Delivery Robots Roll Along

Campuses embrace the new services, while big retailers are trying to keep manned deliveries affordable.

August 22, 2019

ALEXANDRIA, Va.—Investors love Starship Technologies, the San Francisco company that is creating self-driving robotic delivery vehicles, reports CNBC. The company recently raised $40 million in new venture funding to expand its deliver robot fleets to 100 college campuses across the U.S. within the next two years.

The company’s small, autonomous robots now deliver Starbucks, pizzas, sushi rolls and almost anything but alcohol to students on college campuses in the U.S. via partnerships with foodservice companies, such as Sodexo and Compass Group.

The University of Pittsburgh and Purdue University are among the latest schools to get robot delivery. Students simply download the Starship app in order to receive food and beverages 24/7. They typically pay a delivery fee of $1 to $2 and receive their food and drinks within a half-hour.

Lex Bayer, Starship CEO, said the robots are ideal for making deliveries down sidewalks and narrow campus streets where cars don’t fit.

Unlike delivery drones and self-driving cars, autonomous delivery robots are comparatively lighter and slower and therefore less likely to hurt people or damage property. Nine states already allow the use of this style of robot, which gives Starship access to at least 100 million people, Bayer said. Currently, Starship delivers mostly groceries, hot meals and retail packages to its customers on college campuses, corporate campuses and other communities.

The company recently celebrated its 100,000th delivery and has dropped off at least 6,000 pizzas, 9,000 sushi rolls, 5,000 bananas and hundreds of thousands of diapers to customers, Bayer added, and Starship aims to someday deliver pharmaceuticals.

The demand for convenient delivery is on the rise. Walmart's second-quarter earnings report last week indicates how important online grocery shopping is becoming for the retail behemoth. U.S. sales and same-store sales grew during the period, much of it thanks to delivery, said Yahoo Finance.

Doug McMillon, CEO of Walmart, told analysts that Walmart is attacking groceries from every direction, with buy-online-pick-up-instore service, pickup towers and lockers and the soon-to-launch InHome delivery program that will bring groceries directly to your refrigerator. Walmart customers will get free delivery in one day for orders over $30 or will be able to pay $30 for unlimited delivery for a year.

Ordering online groceries is a no-brainer when the customer doesn't have to consider the penalty a delivery fee adds to the order. Groceries are already the fastest-growing segment of e-commerce, but the convenience of delivery is a costly service.

Last-mile delivery is the most expensive leg of the trip, making it harder for retailers to make a profit on the service. Retailers have been experiencing rising freight and transportation costs, and increased use of online grocery delivery won't alleviate the pressure. Just as Amazon had to up its annual delivery fee by $20 to try to recoup some of the expenses it has for delivery, Walmart and others may find they also will need to raise their rates.

Frequent online shoppers will find an annual delivery plan economical. Fill-in shopping (shopping that is higher-value than quick trips to the store for single, necessary items but not as valuable as routine trips to the store) is by far the most common way consumers buy groceries today and the most frequent way people shop. However, it could place a bigger toll on delivery services as they grow in popularity.