Amazon’s drone business struggles amid low demand and regulation issues

It currently boasts a tiny customer base.
Loukia Papadopoulos
An Amazon Prime Air drone.jpg
An Amazon Prime Air drone.

Amazon Prime Air 

In a video obtained by CNBC, Amazon drone delivery head David Carbon was quoted as saying that Prime Air (Amazon’s drone business) had recently kicked off durability and reliability (D&R) testing, a key federal regulatory step needed for Amazon’s drones to have permission to fly safely over people and towns. 

Although this may seem like a promising step forward, the division has actually been struggling to take off as regulations and weak demand interfere with its progress.

In January, a large number of Prime Air workers were let go as part of the largest round of layoffs in Amazon’s history that saw more than 18,000 people axed.

In a statement, Maria Boschetti, an Amazon spokesperson, said that the staff cuts and multiple delays experienced by Prime Air haven’t affected its long-term plans for deliveries. 

“We’re as excited about it now as we were 10 years ago — but hard things can take time, this is a highly regulated industry, and we’re not immune to changes in the macro environment,” Boschetti said.

“We continue to work closely with the FAA, and have a robust testing program and a team of hundreds in place who will continue to meet all regulatory requirements as we move forward and safely bring this service to more customers in more communities.”

Small customer base

But is this true?

Prime Air has a small customer base, and demand isn’t exactly soaring. People familiar with the situation have reported that employees have to regularly contact the two households eligible for delivery to remind them to place orders and incentivize them with gift cards. This hardly seems like a promising business model.

However, as of January, Carbon was still optimistic, telling employees Prime Air has a target to make 10,000 deliveries this year between its two test sites. He set those targets even while the D&R campaign was still unfinished and the FAA’s limitations were firmly in place.

“This year is going to be a big year,” Carbon said according to CNBC. “We’ve got lots going on.”

In November 2022, Amazon unveiled its next-generation delivery drone MK30 and it promised increased range, expanded temperature tolerance, and the capability to fly in light rain. 

Can this ambitious goal be achieved? Or is Carbon in way over his head? Time will tell how this company develops.

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