Amazon Prime Air, the company’s drone delivery operation, seems to be losing its talent — and with that, its momentum. CNBC reported that Prime Air’s chief pilot and the person responsible for Prime Air’s test operations have both departed the company for other positions. These are the latest signs of trouble for the much-hyped Amazon service. What will it mean for Amazon’s bottom line? We’ll explain.
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A little refresher on Amazon Prime Air
In 2013, Amazon announced its drone delivery experiment on 60 Minutes. Imagine! Toilet paper (or whatever) dropped off right at your door by a drone. It was a buzzy announcement to be sure. But fast forward ten years and here we are — the executives seem to be leaving, and, unless you live specifically in College Station, Texas, or Lockeford, California, you probably aren’t receiving your Prime Day goodies via drone.
Cost-cutting is just one obstacle the drone service has faced. Regulatory issues makes drone delivery complicated everywhere and straight up impossible in certain areas. Also, some of Amazon’s drones are crashing, which certainly doesn’t help the company cut through that regulatory red tape.
As of May, Amazon had delivered a reported 100 packages by drone so far this year. The original goal for the year was 10,000.
Does much depend on the success of Amazon Prime Air?
Amazon is a behemoth and has been for many years. Looking at the recent numbers: Q2 earnings were stronger than expected, likely thanks to Amazon’s smart diversification. In general with Amazon’s ecosystem, when one thing is down another is up. When inflation hits retail, for example, Amazon Web Services or advertising can pick up the slack.
So if drones don’t take off? Well, that doesn’t change the fact that Amazon holds 38% of the ecommerce market among its other offerings.
The bottom line
When something at Amazon doesn’t go as planned, as might be the case with Amazon Prime Air, the company does have to course correct. CEO Andy Jassy recently slowed warehouse expansion, laid off nearly 30,000 people, and took other cost-cutting measures in the face of slowing growth.
All of that said and done, Amazon reported a quarterly profit of $6.7 billion earlier this month and is talking a big game about other innovations, like generative AI.
Our take? It just doesn’t pay to bet against Amazon.
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