E-commerce 2/2

Commercial drones are growing in popularity across different industries thanks to a wide range of potential applications. With the expansion of the e-commerce market and the increase in online purchases, the demand for better delivery services is pushing companies to invest in technologically innovative solutions to upgrade existing services and capabilities.

One of them consists in autonomous aircraft delivery: without human involvement products can be delivered to customers by controlling the entire process through intelligent communications systems, in a shorter time than using normal road transportation, avoiding traffic and other logistical problems.

With the goal to optimize timing and cut additional costs, e-commerce giant Amazon launched its own Prime Air drones service to deliver products to its customers. In August, the company received approval from the Federal Aviation Administration (FAA), anticipating that in the future between 75% and 90% of Amazon products will be delivered by drones flying up to 15 miles and arriving at destination in less than 30 minutes.

Another promising area for commercial drones’ applications is the health sector. For example, the medical product delivery company Zipline recently announced its pilot program in partnership with American retail giant Walmart. With this project, Zipline plans to deliver health and wellness products across the US area providing its customers with medical supplies in less than an hour.

The concept is the same: by using AI technology and machine learning systems, autonomous drones can elaborate a higher amount of data to deliver products in less time and in a more efficient way, in a total independent and decentralized way.

The growing adoption of 5G technologies, smart devices, and the rising demand for faster services is making the drones market increasingly appealing to a broad range of businesses, and rising competition among players from different industries anticipates significant growth in the market over the coming years.

The information in this article should not be regarded as a description of services provided by Delian Partners SA. The opinions expressed in this article are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry. The views reflected in this article are subject to change at any time without notice.

The lockdown has been a boon for online shopping and many companies have been forced to implement e-commerce solutions to avoid the closure of their activities. The shift towards online sales also enabled companies to improve their customers’ experience and even to make their businesses more efficient. In many cases, businesses have benefited from the competitive advantage given by an omnichannel presence and a reduction in operative costs.

As Microsoft’s CEO Satya Nadella said, “we have seen two years’ worth of digital transformation in two months”. This massive acceleration is evident in the US, where e-commerce penetration rose to 23.3% in 2020 compared with 18% in 2019. But a similar permanent step-up is also evident in other parts of the world: In Brazil, e-commerce penetration rose from 7.2% to an estimated 10.3% YoY, and Europe saw the YoY increase in online penetration rise from 1.4% to 5.5%.

In this environment, a major winner has obviously been Amazon, which in 2Q 2020 reported an increase of 40% in net sales compared to the year before. But Amazon is not the only player in this global game. Shopify, a cloud-based commerce platform, has gained almost 20% market share with more than 500K active stores in 175 Countries. The largest Latin American e-commerce marketplace, Mercado Libre, registered 1.7M new customers from February to March 2020, up about 28% compared to the same period in 2019.

The US food service industry also experienced a dramatic demand “pull-forward” effect, with the percentage of food delivery as a percentage of sales tripling YoY from 7% to 21%.

Globally, the e-commerce market is expected to reach $6.07T in 2024, growing at a CAGR rate of 11.34% over the period 2020-2024. This trend has been boosted by changes in customers' habits due to the recent health crisis, but at the heart of this secular change, there is a broader generational shift spearheaded by Millennials.

Today, Millennials represent the largest population cohort ever, with a positive impact on online shopping and digital payments because they represent the first truly all-digital generation on the consumer side. On the supply side, e-commerce platforms are supporting thousands of companies to meet the request for online and mobile shopping in a quick and efficient way.

It is becoming increasingly evident that the upcoming cycle of technological innovation and associated disruption is likely to affect many sectors of the economy, supporting the view of a highly favorable environment for stock picking and highlighting the need for investors to remain exceedingly selective.

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