Wing CFO Shannon Nash on why 2024 is the "year of the drone"

0:08Hello, everyone, and welcome to the Modern Retail Podcast. I'm Cale Guthrie-Weissman, the editor-in-chief here at Modern Retail. This week, I'm really excited. We're going into the world of drone delivery. I have Shannon Nash. She's the CFO of Wing, which is underneath the very large umbrella of Alphabet. Wing is a really fascinating company that's made a lot of recent announcements. I know they just had a new partnership with Walmart or an extension of a partnership. I know there have been some recent clearings with U.S. regulatory stuff, which I want to go into because I don't think I understand it, and I'm sure Shannon does.

0:40Correct me if I'm wrong, but my research says that Wing is in three different continents. So it's Australia, I believe it's Europe with Ireland and Finland, and then the U.S. You're right. Oh, wow. Great. I always mess up my research somehow, but I got it right this time. But I want to talk about just the difference in those geographies, what you're learning in the U.S., what types of retailers you're working with, all that stuff. But Shannon, how are you doing? I'm great. And I'm so excited to be here to talk about the wonderful world of drones. Me too. I know drones are something that I see and I know about, but I don't know about the business model of them.

1:14And I want you to explain it all to me. But first, let's start with you. So how did you end up into the world of Wing? What led you here? Yeah. You know, so as a young kid, I grew up during the era of cartoons like The Jetsons. And I was fascinated by like all the things that happened on The Jetsons. And I would just sit around and like daydream as a kid, like could any of this ever happen in our life? And lo and behold, lots of things from The Jetsons are happening in our life. I mean, there's the, remember there was the robot and the robot had like another robot that cleaned your floor. That's called a Roomba.

1:52Like that exists. That's true. There was certainly video conferencing. The dad used to talk to his boss. Basically, we have video conference and that seemed like so far-fetched. And COVID has shown us that video conferencing is like a must for everybody. We're doing it right now. Exactly. And they had drones. And they had drones. And I just remember thinking, oh, how amazing that would be if that could really happen in my lifetime, drones and flying cars and all those type of things. Well, when this opportunity became available, it definitely piqued my childhood interest of always wanting to be involved in such an innovative company.

2:32And so that's what actually really brought me to Wing was just the interest in helping make something like this be a reality. And I know we will talk about it because it's more than just my dream as like a seven-year-old, right? It is truly happening. What is the story of Wing? When did it launch? And how, what was, I always try to ask people at companies this question, like, is where it is now what it had originally anticipated to be? Yeah, so Wing has, you know, really come a long way over the last, say, the last 10 years. And 2019 in particular was when Wing actually started operating in Australia.

3:09And I mean real flights, not, you know, testing anymore. Wing is an outgrowth of the X Innovation Lab over at Alphabet. And so a real success story there in terms of, you know, an idea that then is kind of formulated, is developed, and then graduates, if you will, to a, you know, a standalone actual company that needs to build, scale, and do all the things to be a viable service. And so I joined about two years ago, and really the focus has been on, you know, our mission and our goal is to be the best delivery service provider for those millions of small packages that are delivered every day. I have a household or had a household until two of my kids have left the nest of five people.

3:57And I would come home routinely to nothing but boxes outside my door because no one's coordinated in terms of their ordering, right? And these boxes would be big boxes, small boxes. But inevitably, it seemed like every time you'd open them, there'd be the smallest thing in them, completely inefficient on a million levels, whether it's how much we pay for it, whether it's what it's doing to an environment, whether it's why are you using a 3 ,000-pound truck to deliver my little, you know, case of like lip gloss that I ordered on a whim type of thing. That is what I know Wing is focused on. Wing is really focused on right-sizing the delivery mode with the delivery package, if you will.

4:40And so what I would say is that over the last couple of years, we've gotten really granular with that. We have our partnership in Australia with DoorDash. We have our partnership in the U.S. in the Dallas-Fort Worth area with Walmart. We started with two stores and we announced earlier in 2024 that we're expanding in the DFW area. So, you know, we're dubbing this the year of the drone. I think you're going to see a lot of interesting expansion with drone delivery this year. Wow, the year of the drone. I love that. There are a million things I want to dive into. But what I wanted to ask, this goes into sort of your background, because you've been doing CFO work for years now, well before Wings.

5:20So when you come from a company that is under the Alphabet umbrella that now is sort of being thrown out into the world, being like, all right, make a business. Is that different from other roles you've had in terms of what your mandate is, would you say? Or how do you approach this role compared to other ones that you've had? So I think that what's similar about this role to some of my other roles is we are in scaling mode. And a lot of the roles that I take are companies that are in scaling mode. And so that involves not just being, you know, uber focused on the financials. It's really being granular about the business model and, you know, diving into pricing models, diving into, you know, go to market strategies.

6:01that part I think is very similar and kind of like what I would call my superpower where I thrive. When I look at my background, you know, I started as a practicing attorney and decided that wasn't for me, but I did it for quite a while. But the background of actually doing that has been super helpful in terms of just really understanding, you know, a tech product, what you can do with it. I spent a lot of time in corporate law, so I really understand a lot about how we have to actually work and be governed, because Alphabet is obviously a large publicly traded company. So I have a lot of that experience.

6:41And I think that's very helpful to this role. And then finally, when I look at some of my CFO roles, I've done software. I've also done manufacturing supply chain hardware type of roles. And so this is the perfect marriage, right, of those type of things. We build planes, so really understand logistics, supply chain hardware, but we also sell a service that is autonomous, right? That is very dependent on AI and software. And so it really was like the perfect marriage of those two roles for me. So I wanted to ask, because you mentioned Australia earlier, which was, correct me if I'm wrong, but that was the very first market you went commercially into.

7:19Is that right? Yeah, Australia is the market. So a couple of things. Wing, as you mentioned earlier, in three different geographical locations. So in the United States, we actually started in a rural community called Christiansburg, Virginia. And that is very close, if you've ever heard of the school Virginia Tech, right? That's where Virginia Tech is. And so got a lot of great learnings in that environment. In fact, there is a couple that holds the world record for the most commercial residential drone deliveries to them. And we learned a lot about that because they are not probably what most of your listeners think is the stereotype of who would be ordering drone delivery.

7:59They are in their 80s. And the use case for them was one is a driver. The other one doesn't drive, but is nervous about the one that drives. And so this was a good kind of use case for them to not have to drive to get things that they need. And of course, it was things like certainly food items. And it was, you know, items that they needed for purposes of, you know, their household. But one of the things that I thought was most interesting of the list of all the things that they ordered and apparently was a need, they ordered almost 100 boxes of Girl Scout cookies. All delivered by drone? All delivered by drone.

8:41All right. I would love my Girl Scout cookies delivered by drone because I always forget the window to order them. Exactly. So we did start in the, you know, we had started in the U.S. You mentioned Finland. We started doing deliveries there. And then in Australia, the focus was really on being in different environments, less rural, more urban, you know, really dealing with volumes. in Australia, the highest number of volumes we've done in a single site have approached a thousand a day. It's like 30 every second during our delivery hours. So really pumping up that volume side of our business. And look, we got a lot of learnings.

9:22When we go into markets, we spend a lot of time with the community. And so we got a lot of learnings about things like the sound from our drones. And that helped us really design how we made changes and improvements to our planes to actually address those type of things. So Australia was a great place to kick off and to really grow and expand not only just our reach, but just our service offerings in the community. With Australia, the reason why it just became one of the biggest first markets, was that just because you had a partnership that worked out? Or was it, are regulations different in Australia so that you were able to do a little bit more?

10:03Yeah, I mean, I think whenever you look at them, especially at this stage of this industry, the drone delivery industry, you need to look at the regulatory landscape. You need to look at the community. And this is the community that welcomes needs, et cetera. It's like, does this tick and tie for that community, right? And then do you have the actual partners that you can collaborate with and deliver their items? Like all three things have to come together for it to be the right community for us to enter in. And for us, that Australia ticked and tied all of those boxes, for sure. We've done certainly over 350 ,000 residential deliveries, and a lot of those have been done in Australia.

10:43Yeah, I was going to bring that up. That was one thing I meant to bring in the intro, but 350 ,000 deliveries is a lot. While we're on the subject of regulation, one of the things that has happened in the U.S., and I was hoping you could just explain this to me because I've read about it, but I feel like I would not do it justice, and this is your world, you're the expert in it. So there was a specific ruling a couple of months ago, if I'm not incorrect, that pretty much made it so that drones can fly further or higher up. That opens up, that paves the way so that you would be able to do this more freely in the U.S.

11:13Is that correct? Yeah, absolutely. So first, let me just set the stage. So in 2019, Wing was the first drone delivery company in the U.S. to receive what's called a Part 135 air carrier certificate. So that really kind of opened the door for us to be able to offer this service. And so now we have extended approvals. We have an environmental approval in the Dallas-Fort Worth area that marks the first time the FAA has approved an entire metro area for drone delivery. And that's super important because now you can really look at approaching expansion in terms of looking at an area as opposed to just looking at like one city, for example.

11:55We've already been serving customers, like I mentioned before with our partnership with Walmart in the Dallas-Fort Worth area, basically serving customers in a six-mile radius from the actual Walmart location. But with our recent summary grant from the FAA, this allows us to move beyond what's called the visual line of sight. So that's beyond what your eye can see, like what you and I can see with our eye from like a Walmart store. We can do so without what's called visual observers, like looking at that. and we can do that across the Dallas-Fort Worth area. And then we could do that across similar air spaces surrounding other major U.S.

12:32cities. So this adds to really the momentum of the drone delivery industry at large. And that's why I said to you in the beginning, this truly is the year of the drone. So it just means that the radius is getting expanded wider and so you can do more deliveries essentially, right? You can reach more people. and as you think about scaling the business and you think about like, you know, having rules that you can only go to one city at a time or you can only look at the drone as far as this distance or that distance, the more that opens up, that's the more people that you can reach. Got it, got it.

13:08So let's talk about Walmart specifically. How does that partnership work? What are the types of orders that you guys are doing? Because you mentioned earlier, you know, drone delivery works really well for the smaller things. And correct me if I'm wrong, you have a new drone device that holds bigger packages, but it can't hold more than five pounds or six pounds? I can't remember what it was. So yeah, let's take a step back. So I'll do current and then kind of like what we're looking at future state. Okay. So current state right now is we deliver small packages. They are just under three pounds.

13:39And there's a lot of, there's, there's a lot of SKUs that fit under three pounds. For example, you're, this was really popular during the football season, especially Super bowl. Oh, you're about to make that, you know, margarita or you're about to make the, you know, the guacamole and you forgot like the tomatoes and the limes. Like you can fit a decent amount of tomato and limes, right, in a package and it's at your house quickly. In fact, the delivery time that we've been averaging from the Walmart locations in Dallas-Fort Worth has been under five minutes. So it's pretty quick. The way our partnership works is we feel it is very important for us to really work already within our partners' processes in terms of how they already operate.

14:24So we all saw the advent of curbside delivery during COVID and it hasn't gone away. So partners like Walmart have come up with really good work streams and processes to actually pick the product for the customer, get it outside to the curb and give it to the customer. We fit within that same ecosystem. We don't want drone delivery to add like 18 steps to doing something that they're already doing. So all of that pretty much works the same. If you're a customer, you would have gone on some sort of app. Right now you're going on the wing app. You would have ordered your item, right? You would have paid for it.

14:59And then you would just expect it to come to your house. All of that is the same from the customer's standpoint. And from our partner's standpoint, very similar because somebody's still going to pick your limes. They're putting them in a package and then they're walking them out. But in this case, they're walking them out to our location. We call them Ness. They're walking them out to our location. And then the drone, and they're basically having, the drone is actually taking that package and then it's, you know, hovering up in the sky and then it's taken off. And when it takes off, it does about 65 miles an hour and it's going to, right.

15:36So it's fast. There's no traffic jams in the sky. So you don't deal with car traffic, you know, road traffic. You get to someone's house or location. We've all, you know, this is where technology and autonomy come in because we've already figured out where this is going to land the package. One misconception is people think that the drone lands on the ground. It does not. It hovers and it lowers with the tether. it lowers the package down to the ground. It unclips itself automatically. You, the customer, don't have to do anything. And then it just flies away. You just go get the package. So that's just kind of how it works.

16:13I'm trying to explain it in words, but I will tell you, we have a very robust YouTube page that I highly encourage your listeners to go and look at some of the videos because I cannot do it justice. People are always telling me that. You did a great job. I have a very specific image in my head of how it works. And I feel like I saw the YouTube video and it matches perfectly. Thank you. Thank you. And so basically, that's what's happening now. We're operating in two sites in the Dallas-Fort Worth area, seven days a week. Over the last kind of four months, we've already done 5 ,000 deliveries. And at this point, we've got some decent data.

16:52So we have some regular customers that order roughly about two times a week. And then our top 25 % of customers are ordering like three times a week. I think I already mentioned on average, they're experiencing their delivery in five minutes. And what we're really hearing for people, we've done a study about like fast mile delivery. What we're hearing from over 74 % of the people we surveyed came back with very favorable views of drone delivery. And what they're mostly ordering are last minute items that they need to prepare something. And a lot of people are using it for, especially because we just came off the holidays, for gifts, last minute gifts they need to get.

17:29So, you know, we have over three dozen aircrafts ready to complete these commercial deliveries in just two Walmart locations. And what we see happening is that this will increase and increase in 2024 as we're expanding our service such that, you know, we expect to be able to service millions of customers at the end of the year in the Dallas-Fort Worth area. And that's just with our existing operations. You also mentioned that we announced and we're super excited to bring this to our customers that we have a new plane. It's right now being called the Big Box Plane. Great naming convention, I'm sure.

18:06But that can deliver like five pounds. And again, we listen to our customers and we listen to our communities because about 30 % of our orders were requesting us to deliver things with two drones. Hmm. About 70 % are okay with it. So for that population of 30 % who need something closer to five pounds, we now have a solution for that. And that's just a bigger drone. Everything else is the same. It's just a bigger drone with a bigger payload that can go a little bit far, like it can go further in terms of delivering the package. We're going to take a quick break and we'll be right back. For the Dallas-Fort Worth area, how are these customers found?

18:49Is it that they're shopping in the Walmart and they see something says, you want to get the wing app, we can deliver to your home. Like, how have you been able to build that customer base? Yeah, I think a number of ways. Certainly, nothing does advertising and marketing for you than seeing the drones in the parking lot and going, what the heck is this? So nothing is better than that. And let me tell you, especially over the holidays, we've had, you know, kids will come by and take selfies. We even had several times someone dressed up as a Grinch who would come by and want to like take pictures next to the because it's fenced in.

19:24But so so it's a very popular thing that people come and want to see. But certainly, as I mentioned earlier, we get out into the community. We spend a lot of time doing it, doing that. So we go to, you know, Texas is football. So we went to, especially for Friday Night Lights, a lot of like local high school football games. We actually were at the Cotton Bowl over the holidays. So we spent a lot of time in the community also just really having people pick up, pick up the drone, understand what it's all about. But really what happens is that you go onto the app and you check to see if you type in your zip code, your address in your zip code, and you type to see if we're in your service area.

20:07If we're not, you get on our list so that when we get to your service area, you can actually see that because we send out a lot of information to folks that are on our email distribution list. Got it. So I wanted to ask, hypothetically, regulations are not an issue. Like, you know, this is just more about like, you know, there's no, not there's no FAA, but the FAA says, go forth, you can do whatever you want. How long does it take to implement a wing into a new retailer? Like, what is the ramp up? How long does it take? Do you have to bring people on board? Is that a whole process? It is a process because you want to do it right.

20:47You want to be very thoughtful about how you're doing it. I think that, you know, look, we've been at this for five years. We've also integrated with DoorDash in Australia. So we're fairly, we're pretty experienced. This isn't new for us in terms of being able to integrate with a partner and then, you know, have a rollout plan. And every time we do it, you iterate, you get better and better. And so what I will say to you is that, you know, we're expanding significantly in the DFW area in the next kind of, it's February now, so in the next like eight to 10 months. And you will see that more and more and more.

21:23It gets a lot quicker, a lot more efficient every time you do it. I get the question a lot of times also about people thinking like there's somebody with like this is very manual. There's somebody with a joystick like driving the plane. I have to explain like, again, this is autonomous service. We use AI. And so the more we continue to do that, you will see the ramp up times just taking obviously just getting quicker and quicker because a lot of this is kind of rinse and repeat in terms of once you do it. I think the biggest thing that, I love how you said there's no regulatory and we know that that is not the case.

21:59But I think the thing that you always will have to spend the time on and really try to get right is that community engagement. that is that is that just doesn't ever go away and continuing to to iterate with that community and really like build your service together with that the community needs for example so that to me is one of those things where you know we will continue even outside of all the things that you mentioned you will have to continue to spend the time but that also just makes you better so i i want to ask about community engagement so how like you mentioned the things that you did in Dallas, Fort Worth, just to get the name out.

22:38How much, you know, this is a multifaceted question, take it however you want. But like, how much of that is about demystifying drones? And how much of it is about just saying that we're there? Do you understand what I'm saying? Like, I can imagine some people might be like, I don't, I'm worried about drone delivery for whatever reason. Is that what your community engagement is about? Or is it more about just like, hey, this is a service, you might want to take it? It's both. It's both in like 20 ,000 other things, right? Like, Like it's both. I mean, so another example I'll give you in Ireland, and this one is personal to my heart because I do have an adult son with autism.

23:16We spent a lot of time speaking to the autistic community. And it was really about understanding the needs of that community. Noise is a big thing for that community. I know that firsthand again with my own son. And so really spending the time to not just educate, but listen, listen to what that community, listen to what that community's needs are, as opposed to just coming and saying, hey, we're here and we're doing this and would love for you to try it. And here's a coupon. It really is more about having that conversation, but making sure we're listening and we're trying to really help understand what are the needs of that community.

23:58that's a big part of it, quite frankly. So I would say it's both, Cale, and a whole bunch of other things. And it's not one of those things where you can literally just do in a day, right? And you have to continue doing it. You don't stop, right? Just after you've gone into the community, you continue to do more and more things in the community. The awareness is important, but also making sure we're good listeners and we're iterating our services is equally important. It makes a lot of sense. sort of on that note, and this is, you know, this is sort of forward-looking strategy, but like, how integral will the wing branding be down the line on the consumer side?

24:38Do you understand? Like, will it be, will it always be that people are using the wing service? Or in the future, do you want to be an invisible intermediary? Yeah, I think that, look, I think the market is going to determine how that happens. I really do. I think our goal right now is to be the best partner we can to Walmart, DoorDash, and our other partners. That is our goal. And so I think as we continue to expand, how we expand, how consumers take that expansion, et cetera, that will determine out the answer to your question more so than us doing it. Because our goal is really to help our partner, and that helps our partners' customers.

25:21And we know our partners care about their customers, so what are we doing to help them help their customers, right? I think that that is what I see in the foreseeable future. This is like a very, I would say, not infancy, but more like the middle school, if you will, age of our industry, right? We haven't graduated from high school yet. Tween era, yeah. The tween era. And so, you know, we could have this phone call in a couple years. And I think that you will see other models in the industry. And some of them may be very compelling from a scaling standpoint. You're in the Dallas-Fort Worth area now.