DEEPER DIVES: Should Gigwork's Future Be In Warehouses And Not Delivery?

Good Morning,

First, as always, thank you for joining. Each week we add new subscribers as the newsletter’s popularity keeps growing within the industry.

This is edition 42 of the newsletter! Not bad for the first year.

Today’s articles are going to be the last for the newsletter in 2024. The next edition will be published January 5, 2025.

I want to thank all of you for joining each week. The amount of feedback and support for the newsletter has been phenomenal.

Two things to get your creative juices flowing as you focus on making key changes for 2025.

Let’s get into it

Here’s what this issue brings:

• Will warehouses become the real winners of the gigwork economy? Here’s why it’s a strategy that I think gives them an edge
  

• My 2025 predictions. I’m sharing all of what I think is going to be the most important trends and changes for the new year. I’m not holding anything back!
  

Gamifying Gigwork Is Making Platforms Billions, But How Long Can They Keep Killing The People Doing The Work?

Last-mile delivery drivers in the gig economy are caught in an unsustainable economic model.

The promise of flexibility to work whenever you want doesn’t hold up when drivers are making less than minimum wage.

Study after study shows the same thing. That the majority of drivers make well below minimum wage once you factor in expenses.

One such study revealed earnings as low as $9.21 per hour after accounting for expenses.

Why?

It’s the same root cause that’s plaguing the transportation industry—a relentless focus on low cost.

Despite have TWO types of customers, delivery platforms are designed to prioritize the customer that is buying. This intentional choice is forcing wages to the bottom.

The platform’s goal is one thing. Sell more.

And they are doing it by taking the easiest path.

Discounting.

This cost-cutting strategy has created a race to the bottom in worker compensation. For drivers, it means inconsistent earnings and payment structures, with platforms benefiting from a lack of transparency (despite claiming that they are more transparent than ever!).

The Illusion of Control in Gigwork Platforms

Gig platforms like to sell on the dream of control.

Drivers can work when they want, where they want.

But in reality, gigwork drivers are stuck in a prison of dependency.

Time is wasted waiting for gigs, while their actual control over earnings is non-existent.

Algorithms drive the show.

Algorithmic wage discrimination adds another layer of complexity.

Platforms use personalized pay rates calculated by systems that no one understands.

Drivers performing the same task, at the same time, in the same place, often get paid differently.

Why?

It’s not clear.

Driver behavior metrics—like acceptance rates or responsiveness—can influence earnings, but even the platforms themselves likely don’t fully understand their algorithm’s nuances.

Warehousing: A Better Path for Workers?

As e-commerce continues to grow, warehouses are the strategic weapon of fulfillment.

Unlike gig platforms, warehouses operate in controlled environments with predictable workloads.

This stability would give them a huge advantage in addressing the worker compensation challenges faced by last-mile delivery.

Warehouses can break the cycle of exploitation by offering consistent work and fair pay.

With growing demand for fulfillment, this model could become a win-win-win for businesses, workers, and retailers alike.

I’ve shared this idea before, so you already know that I feel that Social Commerce is disrupting traditional fulfillment.

Unlike traditional eCommerce flows, it introduces wild unpredictability in order patterns and a wider diversity of products.

These shifts make it harder for large, centralized 3PL models to keep up (without big investments into robotics and automation).

To stay competitive and relevant, more 3PLs will embrace hub and spoke models that create micro-warehouses (smaller facilities strategically located near consumers).

In addition to being able to support different wage structures, warehouses also offer a better benefits to reduce environmental impact or logistics.

By consolidating operations and putting more of the right stuff in the right places, they can minimize the number of small shipments being done.

For example, grouping orders into fewer, larger deliveries can cut transportation-related emissions by up to 40%. Pair this with new go to market strategies like trigger (volume threshold) based deliveries and more sustainable vehicles like EVs or cargo bikes and you start to make a real impact for the planet as eCommerce activity continues to rise.

The Costs and Challenges of Automation

One of the major reasons why I see an opportunity for 3PLs and crowdsourced labout is because of the fact that automation and robotics are changing the game.

But not without challenges.

Smaller providers face real barriers to entry.

Costs for even basic systems range from $50,000 to $500,000, while full-scale solutions can run into millions.

Beyond costs, there’s the challenge of integration also.

Smaller warehouses often lack the expertise to implement these systems effectively or to implement systems that make sense for their varied activity base.

As a result, many smaller providers will have to look for hybrid solutions that balance technology with human labor in the short to medium term.

The cost of these automated systems is dropping, and there are some companies that are looking to further democratize access, however that won’t happen fast enough compared to the giants that a investing billions into these solutions today.

Why 3PL Warehouses Outperform Delivery Models

Warehouses, especially 3PLs, have inherent advantages over delivery platforms:

1. Order Density and Stability: Predictable order volumes allow for better planning and resource allocation.

2. Fair Compensation: With stable revenue streams, 3PLs can pay workers more per engaged hour, reducing waste and exploitation.

3. Quality Tracking: Warehouses can track and reward high-performing workers, fostering a more motivated workforce.

4. i: By aligning labor costs with activity levels, warehouses can optimize operations without compromising on fairness.

Micro-Warehouses: The Future of Fulfillment

Micro-warehouses are here and they will only get more popular.

These smaller facilities, located closer to consumers, allow for more efficient (and effective) fulfillment of high-demand products.

They complement larger “master” facilities that handle less dense markets or slower-moving SKUs, as well as the replenishment of micro-warehouses and retail stores.

By bypassing traditional flexible staffing solutions (which take a large cut of workers’ earnings), warehouses can offer better wages directly to workers - improving overall quality and performance.

This disrupts the old model of fulfillment that relies only on large, centralized facilities, making the system more flexible and adaptable to an eCommerce market that is quickly changing to meet the needs of an attention economy.

The gigwork delivery model’s failure to provide fair wages is a wake-up call.

3PL warehouses have the tools, stability, and opportunity to step in and create a better offer for workers while increasing capacity and throughput for the retailers and brands they serve.

2025 Is Around The Corner
Here’s My Predictions For What’s Coming

My work gives me a unique perspective.

I get to work on both sides of the fence.

I work with retailers and brands to help them increase their sales and execution by leveraging their operations.

On the other side, I still do what I’ve always done throughout my career. Help make sure that service providers have a sustainable model that drivers the highest level of profitability and customer experience.

So, with all of the work that I do, and the content I share, here are my (key?) predictions for 2025 in no particular order of significance:

• AI Agents - Probably going to be one of the biggest changes you will see. From sales reps to service coordinators, AiA will be popping up everywhere. The amount of work being done simply with back and forth emails is straightforward but takes up way too much time and attention to not be a strategic opportunity for most businesses
  

• Regionalization - For both physical retail and eCommerce brands, more people are going to be looking to better align their inventory for the customer base that surrounds them (either the store or their warehouse). Having the same product in every location and treating all activity as the same is a losing strategy in an ultra cost-competitive market
  

• Returns Management - More front loaded returns management. The pace that retailers need to continue to sell means that even more physical product would end up being handled as returns. It isn’t sustainable (in any way). Watch for more programs, offers or conditions that will work to manage consumer shopping behaviour from the start of the cycle rather than the end
  

• Consolidation - Particularly in the last mile and bulk transportation space, you will see smaller players get absorbed by larger ones. This will happen either through M&A activity (there’s a number of people on both the buy and the sell side right now) or simply because of attrition
  

• Authenticity - AI and rapid software development is blowing the doors of what can be done. Because of the ease of access of these tools, everyone is going to double down on content. But this means that you are going to be flooded with a lot of weak, and generic stuff that all leverages the same base templates. Whether you are a retailer trying to reach consumers, or a service provider trying to reach brands, real will become rare, so make sure you use it.
  

• Inventory Management - I’ve shared for a while that the best immediate use case for new tech in Supply Chain and Logistics is on the inventory side. The days of not having real time inventory visibility or a unified view of your store and warehouse stock are over. You need to be able to provide customers with clean experiences and be able to make solid offers on your product knowing exactly where it is and how you can get it to the customer.
  

• Scheduled Delivery - Certainty is finally claiming its rightful place in your execution. It’s what consumers have always wanted and everyone is starting to see it. More and more retailers are starting to offer a buy and schedule structure to their checkout experience. I love it. But, it also requires changes to how you execute and how well you are aligned with your partners. If this isn’t on your radar for 2025, you’re missing the biggest shift in consumer expectation.
  

• Incubators - The biggest opportunity as a 3PL isn’t the big logos. Everyone wants them and those players have solutions. Being able to support and help grow new brands with low sales volume is a key unlock to your future. If you want to keep building your revenue on easy transactions, you better invest a lot into infrastructure to keep up with those focused on world class efficiency.
  

• Intentional Diversification - Rate shopping as a customer is a weak strategy. You get varying service levels and tell you customers every day that you pick the cheapest option. While things like carrier diversification has been the most popular piece of advice from experts, the pendulum has swung too far. Diversification has one real goal, mitigating risk. You will see more people who are doing this but with fewer partners.
  

• Beginning Of The End For Aggregators - The world doesn’t need another platform to help you print a shipping label. Everyone is getting 80% off those wholesale rates. It’s easier than ever to plug into your carriers directly and be able to get credit for your own account activity.
  

• Partners Not Just Providers - Service providers that stand out from the crowd and who will see more growth are the ones that can give more value than just a price to their customers. Selling on low cost is everyone’s game. The real key (and what I’m seeing over and over) are retailers/brands than want a partner that can help them grow (and no, that doesn’t mean you do the shipping so they can focus on sales!)
  

• Data Savviness - The best smaller retailers/brands or service providers that will prosper in 2025 (and beyond) will be those that are able to work with their data. Not just sales data, not marketing data, but all of it. To weave together different insights from different sources and use it to be very surgical with their decisions. Data is the backbone of how Amazon and Walmart keep spinning their flywheel. With more data available than every before, those that use it, win (no, the canned reports and metrics from your WMS, TMS, OMS, etc aren’t enough). This is single handedly the biggest change I have seen in the last 6 months and why I have spent more time helping my clients get more value from their information than anything else.

That’s it for this year! Thanks for being here. See you all again in 2025.