Proximity on Online and Offline Channels: Agglomeration or Competition

As franchise systems expand, concerns arise regarding whether intra-brand proximity intensifies intra-brand competition or contributes to market expansion across online and offline channels. Existing studies neglect the channel-specific variations of these effects and the moderating role of inter-brand competition. This study examines how intra- brand and inter-brand competition influence store performance in an omnichannel retail context, applying a 1.5 km threshold. Leveraging sales data from a South Korean multi- brand retailer, we apply a multilevel random intercept model and the Gaussian copula method to mitigate endogeneity concerns. The findings indicate that in offline markets, intra-brand proximity initially enhances sales through agglomeration effects; however, this effect dissipates after accounting for endogeneity. Inter-brand competition enhances offline sales, particularly in low-density areas. In online markets, intra-brand proximity exacerbates intra-brand competition, leading to lower sales, whereas inter-brand competition amplifies these pressures further. These findings underscore the necessity of strategically managing store proximity in omnichannel retail environments.