Is the unstable future of the gig-economy a threat for Retailers buying logistics companies?

by | Jan 5, 2018

Retailers, both online and offline, are acquiring logistic companies & startups, en masse. eBay was among the first, with the acquisition of Shutl. Walmart has bought Parcel, to implement same-day deliveries in New York and then use its tech and experience to do the same in other markets. Target is now the owner of on-demand grocery delivery startup Shipt. Now rumors (probably a bit unreliable) say that both Home Depot and Amazon have some much bigger game in their crosshairs: XPO Logistics, which has 91.000 employees, 1444 locations and is active in 32 Countries (the only courier in the lot and not offering crowdsourced deliveries).

The reason of this sudden interest in logistics solutions has already been discussed long and hard: the explosion of eCommerce has raised shipment volumes and clients’ expectations so much that it has become the single most important element of new retail strategies.

This Christmas saw so much parcel traffic that, as reported by Forbes, for “the first time since Kurt Salmon began measuring holiday shipping in 2012, more than 30% of retailers opted not to provide a “guaranteed” shipping date at all. Retailers that did promise a guaranteed shipping date issued an average cut-off date of Dec. 17, the earliest it’s been since 2014.

Buying logistics entities could be good long term strategy: in-house deliveries on selected “hot” territories guarantee more control on delivery options, service quality and costs. And we know that these costs, especially when it comes to the last-mile, are a virus that rarely lets eCommerce become profitable.

Careful at what you buy, though, because to limit operative costs many of these companies have to rely on gig-economy drivers. So what? You might ask.

Well: in Europe the wind is blowing towards the impending regulation of this kind of cheap labor and if it occurs many startups will find their price models even more unsustainable than they already are.

Think about the European Union declaring, a few days ago, that Uber is a transportation business, not just a technology platform. Britain will take steps next year, following Matthew Taylor’s report on gig economy and has already suspended Uber’s London license. This sets a strong precedent, possibly a game-changer.

On the online marketplaces’ side Amazon recently refused to meet with Italian workers’ unions, causing a strike in its biggest peninsular fulfillment centre (and it happened in Germany too). This is not only about warehouses: on December 5 the Italian Authority for Communications Guarantees has cautioned Amazon Logistics and Amazon City Logistics against ignoring state laws about the regulation of Postal Services (basically killing hopes for a widespread implementation of Amazon Flex in Italy).

Gig-economy has always existed and, in one form or the other, will keep existing. But the sheer proportion it has reached in the last few years, following the birth of so many “tech platforms”, it’s not socially or legally sustainable. It’s not even economically sustainable, because startups keep losing money anyway. As Chris Webb writes in ReCode: “The recent delivery model has only been sustainable up until this point thanks to venture capital money.”

This reminds us how true disruptive tech is there to improve everyone’s life, not only those of founders and users and it surely doesn’t need an underpaid workforce to become profitable.

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