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Customers' conscience: An avenue for boosting sales or a deadend?

May 11, 2013

Online purveyors of the "disruptive technology" model espoused by the likes of airbnb and onefinestay have taken to suggesting that their enterprises serve a social purpose beyond their brazenly illegal (in New York and Amsterdam) conduct. 

Lobbyists seeking to overturn or at least water down New York's laws against selling rooms in homes have begun to tout the (specious) fact that listers on their website are New Yorkers whose ability to make ends meet is dependent on income from the illegal hotel room revenue absent which many are likely to be turfed out of their homes. Unsurprisingly, Airbnb offered a self-serving self-commissioned survey in support of its dodgy claim.

Academic suggestions to the contrary notwithstanding, the foregoing appeal to customers' conscience, whether genuine or not, has thus far failed to make inroads into customer sales. Conscience keepers for the retail industry have striven mightily and long to make customers aware of sweatshops that put together garments peddled by retailers across the clothing spectrum.  For instance, the Seattle based Network for Business Innovation and Sustainability (NBIS) has since 2007 touted a certification for corporations that have a formalized system of generating positive impact for society somewhat oddly called a "Certified B Corporation". 

NBIS's  drive for corporate social responsibility included Seattle area big box retailers where in 2007 picketers lined the outsides of a store to  "underscore the fact that companies importing supplies and products from overseas have to pay a lot more attention to the working conditions and environmental rules in those countries -- or risk the wrath of consumers and negative publicity." Nearly six years later, the tragedy in Bangladesh seemed to underscore just how unsuccessful these efforts have been.

A recent Reuters report documents just how intractable the problem is as customers remain oblivious and even distinterested in the issue. Similarly, several years ago customers' conscience  underpinned the efforts to label the coffee bean trade with the coveted and allegedly virtuous "fair trade" label for growers.  The effort has done little for the growers and even less for the customer as fair trade coffee put out by higher end outlets is always more expensive with no evidence of the surplus going to the growers.

Evidence from the field points to what economists have long pointed out: that both customers and merchants maximize their respective utilities with a focus on price almost to the exclusion of all else. Social conscience rarely if ever enters the picture. Were it not the case real hotels, particularly in New York City, would have done better by merely pointing to the fact that tens of thousands of hotel employees, all from the greater NYC area, benefit from their patronage.

Not so paradoxically, illegal hotel rooms are often listed by the well-off and the prominent seeking to make extra bucks from illegal hotel room sales with nary a thought for either the law or one's conscience.

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