Walmart-backed DroneUp is cutting jobs as drone delivery market struggles

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A delivery drone takes flight during a functional test at the DroneUp hub in the parking lot at the Walmart Supercenter in Clermont, Florida, United States on March 30, 2023. Walmart customers who live within one mile of the store can have certain items weighing up to 10 pounds delivered to their home by drone within 30 minutes for a $3.99 fee. 

Paul Hennessy| Anadolu Agency | Getty Images

DroneUp, a Walmart-backed startup competing alongside Amazon and others in the nascent drone delivery market, is cutting jobs across the company, CNBC has learned.

The Virginia-based company began informing staffers of the layoffs Monday morning, according to two people who lost their jobs and asked not to be named because they weren’t authorized to speak publicly on the matter.

Founded in 2016, DroneUp has a fleet of quadcopter-style drones that are designed to handle the last-mile portion of the delivery process, ferrying things like clothing, medication and food from warehouses to customers’ doorsteps.

The layoffs come as the tech industry continues to downsize and were part of the company’s decision to focus more on its delivery hubs, a network of facilities for on-demand orders in the U.S. DroneUp is moving away from enterprise services like construction and real estate monitoring, aerial data capturing, and marketing, the ex-employees said.

DroneUp confirmed the job cuts and the strategy change and said in an email that the layoffs hit “a small percentage of the team,” which now totals 418 people.

“After tremendous consumer adoption of our drone delivery services, we have made the decision to shift our business model to align our company structure around the continued growth and success of drone delivery and other drone services out of our Hubs,” DroneUp CEO Tom Walker told CNBC in a statement.

The company said that over the next six months, “we will hire more people than were laid off.”

DroneUp is one of several startups racing to make drone delivery a reality. Within the past three years, DroneUp, Zipline and Flytrex have signed multi-year partnerships with Walmart to deliver lightweight goods by drone in as little as 30 minutes. At least 36 Walmart stores in the U.S. have the service, the company said in January.

UPS, Amazon and Alphabet‘s Wing unit are also in various stages of developing their own drone delivery services.

Attempts at scaling commercial drone delivery in the U.S. have been slow moving, largely due to technical challenges and a lengthy regulatory approval process with the Federal Aviation Administration. The agency has authorized several companies to test drone deliveries in select markets as long as they don’t pose significant safety risks.

The economic downturn has also proven a setback for some drone delivery operators. Amazon in January laid off a significant number of employees from its Prime Air drone delivery unit just as the 10-year-old project prepared to begin flying packages to some customers in two small U.S. markets.

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