Making it easier for consumers to find Black-owned businesses online can lead to a substantial increase in their demand, according to new research.
The study, conducted by Johns Hopkins Carey Business School Professor Michael Luca, in collaboration with UC Berkeley Professor Abhay Aneja and Washington University Professor Oren Reshef, examined the effects of a policy implemented by Yelp beginning in mid-2020, which allowed restaurants to self-identify as Black-owned and enabled users to more easily search for Black-owned businesses.
The research found that restaurants with a “Black-owned” label saw an increase in customer engagement, as measured by online traffic, calls, orders, and even in-person visits tracked via cell phone.
“Business leaders who are mindful of the societal footprint they want to leave can actively design their platforms to reflect it,” said Luca.
Looking at Yelp’s Black-owned business initiative, the researchers found that the effects were stronger in areas with lower levels of implicit racial bias as measured through data from Project Implicit, a nonprofit organization dedicated to advancing the science of implicit cognition. The policy taps into a pre-existing desire among certain consumers to support Black-owned businesses.
The authors used a variety of approaches to separate the effect of platform initiatives from other factors, such as the Black Lives Matter protests that occurred around the same time as Yelp’s initial policy change. For example, they look at how business changes for Black-owned restaurants that received the label relative to Black-owned restaurants that did not, and also examine later adopters of the feature. The authors found similar, but smaller, effects when looking at a Latinx-owned feature later launched by Yelp.
To explore the broader phenomenon, the researchers turned to a similar policy enacted on Wayfair’s furniture sales platform, which launched a label that allowed for customers to search for Black furniture suppliers on its website in 2023, and found evidence that customer engagement improved with the use of a label.
The study implies that certain policies have the potential to improve the performance of minority-owned businesses, but such effects may depend on the characteristics of the consumer base. However, when carefully thought through, design changes on online platforms have the potential to impact the success of minority-owned businesses.
Over the past decade, Luca, who directs the Technology and Society Initiative out of Carey, has worked to assess and improve the societal impact of tech companies, including fostering an online economy that enables opportunity for historically marginalized groups. His earlier research includes work that sheds light on racial discrimination against Black users of Airbnb and laid out a path to mitigate such bias. In response to the research, Airbnb and others have incorporated aspects of the proposals including changes to their platforms and analytics.
The latest study is available upon request and is forthcoming at theAmerican Economic Review.
