Labeling increases customer engagement with Black-owned restaurants.

Racial bias remains pervasive in the United States, affecting aspects of life ranging from job seeking to Airbnb stays. But racial attitudes are not monolithic, notes Johns Hopkins Carey Business School Professor Michael Luca. And as awareness of bias has grown, people have looked for ways to support Black participants in the market. Recent features on platforms, such as Black-owned business labels, have sought to make it easier for people to do so.

Research Luca and colleagues conducted following the death of George Floyd and the ensuing Black Lives Matter protests in the summer of 2020 shows that such features can have an impact. The researchers found that after the online platform Yelp rolled out a new feature making it easier to identify Black-owned restaurants, customer engagement increased, most markedly in left-leaning communities characterized by lower bias against racial minorities.

“The feature empowered consumers looking to support Black-owned businesses,” says Luca, who collaborated with Abhay Aneja at the University of California, Berkeley, and Oren Reshef, at Washington University, on the study “The Benefits of Revealing Race: Evidence from Minority-owned Local Businesses,” which is coming out in American Economic Review.

A significant jump in restaurant orders and revenue

Luca, who is director of the Technology and Society Initiative at Carey Business School, has conducted research and done advisory work on making online platforms more inclusive for more than a decade. His earlier work prompted Airbnb, the online marketplace for short- and long-term homestays, to address discrimination on the platform, and helped to develop strategies to reduce the potential for discrimination among platform users. His work on this topic was used to develop strategies to help corporate leaders reduce the potential for discrimination among platform users. This topic is now taught widely in MBA programs.

For this study, Luca and colleagues analyzed data involving Yelp, one of the largest user-generated review sites in the U.S., which also allows users to directly order food from local businesses. In June 2020, Yelp leaders added a new feature on its platform nationwide, the “Black-owned Business Label,” aimed at supporting Black entrepreneurs by increasing the visibility of Black-owned businesses. “The feature made it easier for people to search for Black-owned businesses on the platform,” Luca notes.

To measure the impact of the new label, the researchers analyzed a weekly dataset of restaurants on Yelp in seven large U.S. cities, from April 2019 through August 2021. They also used data from the National Establishment Time Series to identify additional minority-owned businesses that did not have the label on Yelp, and data from SafeGraph — which tracks aggregated business-level visits to locations using smartphones — to better understand foot traffic (dine-in and take-out food purchases).

Zeroing in on consumer identity

Next, in an effort to identify where the increase in traffic for Black-owned restaurants was most pronounced, the team zeroed in on data describing consumers in local markets. Here, they used measures of political identity based on an Election Atlas; zip code-level data on presidential vote share from the American Ideology Project; and zip code-level average racial prejudice measures derived from the Implicit Association Test, which has been used to chart local variations in racial prejudice.

To explore how Yelp’s new label affected the racial composition of customers, the researchers analyzed photos of Yelp reviewers of the businesses in their sample. “We were interested in understanding whether the intervention was encouraging allyship or relying more on Black restaurant-goers. Data on reviewers helped us to get some sense of this,” Luca says.

Their findings? The main effects of labeling of Black-owned restaurants are driven primarily by neighborhoods with higher shares of white residents. Also, labeling restaurants as Black-owned businesses primarily increases the number of white restaurant reviewers. “The results suggest that the feature increased patronage of Black-owned restaurants, particularly among White consumers,” Luca says.

What’s more, the impact of the feature varies with other indicators of underlying interest: they found the effects to be stronger in areas of lower implicit bias against racial minorities and in areas where the majority of the population voted for the Democratic party candidate. 

Luca and colleagues found that the new label was more helpful to Black-owned restaurants that were already highly rated, rather than struggling restaurants. “The results here suggest that a policy of increasing the visibility and business activity of Black-owned firms will be most beneficial to high-quality firms,” they conclude.

Using online platform design to benefit marginalized groups

The findings are particularly salient, Luca notes, “in a world with anti-Black bias.” Unlike traditional models in which all users immediately become aware of minority ownership, the label instituted by Yelp followed an opt-in approach: consumers chose to actively learn about a seller’s race.

The study’s results, Luca says, underscore the importance of online platform design and “the role that design decisions can play in supporting historically marginalized groups.” Specifically, he says, “Thoughtful platform design can facilitate support for Black business owners.”