HONG KONG (Reuters Breakingviews) - China’s epidemic could give rise to the drones. Contagion fears and quarantines have made deliveries costly and tricky for Alibaba and others. Reducing human contact might help. Just as past crises have spurred technological developments, the latest outbreak should give automation a boost.
Millions in China have been stuck at home since the Lunar New Year holiday in late-January. Efforts to contain a deadly new coronavirus, which has killed more than 560 people, have triggered unprecedented city-wide shutdowns, travel restrictions and self-seclusion. With retailers from Apple to Starbucks closing shops across the country, food delivery, e-commerce and grocery apps in theory stand to benefit. During the holiday week, postal deliveries were up substantially from last year’s festival period, Bernstein analysts note.
Even so, dispatching people to drop off prepared and unprepared food amid an epidemic poses huge challenges. To ease customer fears of contracting the virus from potentially infected drivers, takeout apps run by Alibaba and rival Meituan Dianping are offering “contactless delivery”, where couriers leave food in designated pickup spots. Moreover, with fewer people willing or available to deliver, labour costs are bound to rise. Investors are worried. Meituan shares, for example, are down 11% since Jan. 15.
Drones may be one solution. As early as 2013, Amazon boss Jeff Bezos unveiled ambitious plans to use unmanned aerial vehicles to bring down costs and cut delivery times. In China, drone-makers from DJI, the upstart last valued at $15 billion in 2018, to the recently-listed EHang are growing fast. Alibaba and rival JD.com are also experimenting with aerial deliveries. Both are rolling out high-tech upgrades across their logistics networks, including automated warehouses.
Technical and regulatory hurdles have hampered progress for drone deliveries. Companies and governments may now be prepared to invest more and accelerate approvals. Consumer habits could change, too. The 2003 SARS outbreak hastened the adoption of online shopping in China. JD founder Richard Liu has said the virus forced him to close his brick-and-mortar shops and pivot online. Likewise, Japan’s most popular chat app, Line, was inspired by the Fukushima nuclear accident in 2011. Drones could be next to be nudged by a crisis.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.