Commercial Cluster Dynamics

Researchers Minjin Lee, Thi Kim Dung Dang, Siqi Zheng, and Bogang Jun released "When Peers and Neighbours Go Online," examining how e-commerce penetration reshapes offline commercial activity across Seoul's 523 commercial clusters using nearly 10 million establishment-month observations.

—

We look into Seoul (South Korea), a global consumer city, and examine how e-commerce penetration reshapes offline commercial activity across its 523 commercial clusters using 9.7 million establishment-month observations (2020-2024). We identify two channels through which digitisation erodes in-person sales: (1) "Your peers" - A ten-percentage-point increase in own-industry online penetration is associated with a 26-29 per cent reduction, (2) "Your neighbors" -Rising online intensity among colocated industries creates distinct negative spillovers.

In the physical world, agglomeration benefits are also reshaped: Marshall-type specialisation premiums reverse once online substitutability exceeds an estimated threshold of around 15 percent, whereas Jacobs-type diversity benefits in mixed-industry clusters remain unconditionally positive and strong.

These findings reveal how digitisation selectively transforms the mechanisms sustaining urban commercial clusters in a major Asian city.