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Received June 2023; Accepted February 2024
Abstract
We quantify the heterogeneous impact of food delivery platforms on sales amounts at the restaurant level, using novel credit card transaction data from 2020 that cover the entire universe of Korean restaurants during the COVID-19 pandemic. Our instrumental-variable regression demonstrates the use of platforms increases a restaurant's monthly sales revenue by approximately 1,545 USD. Furthermore, we demonstrate the impact is particularly large on small restaurants. The bottom-decile restaurants experience a 97.6% increase in total sales revenue from platforms. Our findings show that small firms-not just 'superstar firms-can be the main beneficiaries of technological advancements, depending on industry characteristics.
Keywords: food delivery platforms, online shopping, food delivery, COVID-19
JEL Classification Codes: L81, L83, L10
(ProQuest: ... denotes formulae omitted.)
I. Introduction
The proliferation of online platforms has provided customers with a convenient and flexible means of purchasing goods and services without needing to physically visit brick-andmortar stores, offering greater convenience and flexibility. Food delivery platforms are no exception to this trend. In the US, the delivery market has experienced significant growth, doubling from 2018 to 2019 and more than doubling during the COVID-19 pandemic (Ahuja et al., 2021). However, the impact of this shift on the performance of firms has yet to be fully understood and requires empirical investigation. Specifically, determining the extent to which a firm's sales revenue changes when adopting food delivery platforms, compared with relying solely on non-platform sales, is an empirical question that may vary depending on the firm's characteristics. The answer to this question would be of interest to a range of audiences, including business owners considering adopting online platforms and policymakers concerned about market and welfare implications.
We quantify the influence of online platforms on the total sales of restaurants in the Korean restaurant industry during the COVID-19 pandemic, where consumers have multiple options for ordering food: platform orders, and non-platform options such as on-premises dining. The key challenge in establishing the true influence of food delivery platforms is distinguishing the true influence from restaurant- and regional-level heterogeneity. Endogeneity may arise if platform adoption is correlated with factors specific to the restaurant, region, or time period. To address potential endogeneity issues, we employ an instrumental-variable regression with a rich set of fixed...