Amazon testing drones for package delivery

Amazon CEO Jeff Bezos told 60 Minutes that the gadgets, called octocopters, can carry as much as five pounds and are much greener than trucks.

Amazon CEO Jeff Bezos says the company is testing "octocopter" mini-drones that would be used to fly small packages to consumers within 16 kilometres (10 miles) of one of Amazon's fulfillment centres.

By: Bloomberg 

Amazon.com Inc. is testing drones to deliver goods as the world’s largest e-commerce company works to improve efficiency and speed in getting products to consumers.

Chief Executive Officer Jeff Bezos unveiled the plan on 60 Minutes, showing interviewer Charlie Rose the flying machines that can serve as delivery vehicles. The CEO said the gadgets, called octocopters, can carry as much as 2.2 kilograms (five pounds) within a 16-kilometre radius of an Amazon fulfillment centre. Amazon may start using the drones, which can make a delivery within 30 minutes, within five years pending Federal Aviation Administration approval, Bezos said.

 “It will work, and it will happen, and it’s gonna be a lot of fun,” he said in the 60 Minutes interview broadcast yesterday.

Amazon, based in Seattle, has been ramping up ways to get products to consumers more quickly as it tries to keep shoppers coming back to buy from its Web store instead of going to brick- and-mortar retailers. The company said last month it was teaming up with the U.S. Postal Service to begin Sunday delivery to members of its $79-a-year Prime program.Amazon Hiring 70,000 for Holidays

Delivery drones also are being used by the Australian company Zookal to deliver textbooks, said Oliver Lamb, director of Sydney-based Pacific Aviation Consulting. In China, the SF Express delivery company is experimenting with drones in the southern city of Dongguan, according to a report by the Civil Aviation Resource Net of China.

“When and how to allow this kind of delivery is going to be a big question,” Lamb said. “Regulators will have to deal with this, and I’m sure each jurisdiction will come up with regulations to allow this in due course.”

Experimentation with delivery by drones is part of a shift from the craft’s use by the U.S. military to spy on and kill suspected terrorists.

The U.S. Congress has directed the FAA to develop a plan to integrate drones into U.S. airspace by 2015. That led U.S. venture investors to pour $40.9 million into drone-related startups in the first nine months of this year, more than double the amount for all of 2012, according to data provided to Bloomberg News last month by PricewaterhouseCoopers and the National Venture Capital Association.

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Drones aren’t the first futuristic technology to attract the interest of Bezos. Separate from Amazon, Bezos created a closely held spaceflight venture called Blue Origin, which in October said it planned to soon begin offering suborbital flights on a commercial basis.

The electric motors of the drones also will help reduce the environmental impact of package deliveries, Bezos said.

“It’s very green,” Bezos said. “It’s better than driving trucks around.”

Still, the challenges to achieving a safe delivery at the end of the day may prove insurmountable, said Jeff Lowe, general manager of Asian Sky Group, a Hong Kong-based aviation consulting company.

“You’d have to make it idiot-proof,” Lowe said. “From a height, a 5-pound load hitting anything is going to be fairly destructive, so that can never happen. The first time it does, the FAA will ground all these drones and they will never fly again.”

The research into delivery by drone is a reflection of the fact that some of Amazon’s most lucrative customers are members of its Prime program, which promises fast delivery.

The company invests heavily in distribution and delivery, which made up the largest portion of Amazon’s expenses in the third quarter. Investors have endorsed the spending on capacity – the costs increased 35 per cent to $2.03 billion – pushing up the company’s shares 57 per cent so far this year even as it posts losses.

The company had 89 warehouses in 2012 and is planning seven more this year. Amazon also unveiled plans in July to increase staff by 5,000 in 17 centres this year and is hiring 70,000 seasonal workers in the U.S. to meet holiday order demand.

Bezos showed the drones as the growth of e-commerce sales outstrips total retail sales. On Black Friday, e-commerce spending increased 15 per cent to a record $1.2 billion as more consumers opted to shop from their couches rather than battle long lines at stores, according to ComScore Inc.

Amazon ranked as the most visited online retail store, said ComScore.

Online shopping is also anticipated to be heavy today, which is dubbed Cyber Monday for the number of Web deals that retailers offer. ComScore projected that Cyber Monday sales will increase more than 20 per cent to about $2 billion.

Pui-Wing Tam and Edmond Lococo, with assistance from Olga Kharif in Portland.