Venture Bytes #94 - Autonomous Delivery Set to Take Off
Autonomous Delivery Set to Take Off
Driven by the need for faster, more reliable, and cost-effective delivery solutions, autonomous delivery services offer a futuristic alternative to traditional delivery methods. With advanced algorithms, better mobility software, machine learning, and high-tech sensors, they promise to revolutionize the delivery landscape, creating a paradigm shift that could potentially disrupt the status quo.
The US e-commerce sales hit a staggering $1.09 trillion in 2022 (per Comscore) with grocery, baby, and pet products accounting for nearly 22% of all sales. The growth has been particularly impressive in recent years. Between 2016 and 2022, sales tripled from $364 billion. The surge in grocery e-commerce is poised to stimulate the demand for autonomous delivery owing to its potential to optimize supply chain management and reduce operational costs, enhancing the profitability of the grocery retailing business. Additionally, the convenience and promptness provided by autonomous delivery can augment the customer experience, fueling customer retention, and loyalty.
Additionally, e-commerce as percentage of total global retail sales is on the rise. From 10.4% in 2017, e-commerce sales now account for 24% of the total retail sales.
Taking the Last Mile Challenge Head On
The last-mile delivery has remained a key pain point in supply chain management and transportation, accounting for around 53% of the overall cost of goods. Being the final leg of the delivery process, it is often fraught with complexities like traffic congestion, unpredictable delivery times, and high delivery costs.
The deployment of autonomous vehicles, drones, and robots for the last-mile delivery can mitigate these challenges and enhance the delivery experience for customers. The reduction in delivery costs, coupled with the potential to handle a higher volume of orders, can augment the scalability of e-commerce and retail businesses. Accordingly, big players like Amazon, UPS, FedEx, and Walmart are investing heavily in improving last-mile logistics. In May 2022, UPS acquired Delivery Solutions, a software-as-a-service delivery orchestration platform to augment its last-mile operations. Similarly, Amazon has bolstered its efforts in building out its last mile delivery services to grab a piece of the growing grocery delivery market, which is expected to reach $307 billion by 2027 in the US, growing at a CAGR of 18% between 2021 and 2027. In August 2021, Walmart also doubled down on last-mile by announcing GoLocal, which topped 1 million deliveries within the first year of its launch.
Autonomous Delivery Adoption Picking Up
The autonomous delivery space in the US is rapidly gaining momentum as businesses seek to capitalize on the benefits of cost savings, increased efficiency, and improved customer experience. The adoption of autonomous delivery vehicles has led to a significant reduction in transportation costs, making it an attractive proposition for businesses. Moreover, with the deployment of advanced technologies such as artificial intelligence, machine learning, and computer vision, autonomous delivery systems are becoming increasingly sophisticated, capable of navigating complex environments and ensuring timely deliveries. As a result, businesses are investing heavily in this technology, which is poised to revolutionize the delivery industry and create new business opportunities.
As larger players focus on optimizing last-mile delivery, start-ups are disrupting the space with innovative solutions, becoming potential M&A targets for incumbents. Amazon’s acquisition of Zoox, DoorDash’s acquisition of Scotty Labs, and UPS’s acquisition of TuSimple are some examples wherein the logistics giants acquired autonomous delivery players to bolster their last-mile capabilities. These acquisitions demonstrate the value proposition of acquiring start-ups with complementary capabilities, enabling larger players to accelerate their innovation and growth, expand their customer base, improve operational efficiency, and reduce costs. Accordingly, the autonomous delivery space, which is expected to reach $90.21 billion by 2030 from $12.88 billion in 2021, is transforming the delivery industry, creating opportunities for both established players and disruptive start-ups.
Nuro – A Category Leader
Nuro is well-positioned to tap into the growing global autonomous delivery market by leveraging its best-in-class tech stack, well-funded business model, and strategic partnerships with major retailers. With an $8.6 billion valuation and over $2 billion in funding, the California-based robotics company has demonstrated its ability to navigate regulatory challenges, establish trust among consumers, and effectively address the last-mile delivery demand. Nuro’s autonomous vehicles are purpose-built for delivery and are designed to be nimbler and more maneuverable than traditional delivery trucks, allowing them to navigate congested urban environments with ease. Further, being a pioneer in autonomous last-mile delivery vehicles for neighborhoods, Nuro’s ML model has years of additional training over competitors.
Additionally, Nuro has secured partnerships with some of the biggest names in retail and food delivery, such as Walmart, Kroger, Domino’s Pizza, and CVS Health. These partnerships not only provide Nuro with a solid customer base but also help to establish the company as a key player in the autonomous delivery industry.
Technology is transforming last-mile delivery by enabling faster, more efficient, and cost-effective delivery solutions. From advanced route optimization algorithms and real-time tracking systems to autonomous vehicles and drones, technology is streamlining the delivery process, reducing delivery times, and enhancing customer experiences.
However, autonomous delivery still faces some significant challenges, both technological and regulatory. Safety remains a crucial concern, with accidents involving autonomous vehicles raising concerns about the safety of technology. Additionally, regulatory frameworks are still evolving, with many states and local governments grappling with how to regulate autonomous vehicles.
Despite these challenges, the future of autonomous delivery looks promising. The potential cost savings and efficiency gains are too significant to ignore, and the technology is rapidly advancing. Lidar and other sensing technologies are becoming more sophisticated, while machine learning algorithms are improving the capabilities of autonomous vehicles. These advances will help to unlock the full potential of autonomous delivery, making it safer, more reliable, and more efficient.
The Future is Now for Immersive Technology
Immersive technology products are gaining momentum with rapid advancements in technology, creating a strong market for virtual reality (VR) and augmented reality (AR) start-ups. These game-changing technologies have the potential to revolutionize the way we experience content, breaking down the barriers between the digital and physical worlds. The widespread availability of Meta’s Quest 2 and Quest Pro has unlocked a plethora of exciting opportunities for consumers, spurring market growth and laying the foundation for an innovative future. From nearly 11 million units in 2021, the worldwide shipments of AR/VR devices are expected to reach nearly 88 million by 2026, per estimates from CCS Insights. As we stand on the cusp of this new era, the future of industry looks bright, with limitless opportunities for growth in a range of industries such as healthcare, education, and entertainment.
despite an overall downturn in the market in 2022. While the overall VC funding fell by 31%, the funding for AR and VR start-ups went up by 38% with VCs investing $4.2 billion across 223 deals. Late-stage funding saw a bigger jump of 45% with $3.6 billion invested across 149 deals. The surge in funding highlights the confidence that VCs have in the future of AR/VR, and the immense potential for growth and innovation within the industry.
Adoption Across Industries to Support Growth
While adoption is picking pace, the AR/VR market is still in its infancy, with a massive market opportunity ahead. VR and AR have the potential to deliver a $1.75 trillion boost to the global economy by 2030, per PwC. The market is currently dominated by gaming, with 80% of all AR and VR revenue generated by gaming activity. Meta’s gaming-focused ‘Quest 2’ achieved a historic milestone in 2022 by becoming the best-selling VR headset ever, with over 10 million units sold. Potential applications in other areas such as retail, healthcare, education, and travel, the AR/VR market offer opportunities for even wider adoption of the technology.
The global retail market size of augmented reality is expected to reach $61.3 billion by 2031 from $2 billion in 2021, growing at a remarkable 41% CAGR, according to Allied Market Research. AR and VR technologies are increasingly being used to create virtual shopping experiences, allowing customers to try on clothes or visualize products in their homes before making a purchase. This is expected to drive sales and improve customer satisfaction, as customers can make more informed purchasing decisions.
Immersive technologies are also gaining traction in the healthcare industry where they are used to train healthcare professionals, simulate surgeries, and provide virtual therapy to patients. MindMaze, which raised a $105 million Series C round in February 2022, develops a VR platform to map and respond to brain activity for applications in healthcare and other fields. Osso VR, another Series C virtual reality surgical training technology company, offers surgeons, sales teams, and other trainers an on-demand training platform featuring realistic, haptic-enhanced interactions in an immersive training environment. These immersive technologies have proven to be effective in reducing healthcare costs, increasing patient engagement, and improving patient outcomes. Similarly, as technology continues to evolve and become more accessible, AR/VR will likely become a more prominent tool in the education industry, transforming the way students learn and engage with information.
Enterprise Adoption Picking Up
Although the creative economy industries, such as gaming, live events, and video entertainment, currently drive the demand for immersive technologies like AR and VR, their adoption in the enterprise space is gaining momentum. The upcoming third generation of AR devices will likely offer an opportunity for wider adoption of the technology.
A potential use case for enterprise AR/VR technology is in remote field sensing and operations guidance. By using AR/VR to guide users remotely, companies can help workers conduct operational tasks that they may not have performed before, with the assistance of an expert in a remote location. Companies like Boeing and Xerox have already adopted this use case, indicating its potential value.
Another use case for AR/VR in enterprise operations is to provide real-time guidance to workers and assist them visually in conducting tasks. Companies such as Plant Vision in the agriculture industry and Medivis in the healthcare industry have successfully implemented this use case, resulting in positive feedback on their experience. This demonstrates the potential of AR/MR to enhance traditional processes and improve worker productivity and efficiency.
Start-ups Focusing More on AR/VR Software
While big tech giants like Meta, Apple, and Google have dominated the hardware market, VC-backed startups have made significant strides in AR/VR software development. For instance, Florida-based Magic Leap has developed a spatial computing platform that enables users to interact with digital content in real-world environments. California-based Niantic, which raised its Series D round in 2021 at a $9 billion valuation, is building an AR and real-world game platform with a server architecture that enables massive scale supporting global, shared, and state-rich interactions.
By leveraging their expertise in software development, these startups are driving innovation and creating new use cases for AR/VR technology. They are also making it more accessible and affordable for a wider range of industries to utilize AR/VR in their operations. The future of AR/VR technology is likely to be shaped by these innovative startups, as they continue to push the boundaries of what is possible with software development.
-The MVR Team
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