Product Sense/Strategy : Should Walmart Enter Drone Delivery Area?
Here I would break it down into 6 steps to remember to tackle this Product Strategy Questions
6 Steps
Goal
Market
Strengths
Cost to Enter
Decision Tree
How to Enter
Goal
Whats the goal to enter drone delivery in addition to the existing Delivery system of Walmart ?
· Is it increase in revenue ? Extreme Faster Delivery would mean more people would be interested in buying the goods and quicker
· Is the goal of making more in Profit Margin: Faster delivery can be tamed to making more bucks out of customer
· is it competitive advantage/policy: Amazon is still in progress to get to Drone Delivery business. It would be an advantage to seek more potential customers
Market
Size (TAM, Revenue, Growth Rate).
In the interest of time, Lets assume the market is US. Please proceed to end of the page to know some fun facts about ecommerce orders
US Population — 300 Million
lets assume 50% shop online and 50% in Store
and 50% purchase 5 orders per month with an average order size of 100 dollars
Total Addressable Market — 50% of 300 M= 150M
Total revenue estimate per year — 12*100*5*150M = 900000M = 900B per year
Growth Rate — Ecommerce is growing at 5%. So growth would be 900B*0.05 = 4.5B.
Now, lets talk about the areas in which drone delivery can be uselful and areas which cant be
Growth areas in Drone Delivery possibility —
Use cases for Drone Delivery
· Urgent Items such as Emergency kit, Medicines
· Small Items
· Small Range items
Lets assume this accounts for 5–10 % min items customers order online
10% of 900B ecomm market = 90B Market as of now
The faster people receive these items, the more prospects it would have.
So, Market is really strong and Its GROWING. Lets move to step 3
Strength
Walmart has positioned itself really well in the last 4–5 years in retail ecommerce space; leveraging its suply chain, Store and fullfillment Center. would list few of top Walmart Strengths here. Feel free to add more in the comments
- Strong Brand Recognition.
- Low Prices — Everyday
- Best Supply Chain Management
- Diverse Revenue Streams
- Economies of Scale
- Strong Customer Base
- Walmart Stores is at every 5 miles of major cities. This is called out to make efficient use of Stores
Cost to Enter and how to Enter
- Walmart is already in the ecommerce market.
- Walmart needs to work with Drone company as Creating and investing in Drone would consume time and lose the market in the short run
- Walmart can use the expertize of existing drone company and optimize it for their own use cases and customer
- Drone company might have already worked and abided to FDA rules and regulations
- So, Walmart should acquire teh drone company or use the drone expertize on a contractual basis
Decision Tree (Yes/No)
1. Yes- Walmart should enter due to following reasons
Revenue potential
Stay ahead of market competitors
High chances of new customer acquisition with speedy delivery
More Add to Basket opportunities specially on Urgent items. Customers will definetly prefer drone delivery over going to Stores
Expand the areas for new possibility for Faster delivery
2. No — I dont see any reason for company like Walmart to not pursue drone Delivery. But, I want to call out some challenges
Leaving the parcels on driveway would increase the risk of thefts
Backyard delivery would have an impact on privacy
Not many would be leaving in their houses
If people are travelling and want to deliver either at hotels, etc . Normal Delivery can still happen.
Expand to other countries would be challenging as many countries would have more apartments than houses
Rules and regulations would differ in other countries
FunFacts as promised at the start
In 2020, Amazon processed over 66,000 orders per hour in the United States, which is about 1.6 million packages per day.
Average number of products per order
In 2024, the average number of products purchased per ecommerce order worldwide was 4.41.
Average order value
In September 2023, the global average order value (AOV) across all ecommerce was over $110.
Busiest day for ecommerce
Mondays are often the busiest day for online sales, due to the Monday Rush and people being in a “buying mood” after the weekend.
Order value by device
The average value of online shopping orders in the U.S. is generally higher on desktop than mobile devices.
