Look ma, no driver!

The driverless vehicle navigates its way along city streets and through subdivisions, several online grocery orders safely stowed in the compartments running along its sides.

It is a testament to human ingenuity, using a roof-mounted LiDAR (light detection and ranging) unit that constantly emits laser beams to generate a 360-degree view of its surroundings; radar sensors that determine the distance between it and obstacles; and cameras capable of detecting traffic lights, road signs and moving objects such as pedestrians and cyclists.

Unlike traditional delivery vehicles, it doesn’t exceed the speed limit, run amber lights, or make unsafe lane changes. It’s also fully electric, so there are no toxic fumes being spewed into the atmosphere.

As the order nears its destination, the waiting customer receives a text notification and heads outside to find the vehicle—car-shaped, but not really a car—waiting at the curb. The customer enters a custom code generated when they placed their online order (or perhaps they scan with their phone) to unlock the compartment and remove their groceries.

It might sound like something out of science fiction, but versions of this future are already playing out across Europe and the United States, with companies conducting a series of test-and-learn pilots in the autonomous delivery space.

Companies such as Tesla and Ford have generated a slew of headlines around self-driving passenger vehicles, but several firms, many bearing futuristic names like Udelv, AutoX, Nuro and Starship Technologies, are working to address the commercial implications.

In recent months, they’ve announced delivery partnerships with companies ranging in size from local/regional chains to corporate giants such as Kroger and Domino’s Pizza. In September, the Oklahoma grocery chain Buy for Less announced that it had teamed up with San Francisco’s Udelv on a pilot delivery program, while AutoX—business slogan: “Automate your everyday”—has announced partnerships with the San Jose, Calif.-based farm-to-table delivery service GrubMarket and Los Altos, Calif. family-owned grocer DeMartini Orchard.

READ: Kroger’s driverless delivery cars hit the street

AutoX users place their order through a dedicated app, with the groceries picked and stored in a temperature-controlled environment. When the car arrives, the customer simply taps the “Unlock” button on the app to retrieve their order from the trunk. AutoX vehicles are also equipped with “mobile shop shelves” in the right rear window, enabling customers to pick up a snack or add to their list.

One state over, in Scottsdale, Ariz., Fry’s Foods—a division of the U.S. grocery giant Kroger, which operates 2,800 stores in 35 states—has partnered with Nuro, a robotics company co-founded by former Google engineer Dave Ferguson, to conduct a test of its technology.

Some experts believe these tests could radically transform the grocery industry. “Autonomous vehicles have tremendous potential to change the game,” says Steve Bishop, managing partner of Brick Meets Click, a retail consultancy in the Chicago suburb of Barrington, Ill.

Check this out: A self-driving delivery van

Indeed, autonomous delivery vehicles are expected to address one of the fundamental challenges of e-commerce: last-mile delivery. In its 2016 report Parcel Delivery: The Future of Last Mile, consulting firm McKinsey said companies are currently spending more than $100 billion a year to get parcels into the hands of customers.

And e-commerce is only going to grow, with a recent report from New York-based 451 Research forecasting it will account for 17.3% of global retail sales by 2022, fuelled largely by the growth of mobile, or “m-commerce.” That’s a lot of deliveries.

Autonomous delivery is expected to help facilitate that growth: McKinsey predicts autonomous vehicles, including drones, will account for nearly 100% of deliveries of business-to-consumer items by 2025. The consulting firm says a combination of droids/bike couriers and autonomous vehicles will handle those duties in large urban areas with populations of a million or more.

The grocery industry could be one of the primary beneficiaries of self-driving delivery. “The reality is that the burden of last-mile has a significant impact on margin for a retailer,” says Sylvain Perrier, president and CEO of Mercatus, a Toronto company specializing in end-to-end solutions for grocery retailers.

Udelv CEO Daniel Laury is blunter, calling autonomous delivery vehicles—or ADVs—a “no-brainer” when it comes to improving the delivery experience. “Delivery is one of the largest costs for merchants, and for consumers it has generally been a frustrating experience,” he says. “By introducing autonomous technology, we’re able to reduce overheads for merchants, meaning savings can be passed on to the customer.”

Laury says ADVs could one day make delivery as ubiquitous as in-store shopping, while at the same time removing complications for retailers around operating, managing and maintaining truck fleets. The convenience factor for consumers, he says, is “huge,” particularly for people who work long or off hours or have difficulty leaving their home.

“With ADVs, groceries will be coming to you instead of you going to the grocery store—at any time of the day or night, to any location, and all of it at an extremely low cost,” says Laury.

Brick Meets Click’s Bishop, meanwhile, says ownership of a fleet of autonomous delivery vehicles would enable grocers to take control of their entire online offering, from ordering through to fulfillment (which is typically outsourced to third-party vendors). “The ownership of the entire process, with vehicles designed to transport groceries, should result in better quality control and improve the shopping experience,” he says. “At scale, this should help a retailer with their online profitability while providing less costly delivery options to shoppers.”

Perrier agrees, saying that entrusting last-mile delivery to another company remains an “extremely great concern,” for grocers still trying to adapt to the new online marketplace.

He predicts stores will employ autonomous vehicles to make what he calls “micro-deliveries” to customers within a three-to four-kilometre radius of a given store, stripping out one of the primary costs of last-mile delivery: labour.

According to one report, drivers and fuel constitute 70% of the cost of last-mile delivery. “If could do it without the labour component ... it would save them so much of the cost burden,” says Perrier.

Yet for all their promise, autonomous delivery vehicles still must clear several significant hurdles before they’re whisking grocery orders to people’s door. That includes everything from obtaining the necessary government approval (“I’m not sure that John Tory would allow autonomous vehicles to roam the streets of Queen St. West,” says Perrier) to thorny issues around liability should the driverless vehicles careen into other vehicles or pedestrians. “We’re still trying to figure out Airbnb,” says Perrier. “ I would hate to be the underwriter on insurance if that thing went awry and hit an oncoming school bus.”

Bishop says the capital investment required to build and maintain a fleet of autonomous delivery vehicles could also be prohibitively expensive, especially for an industry already operating on notoriously thin profit margins.

For now, Perrier says widespread adoption of autonomous delivery vehicles isn’t among the primary concerns for a legacy industry still coming to grips with online shopping. “It hasn’t even hit the edge of the piece of paper yet,” he says. “The cool factor will drive things forward, but I always caution retailers: don’t get distracted by the shiny things you see out there.”

This article appeared in Canadian Grocer‘s November 2018 issue.