Walmart is discontinuing its drone delivery services in Phoenix, Arizona; Salt Lake City, Utah; and Tampa, Florida. The decision stems from the fact that the operations in these cities were not financially sustainable, as reported by Axios. This change follows the 2022 announcement by Walmart and its partner, DroneUp, to expand drone deliveries to these states.

Currently, each drone delivery costs around $30, which DroneUp aims to reduce to under $7, according to CEO Tom Walker. As a result of these changes, DroneUp is shutting down 18 Walmart delivery hubs in these regions and laying off 70 employees, representing 17% of its workforce. After these closures, DroneUp’s delivery services will only be available at 15 Walmart locations, including 11 in Dallas, 3 near Walmart’s Bentonville, Arkansas headquarters, and 1 in Virginia Beach.

Despite the cutbacks, Walmart remains optimistic about the future of drone deliveries. Lindsey Coulter, a Walmart spokesperson, highlighted the positive feedback they’ve received and noted that the program is still in its pilot phase. By focusing efforts in the Dallas-Fort Worth area, Walmart hopes to refine and scale this innovative delivery service.

Alongside DroneUp, Walmart collaborates with other companies like Alphabet’s Wing and Zipline for drone deliveries in the Dallas-Fort Worth area and works with Flytrex in Fayetteville, North Carolina. Walmart is not the only company reevaluating its drone strategy; Amazon also recently announced the closure of its drone delivery service in California.

DroneUp’s CEO, Tom Walker, stated that the company is shifting toward a more strategic phase, focusing on streamlining operations in key areas. The company plans to build a scalable model centered around its autonomous DBX Ecosystem platform, which was introduced earlier this year, with the first implementation in the Dallas metropolitan area.