Platform-Mediated Consolidation and Offline Store Expansion: Evidence from Real Estate Brokerages in Major Chinese Cities

Abstract

This study examines the impact of offline store expansion by Lianjia, China's leading real estate brokerage, within the framework of platform-mediated consolidation. By analyzing micro-level transactions of second-hand houses from Lianjia in ten major Chinese cities from 2016 to 2022, this research investigates how the transaction patterns of traditional brokerages, characterized by the strategic clustering of offline stores, transition towards platform-mediated consolidation, thereby facilitating the development of an extensive franchise network. Utilizing a regression discontinuity design (RDD), this study quantifies the optimal influence radius of offline stores (410 meters) on housing transactions. this study empirically estimates the effects of real estate brokerage's offline store expansion and platform-mediated consolidation on transaction properties. The results indicate that this strategy significantly boosts revenues and attracts more people to housing tours. Additionally, the results suggest that neither the platform-mediated strategy nor offline expansion affects the transaction period, but offline store expansion can reduce the price gap between sellers and buyers. Furthermore, this study introduces a measure of network effect, revealing that Lianjia's offline stores exhibit a local clustering pattern with moderate network strength. The analysis of platform-mediated consolidation indicates a significantly positive effect on network strength. This study provides valuable insights into the synergy between offline store expansion and online platform development, elucidating future trajectories in the evolving real estate brokerage market and analogous sectors.