🚨 Platform Economy's Light and Shadow: Rural Small Business Employment Plunges, Polarization Deepens
Today Korean Economic News | 2025.07.18
📌 1% Rise in Online Consumption Cuts 8.3 Retail Jobs per 10,000 People in Non-Metro Areas..."Selective Support Needed"
💬 The rapid growth of online shopping and delivery platforms is bringing structural changes to small businesses nationwide. Small business employment is dropping sharply in non-metropolitan areas, and restaurant closure rates have increased significantly. According to Korea Development Institute (KDI) analysis, when online consumption increases by 1%, retail employment decreases by 8.3 people per 10,000 population in non-metropolitan areas. Meanwhile, some businesses that actively use platforms are actually growing, deepening the gap between large and small businesses. Experts point out that "rather than blanket support, we need selective approaches that focus support on small businesses with growth potential and provide proper safety nets for businesses that have lost competitiveness."
1️⃣ Easy to Understand
Delivery apps and online shopping have made our lives more convenient, but they are creating a survival crisis for neighborhood stores. Small stores in rural areas are being hit the hardest.
Let me first explain what "platform economy" means in simple terms. Platform economy refers to economic activities of buying and selling through apps like Coupang, Baedal Minjok (delivery app), and Yogiyo. These platforms have grown rapidly and greatly changed our shopping patterns.
The most serious problem is the gap between rural areas and metropolitan areas. In metropolitan areas like Seoul and Gyeonggi Province, restaurants can survive even when delivery orders increase, but the situation is different in rural areas. Many stores find it hard to afford delivery platform fees because they have smaller populations and relatively fewer delivery orders.
The actual numbers show the situation is even more serious. Every time online consumption increases by 1%, the number of people working in retail businesses decreases by 8.3 per 10,000 population in non-metropolitan areas. This means neighborhood supermarkets, clothing stores, and shoe stores are closing one by one or reducing staff.
The restaurant situation is similar. As delivery orders increase, the number of self-employed people working in offline restaurants is decreasing. Since customers order delivery instead of coming to eat at the store, there's no need for hall service staff or store management personnel.
However, not all stores are struggling. Some stores that make good use of platforms are actually attracting more customers and hiring more staff. For example, if a chicken restaurant famous for good food registers on delivery apps and attracts customers from far away, it might become so busy that it needs to hire more kitchen staff.
In the end, "polarization" is happening. Stores that use platforms well are growing more, while stores that can't are becoming more difficult. It's similar to how rich people get richer and poor people get poorer, but this phenomenon is happening in the small business world.
Now the government needs a realistic approach where, instead of helping all small business owners equally, it gives growth opportunities to promising small business owners and helps those who have lost competitiveness find other jobs.
2️⃣ Economic Terms
📕 Platform Economy
Platform economy means economic activities conducted through digital platforms.
- Representative examples include online shopping malls like Coupang and 11th Street, and delivery apps like Baedal Minjok and Yogiyo.
- They act as intermediaries connecting sellers and buyers, earning profits through transaction fees.
- Since COVID-19, they have grown rapidly and significantly reduced traditional offline commerce.
📕 Self-Employed
Self-employed refers to individual business owners who directly operate businesses and earn income.
- These are people who run restaurants, cafes, beauty salons, convenience stores, etc., alone or with family.
- Korea has a high proportion of self-employed among OECD countries, accounting for about 25% of all workers.
- They are very sensitive to economic changes and policy shifts, and have been greatly affected by COVID-19 and platform economy expansion.
📕 Polarization
Polarization means the phenomenon where the middle class shrinks and splits into upper and lower classes.
- In the small business sector, the gap is widening between businesses that use platforms well and those that don't.
- A "winner-takes-all" structure appears where successful businesses grow more while struggling businesses become more difficult.
- This can lead to increased inequality throughout society, requiring policy attention.
📕 Online-to-Offline Integration (O2O)
O2O stands for Online to Offline, meaning services that connect online and offline.
- Representative examples include services where you order online and pick up at offline stores or receive delivery.
- This is a business method that traditional offline stores must adopt to survive.
- Businesses that built successful O2O strategies maintained or increased sales even during COVID-19.
3️⃣ Principles and Economic Outlook
✅ Structural Impact of Platform Economy on Small Businesses
Let's analyze the multi-faceted impact of digital platform expansion on the small business sector.
First, regional gaps are a key characteristic of the platform economy. The change in small business employment between metropolitan and non-metropolitan areas shows a stark contrast. In metropolitan areas, many businesses can afford platform fees due to high population density and active economic activity with large delivery order volumes. However, in non-metropolitan areas, platform fees become a big burden due to relatively low order volumes. Actually, when online consumption increases by 1%, retail employment decrease is minimal in metropolitan areas, while in non-metropolitan areas, 8.3 people per 10,000 population decrease. This is not just a temporary phenomenon but a structural change that could accelerate the regional extinction crisis.
Second, the impact of platform economy appears differently by industry. In the restaurant industry, the number of self-employed focused on offline stores is decreasing due to direct impact from delivery platforms. But at the same time, new business models like delivery-only restaurants or ghost kitchens (delivery-only kitchens) are emerging. In retail, neighborhood stores are taking direct hits from online shopping expansion, but convenience stores and businesses capable of instant delivery are actually getting opportunities. In the service industry, platformization of face-to-face services like beauty, massage, and cleaning is progressing, improving individual business owners' customer accessibility.
Third, platform fee structures are determining small business owners' survival. Delivery platforms usually charge 5-15% of order amounts as fees, and including advertising costs and various additional expenses, 20-30% of sales go to platform costs. Considering that traditional offline stores' net profit margins are usually 10-15%, profitability significantly worsens as platform dependency increases. This causes many small business owners to hesitate entering platforms, or face unsustainable situations even after entering.
Platform economy expansion is bringing creative destruction to the small business sector, with exit of businesses that can't adapt and emergence of new business models happening simultaneously.
✅ Deepening Small Business Polarization and Competitiveness Gap
Let's analyze the polarization phenomenon within the small business sector in the platform economy era and its causes.
First, digital utilization ability has become the key factor determining success or failure. Young business owners or small business owners familiar with IT are expanding their customer base through online marketing, SNS promotion, and delivery app optimization. Meanwhile, elderly business owners or those unfamiliar with digital technology are struggling to adapt to changes and seeing rapid sales decline. Actually, delivery platform utilization rate is over 70% for small business owners under 40, while it's less than 30% for those over 60. This digital gap directly leads to income gaps, deepening generational polarization.
Second, capital strength and economies of scale have become more important in the platform era. To get top exposure on platforms, you need to pay advertising fees, and building delivery systems requires additional investment. Also, to make profits while handling platform fees, you need sales above a certain scale. Due to this, large and medium businesses with capital are actively using platforms to increase market share, while small-scale businesses are gradually being pushed out. Franchise headquarters launching delivery-only brands or operating ghost kitchens can be understood in this context.
Third, the importance of regional characteristics and location conditions is changing. Traditionally in small business, "location is life," but this formula is changing in the platform economy. Delivery-focused businesses can cover wide commercial areas even in areas with cheap rent. Conversely, even in busy areas with high foot traffic, businesses struggle if they lack competitiveness in the delivery market. This is restructuring existing commercial area concepts and complicating the relationship between rent and sales.
Polarization in the small business sector goes beyond simple win-lose issues and connects to society's overall inequality structure, requiring urgent policy response.
✅ Government Support Policy Direction and Effectiveness Review
Let's examine the need for new policy approaches suited to the changing small business environment.
First, policy transition from blanket support to selective support is needed. Existing small business support policies mostly provided uniform benefits like low-interest loans, rent support, and tax reductions. However, in the platform economy era, customized support is needed because businesses face very different situations and growth potential. It's efficient to focus support on small businesses with growth potential through digital transformation support, marketing education, and technology introduction funds, while providing different forms of help like industry conversion education or re-employment support for businesses that have lost competitiveness.
Second, digital capability enhancement support should be the core of policy. Rather than simple financial support, education and consulting to help small business owners adapt to the platform economy is more important. We need to expand practical programs like online marketing education, delivery app operation know-how, SNS utilization, and customer data analysis. Especially, customized digital education for elderly small business owners and mentoring connection programs with younger generations could be effective. The government already operates programs like "Digital Voucher," but improvements are needed to increase actual field utilization.
Third, creating a fair competitive environment in the platform market is important. Along with small business owner support, we need to improve the platform industry's monopoly issues and unfair trading practices. We should enable small business owners to use platforms under fairer conditions through excessive fee rate regulation, prohibition of unilateral policy changes, and ensuring fee structure transparency. Also, we need to foster cooperatives or win-win platforms where small business owners can jointly build platforms or strengthen negotiating power. Regional delivery apps or public platforms operated by some local governments could be such alternatives.
Small business support policies must shift paradigm from past protection-focused to future adaptation-focused, and the role of social safety nets must also be strengthened in this process.
4️⃣ In Conclusion
Platform economy expansion is bringing unavoidable structural changes to the small business sector. In this change process, gaps are widening between rural and metropolitan areas, between generations, and between industries, and the traditional small business ecosystem is being fundamentally restructured.
Particularly, the sharp decrease in small business employment in non-metropolitan areas is a serious problem that could accelerate regional economic hollowing and regional extinction crisis beyond simple industrial structure changes. The fact that 8.3 retail jobs per 10,000 population decrease with every 1% increase in online consumption means small rural cities could lose entire commercial districts.
However, we don't need to view this change as entirely negative. Small business owners who use platforms well have gained access to wider markets than before and are getting growth opportunities through new business models. The important thing is how to adapt to these changes.
The government's role must also change. We need realistic policies that move away from past approaches of trying to protect all small business owners equally, instead providing growth opportunities to small business owners who can adapt to change, and helping those who cannot find other paths.
Above all, strengthening digital capabilities is key. Rather than simple financial support, helping small business owners adapt to the platform economy through education and consulting is a more fundamental solution. Especially, customized support for elderly business owners and intergenerational cooperation programs are desperately needed.
Also, ensuring platform market fairness is important. We need to improve excessive fees and unfair trading practices, and create environments where small business owners can cooperate.
Ultimately, small business policies in the platform economy era must change paradigms from 'protection' to 'adaptation,' and from 'blanket support' to 'customized support.' We need policy wisdom that can turn changes into new opportunities rather than fearing them.