And How It Might Come Back – A Look At Consumer Drone Market Trends
As we covered in our recent blog post about the new FAA registration data, the American consumer drone market hit a snag in 2019. The market’s stagnation is marked by a paltry 6% growth in registration numbers – an indicator for consumer aircraft sales.
Put into the larger context of where stakeholders expected the market to be, we are far off from target. Looking at just the FAA US aerospace forecast from 2017, the industry has quickly dropped to 34% behind the base growth forecast in 2019.
But where did the market go wrong? What is causing this leveling off? And what should we expect in 2020? We break down the consumer drone market trends in this post and look at some new data that shows the COVID-19 global pandemic might have a positive impact.
A Look at the Consumer Market As It Expanded – DJI’s Rise
The consumer drone industry is mostly defined by the dominance of DJI as previous consumer players have either exited the hardware sector entirely (GoPro, 3D Robotics) or doubled down on the commercial market (Autel, Parrot) where they see potential for more growth and less price-sensitive customers.
One way to look at this is to see the price war that happened as competitors such as Yuneec, 3D Robotics and GoPro made their first foray into the hobbyist gimballed camera drone market that DJI created.
As new competitors entered the market, DJI remained one step ahead, releasing products at a comparable or superior performance with lower prices. At the same time, DJI better covered the entire market with a variety of new offerings, both lowering and increasing prices simultaneously to attract a wider range of customers.
While some (including the Pentagon’s chief weapons buyer) have stated this early market trend as evidence of “dumping” by DJI that has destroyed the small UAS industrial base in the US and elsewhere, there isn’t enough evidence to make the dumping claim. DJI keeps its pricing consistent globally (taxes and tariffs withholding) and a 2015 investment of $75 million from Accel is on-par with investments in Yuneec and 3D Robotics.
Instead, we do see evidence of DJI’s investment in technology and innovation of its manufacturing with a recent video showing how automated their production has become. All together, this suggests that DJI’s early investments in manufacturing capability and vertical integration let it make profits at prices competitors simply could not.
However, while our common knowledge of monopolies will speculate that DJI should have risen its prices as competitors exited the market – DJI has opted for a different approach.
A New Type of “Monopolistic Effect“
Instead of raising prices, DJI has steadied its segmented pricing strategy while continually trying to reach new “lows”. With the Mavic Mini released at the end of 2019 priced just below $400 at launch.
This makes sense when considering that the drone market has historically failed to capture the female market and a broader public appeal. Lowering prices and testing out new form factors and control schemes has been DJI’s attempt to grow the market. Seemingly that hasn’t entirely worked, with the Mavic Mini de-emphasizing earlier attempts at different control schemes, and registration data signalling a slowdown.
So how has DJI been maximizing its profits? While DJI has continued to invest in its product lines and lower prices, it has increased profits by slashing sales and marketing efforts. From 2015 – 2017, DJI was investing in a variety of activities across the globe; a series of drone photography exhibitions in major cities, local “new pilot experiences” reaching 200 cities in 2016 alone, a multi-year partnership to showcase drones at the FIA Word Rally Championship, a global rental and photography contest with National Geographic and live-streamed expeditions with Good Morning America to explore lost caves and an erupting volcano.
In comparison, 2018 – 2019 has been dominated by DJI focusing primarily on online efforts and product launches. Cutting the aforementioned programs and dropping out of NAB in 2019. While previous DJI product launches have taken place in Grand Central Station and simulcasted from across the globe, DJI has not held a physical, large-scale launch event for a drone product since its Mavic 2 Pro and Zoom products in late 2018.
While it’s hard to estimate the impact these adjustments have had on the market’s growth, I can speak from personal experience how much a hands-on product demo can help to introduce drones to new consumers. Putting your hands on the sticks communicates just how easy it is to fly. If DJI isn’t investing in hands-on experiences, who is?
Signs of a Consumer Market Surge
So is there any saving of the consumer market, or is it all downhill from here? Yes, and no. There are some signs that COVID-19 has caused a short-term bump in interest for consumer drones.
If you look at Google Trends global data around keywords that suggest high purchasing intent such as “best drones” and “buy drone”, we are able to get a proxy for real-time interest in consumer drones.
This is a great sign, but when you zoom out, this is only a blip in a longer trend towards disinterest in consumer drones that peaked in 2016 (visualised below). Unless we have a new value proposition for consumer drones, and a new way to communicate it, this won’t change.
There is hope new offerings from Skydio that are focused on autonomy will open up a new category of consumer drones and potentially a new customer base. Otherwise, COVID-19 will be seen as a key event that didn’t halt the decline of consumer drone sales, just delayed it.
Dive deeper into the consumer drone market trends of the American drone industry in our latest free report titled “Historical Performance of the American UAS Industry”. Additionally, if you are a stakeholder in the drone industry – which can be anything from a drone hobbyist or commercial pilot to business buyer or public agency using drones – consider participating in our Annual Market Sector Survey.