As online platforms have spread, research results have shown that the polarization of the retail and restaurant industries, which have a high proportion of self-employed individuals, has intensified. This phenomenon is particularly pronounced outside the metropolitan area.
The Bank of Korea announced a report on the 17th titled "The impact of online platform growth on local self-employment and response directions." The report was prepared with the participation of Jeong Min-soo, Head of Team in the Regional Economic Research Department, and Director Jeong Hee-wan.
According to the research team, the expansion of online platforms has increased consumer benefits due to reduced information costs, but this process has widened the gap among self-employed individuals. Looking at the polarization index, or the distribution ratio of self-employed individuals, the retail and restaurant sectors, which have a high proportion of self-employed individuals, showed a significant upward trend, rising from an average of 109.9 times and 31.1 times, respectively, in 2018-2019, to 235.3 times and 34.8 times in 2022-2023.
The degree of polarization intensified based on region, type of store, and scale. In the case of online distribution platforms (retail), the concentration of non-store retail businesses in the metropolitan area (such as telemarketing) and the decline of traditional store retail in non-metropolitan areas have widened the gap between regions. Within the retail sector, larger businesses or those that adopted online sales, or those with a diverse product composition, performed better than those that did not.
Specifically, when the proportion of online consumption increases by 1 percentage point (p), regions with many businesses that have adopted online sales saw a reduction in the number of self-employed individuals that was 2.2 people (about 30%) smaller than in other regions. Additionally, the sales growth rate gap between large and small retail businesses was analyzed to be 5.1%p in the metropolitan area and 7.2%p in non-metropolitan areas, indicating that polarization is more severe in non-metropolitan areas.
The introduction of food delivery platforms (restaurant industry) achieved higher performance as the size of businesses, operating years, and delivery ratios increased. The gap by size was particularly pronounced in non-metropolitan areas; when the proportion of online delivery food increased by 10%p, the sales growth rate gap between large and small restaurants expanded to 3.2%p in the metropolitan area and 6.3%p in non-metropolitan areas. In terms of years in operation, the spread of delivery platforms favored already established businesses more than new startups (1-2 years), while pubs with low delivery ratios and Korean and non-alcoholic beverage businesses saw an increase in closures.
The research team also analyzed the impact of government financial support (credit guarantees, loans) on the performance of self-employed individuals. Based on investigations during the spread of the novel coronavirus (COVID-19) in 2020, financial support was found to increase the sales of beneficiary businesses and reduce the probability of closure. However, the sales improvement was concentrated in specific groups such as early-stage startups, young people, and small businesses, while the remaining groups only experienced a decrease in closure probability. Furthermore, small-scale support (less than 20 million won) was found to have minimal effect on improving sales and limited preventive effects on business closures.
The research team judged that there were negative external effects where businesses with low productivity or continuous sales decline receiving support hindered the growth of other businesses with high potential. In fact, the proportion of support for groups with low financial support effects was found to have actually increased.
The research team noted, "It is necessary to expand the safety net for self-employed individuals who are pushed out of competition during the expansion of online platforms, while financial support should focus on enhancing capital accessibility for self-employed individuals with high potential to ensure growth opportunities," advising that "especially, financial support should be carefully targeted at early-stage startups, young individuals, and small businesses and should be provided at sufficient scales."