How Consumers almost have Unlimited Power in the Sharing Economy

Written by: Michelle Volbeda



How the sharing economy gives consumers almost unlimited power over ‘employees’ through rating systems. One of the disadvantages of the sharing economy. 

Key words: Power of the Consumer, Sharing Economy, Rating Systems, Reviews, Empowerment of the Consumer

Lund – It is great that nowadays everything and everyone can be rated. But, there also is a seam side to this: the customer almost gets unlimited power. In the peer-to-peer economies, service-providers for companies such as Uber, a taxi alternative, and Airbnb, a hotel alternative, are scared to death to make the slightest mistake. This article describes the journey of consumer power through the rise of the internet and web 2.0and implications of this power in the sharing economies.

In the new sharing economy, everything is available on call and the position of employer and employees (or better called: ‘service providers’) is vague. Courts and legislators are still trying to unravel the question who can be classified as the boss in these kind of relationships (Dzieza, 2015). Several answers are possible, for instance: the employees are their own boss because they are freelancers, or the online platform – which according to strict rules and computer algorithms divides the work -  is their boss.  Also, there is 

(Economist, 2005) 

a third party which is often overlooked: the consumer. Nowadays, rating systems turn consumers into a new middle man, into managers or chefs who judge the employees sometimes too critically. These ‘new managers’ are very competent for the new sharing economies: always present, free of charge and hypersensitive to the tiniest mistake. The only thing the online platform has to do, is to sum up the scores and discharge people according predetermined standards (Dzieza, 2015). 

rating systems turn consumers into a new middle man

Rating systems are the outcome for firms operating through an online platform. Most have star-rating systems which both buyers and sellershave to fill in during or at the end of the service. This way it is easy to operate at a large scale and to create and control a large workforce for which no training costs nor supervision costs has to be paid (Dzieza, 2015). Also for the consumers this offers advantages, because bad service providers are filtered out of the system. You will never see a Uber-driver with a less than 3 star rating for example, and as a result of that,  consumers do not have to worry about having a bad experience (Iver, 2013). The rating systems guarantee quality. 

Labrecque et al. (2013) define power as “the asymmetric ability to control people or valued resources in online social relations”. This refers to the mutual dependency between at least two parties. Due to rating systems the position of the service providers is insecure compared to that of the customer. Customers give ratings, and based on those ratings the online platform decides whether you have work or not. Employees are powerless, while consumers have power through the rating system. Isn’t it a terrifying idea that every customer now becomes your boss and has a say in whether or not you can make money for living? This is especially horrible since the internet has made consumers into arrogant bastards; expecting a Hilton Hotel service, for a hostel price and who give low ratings for a tiny or no reason.  

The rise of the internet has opened up avenues for consumers to share and comment on all sorts of things which have changed the marketing landscape. Berthon, Pitt, Plangger and Saphiro (2012) describe this revolution as the rise of web 2.0 in which consumers are both creators and users of information. Consumers actively participate via social media by sharing brand and product experiences with friends and strangers (Hennig-Thurau, Hofacker & Bloching, 2013).  New traffic lanes for the convenience of consumers are build (Deighton & Korngield, 2009), such as blogs or facebook, through which consumers are encouraged and enabled to express their thoughts about products and services online. The increasing amount of information access, choice and liberation of consumers with voice and exit have empowered the consumer (Labrecque et al. 2013). 

This have turned the marketing landscape from a bowling game into a pinball game, aiming attention at the fact that marketing incentives are now directed at various constantly changing targets (Hennig-Thurau et al, 2013). In the new environment the customer has much more power than they had before in the bowling game and they are willing to use it. 

A new type of consumer have risen. Consumers now expect customization, communities, connectivity through multiple channels, competitive value andchoice (Wind, 2008). The consumer wants connectivity with brands and share their ideals and passions (BBMG, 2011). The new consumers are not so easily convinced by marketing messages, but look thoroughly at a brand or product before a purchase. BBMG (2011) describes the new consumer as ‘values aspirationals’ and ‘practical purchasers’. They have interest in sustainability, but are forced to make convenient decisions. They communicate through internet and massively express their thoughts.

These new technologies and peer-to-peer networks are together with unresolved environmental problems, global recession and the fact that we trust people more than we trust firms and governments drivers for the sharing economy according to Botsman (2010). From “a network of peers” the structure of the internet has now changed into a “transforming the world of work into a flexible, hip space for creativity and collaboration”(Henwood, 2015, p.13). 

Many people glorify the new sharing economy because of its collaborative value. In her TED Speech, Susan Botsman (2010) describes it as “an economic system based on sharing underused assets or services for free or for a fee, directly from individuals”. Botsman (2010) speaks about a ‘peer-to-peer’ revolution, where hyper consumption has turned into collaborative consumptions. However, there is many criticism on the ‘collaborative’ part of the sharing economy. 

The rise of the internet has managed to eliminate the traditional middle chain and link the needs and wants of consumers at an online platform (Botsman, 2010). This sounds like a great solution which could add value, but there are consequences. Eckhardt & Bardhi (2015) describe the sharing economy as a misnomer and access economy. They highlight the fact that firms in the sharing economies extract profits from the people actually performing the collaborative behaviour. Consumers and service providers have to pay for access to the online platform. Also, has it created consumers which are prioritizing cheapness and convenience over interpersonal communication. Next to this, are peer-to-peer firms noted to neglect worker protections, give low wages, and ignore government regulation (Asher-Shapiro, 2014). Asher-Schapiro (2014) calls it : “a scheme to shift risks from companies to workers, discourage labor organizing and ensure that capitalists can reap huge profits with low fixed costs”. The collaborative part of the sharing economy is therefore questioned.  

the sharing economy is a scheme to shift risks from companies to workers

Word-of-mouth recommendations have always had a huge impact on purchase decisions in for example search/evaluation efforts, social assurance, an increase in willingness-to-pay, trust and loyalty (Hennig-Thurau, Gwinner, Walsh, Gremler & 2004). Nowadays, regular word-of-mouth has turned into electronic word-of-mouth (eWOM), defined as: “any positive or negative statement made by potential, actual, or former customers about a product or company, which is made available to a multitude of people and institutions via the Internet (Hennig-Thureau et al., 2004, p. 39).  

Peer-to-peer companies use this eWOM to measure the quality of their ‘employees’ and sanction those with an average rate below the desired value. Malhotra and Van Alstyne (2014) argue that these kind of reputation systems are more inclusive than licensing regimes because online platforms are closer to the action and undesired behaviour can therefore better be controlled. 

Since Ebay started it, client reviews are described as a way to build trust between strangers (Dzieza, 2015). For example in travelling, Wan-Ju Liang, Ekinci, Occhiocupo and Whyatt (2013) argue that consumers rely on peer-to-peer recommendations because they consider other people’s experiences as objective and trustworthy. On the one hand, the sharing economy is contingent on the quality of review systems, because people trust them to decide whether and what to purchase (Malhotra & Van Alstyne, 2014). An Airbnb hotel-alternative with great reviews is much more attractive than one without reviews.  However, some companies, such as Uber and Airbnb, also use peer-to-peer reviews as regulation. The online platform divides the work according to strict rules and sanctions employees with a bad rating. Instead of showing that you have all the necessary skills at one certificate at the beginning of your job, service providers in the peer-to-peer economy have to constantly prove themselves through the regulation of mutual reviews (Dzieza, 2015). 

The deletion of the middle man in the sharing economies have led to empowerment of the consumer without limits. Ratings can be dependent on all sorts of things. A well-recognized problem in online platforms is discrimination against skin colour or sex. Next to that, can consumers decide to give low ratings for other things such as delay in traffic, not driving fast enough, picking the wrong route or not allow drinks in the car (Dzieza, 2015). Customer reviews have become the primary factor in an automatic system which distributes the work. J., a LA driver for Uber in Henwood (2015) says that passengers love to wield this power over drivers, blackmailing them to do things such as driving through red light or otherwise lose their good rating. Imagine that someone gets fired because of that. 

 (Dzieza, 2015)

The consequences of a bad rating differs, but can be very serious. The computer system which adds up the scores is exactly as racist as the consumers rate the service.  Sanctions can be harsh. Airbnb puts services with a low rating on the bottom of the list (which results in less customers), while Uber is much more strict: drivers below a certain average are de-activated. Or in other words: you are fired.  And there is no appeal process for a bad rating or deactivation (Henwood, 2015). 

The consumer has power over the employee, because the power relationship is unbalanced. Only one party is dependent on the rating of the other party, the employee on the consumer. It is possible for Uber drivers to refuse customers with low ratings, but when he or she does this too often, he also has the risk to be de-activated (Dzieza, 2015). Consumers almost have no risk. Due to this imbalance, service-providers are extremely at their guard for bad consumers. The risk of a bad rating influences the behaviour of the service providers. For example, when a driver of Uber is stuck in traffic, he would rather cancel the ride, than getting a bad rating for the reason that he is late. Furthermore, as Spross (2015) names it, does this imbalance drive us towards a servant economy, where many insecure and underpaid workers spend their time providing excellent services in order to please the elite consumer.  

Consumers have always had power by giving feedback and employees had the risk to be punished for it. However, now through the internet, the high level of responsiveness and ratings of consumers have led to automatization of management. The easiness through which consumers nowadays can give an opinion and the degree to which that opinion has an influence on someone’s profession in the peer-to-peer economy is a horrible thought. 

the high level of responsiveness and ratings of consumers have led to automatization of management

Service providers for online platforms in the sharing economy are forced to always be kind and act as a servant for the consumer, or they will be sanctioned for a bad rating. Theconsumer has power over the service provider. 

All in all, using rating and review systems as quality management is an easy and the most efficient way to form a big amount of various, un-educated employees into a clear, flexible network. But, the employees need some more protection against the new all-demanding consumer. Normally a manager has to have a good reason to fire someone and protect employees against bad customers, while now someone can be fired for no reason. The position of the ‘employees’ is invidious. There are no worker unions or rules to protect the employees. There is no limit to what the consumer can do and this is something the consumer should become aware of. 













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