The Highly Competitive Consumer Drone Market

Consumer drone technology has gained incredible popularity in the past year. Drone companies are fighting tooth and nail to create unique, intuitive and innovative drone technology that not only stand out in the market, but also more affordable. However, some have succeeded while others have been held back, whether it’s funding, lackluster sales or insufficient R&D capabilities to innovate. The ruthlessness of the competition has shown its form this past year as a surprising number of drone companies or tech companies entering the drone arena have experienced different downfalls.

Just last month, drone startup Lily Robotics announced it was shutting down. Despite its 34 million USD in pre-orders, the startup was unable to secure financing to unlock its manufacturing line. “We have been racing against a clock of ever-diminishing funds,” founders of Lily drone stated.

Forbes reported how Lily’s demise is [just] the latest high-profile blunder in the difficult drone industry. “Late last year, GoPro, which had been promising a flagship drone for more than a year, had to recall its quad-copter, Karma.”

The recall was mainly a result of battery malfunctions that had its drones losing power mid flight. Soon after, the decision to cut about 200 jobs in an attempt to reduce operating expenses was announced. CNN Money noted that this came “just weeks after GoPro posted a significant sales decline and larger-than-expected net loss for the the third quarter [of 2016].”

Layoffs have darkened even Parrot’s story, which has a more extended history of building drones. Earlier this year, the company announced that it would be laying off a third of its employees (290 employees), in its drone division. Parrot’s struggle comes hand in hand with its attempt to gain consumer market share that is currently dominated by DJI.

The Verge analyzed why companies may be crumbling under the market pressure, “It’s hard to sustain growth with expensive electronics that get purchased once for niche industries and upgraded rarely over the next two or three years.” This is especially so for companies that only hold single digit market shares, like Parrot and 3D Robotics.

3D Robotics has in fact now redirected its focus to developing software for other drone makers, like Site Scan, an aerial analytics platform. The restructuring has come after 3DR experienced less than satisfactory demand of its Solo drone.

The former chief revenue officer of 3D Robotics himself stated, “It’s just going to be inherently more difficult for a Silicon Valley based, software-focused company to compete against a vertically integrated powerhouse manufacturing company in China.” 3DR CEO puts it simply, “Drones are really really hard to do well and you can’t just buy the parts.”

The challenge for most companies competing in the consumer drone market is getting such complex products out on the shelves at a competitive price and with quick turnaround, which Chinese manufactures like DJI or Yuneec are able to do. Though consumers are interested in diverse styles of drones, consumers look for something that has all three – easy to use, safe in the air and at an affordable price point. It will be interesting to keep an eye on what’s to come as more start-ups and players emerge from the Chinese market.

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