In June 2020, the business-review website Yelp introduced a feature allowing consumers to search for Black-owned restaurants. As professors who study digitization, inequality, and the economics of technology, Washington University in St. Louis was interested in understanding its effect. digitization, inequality, and the economics of technology,
They found that restaurants labeled as Black-owned saw a 65% increase in online traffic, more searches and calls, and higher sales through food orders and in-person visits. These results suggest that for many Black-owned businesses, a simple change in their visibility can create new opportunities for growth.
However, the impact varied by location. The gains were strongest in politically liberal areas and places with lower levels of implicit racial bias, as measured by regional variation in implicit-association test scores.
This wasn’t just a 2020 trend – in follow-up analyses, they found similar results among businesses that opted into the feature later. They also collaborated with the online furniture company Wayfair, which launched a “Black Maker” label on its site in 2023, and found that it led to a 57% increase in web traffic. Finally, Yelp rolled out a Latino-owned label on the platform late that year, which led to a similar increase in consumer engagement.
Why it matters
This research has implications for business owners, digital platforms and policymakers. Growing awareness of racial inequality has led to increased corporate and customer interest in supporting minority-owned business. It also led many companies to make commitments to promote racial equity.
However, more recently, many companies have dismantled these efforts. Target recently announced that it was eliminating its program to highlight Black-owned businesses. Their findings suggest that increasing the visibility of minority ownership – a relatively low-cost change – can substantially improve economic outcomes for Black-owned businesses.
Businesses should measure and evaluate their impact to ensure their programs are effective. A well-designed program can benefit the bottom line, while a poorly designed one risks being ineffective or even counterproductive.
It’s important to acknowledge the potential risks. Past research indicates that revealing racial identity sometimes can lead to discrimination or backlash – poorly implemented policy can backfire. Yelp’s initiative design empowered users looking to support Black-owned businesses while allowing other users to continue searching in alternative ways.
That means policy design is crucial. What matters isn’t just what information is revealed, but also how it’s communicated. Analysis shows that customer demand and preferences vary considerably across locations and demographics.
What still isn’t known
While research suggests that businesses experienced economic benefits from adopting the label, it’s crucial to understand which policy designs work best in the long run. For instance, Yelp’s program used an opt-in feature.
However, open questions remain. How are platforms affected by labeling businesses? What other types of labels might be impactful, and for which types of businesses? Could some interventions backfire?
Another key question is, which customers respond to racial identity disclosures? Recent advances in data analytics can help companies refine their strategies.
Ultimately, the study is a step toward understanding how transparency and visibility can shape economic outcomes.
Source: The Conversation (Edited by d-mars.com)
