Location still matters: How geographic proximity between customers shapes repeat purchase behavior in online food delivery services

Online food delivery (OFD) services have developed rapidly. By extending service areas, OFD platforms allow restaurants to reach more customers, shifting the focus from the restaurant’s location to the customer’s location. This study investigates the influence of geographic proximity between customers on repeat purchase behavior at a restaurant chain via an OFD service and examines the moderating role of location-specific characteristics from both the supply and demand sides. We analyze 93,987 purchase records from 26,503 customers over a five-month period, sourced from a restaurant chain partnered with an OFD platform. Using a spatial econometric model, we find that customers who live close to one another exhibit similar repeat purchase behavior, which is consistent with prior research on adoption. We extend prior research by showing that on the supply side, offline competition from food retailers like supermarkets or from physical restaurants weakens the proximity effect. In contrast, online competition from other restaurants that offer home delivery intensifies the proximity effect. On the demand side, business density amplifies the proximity effect. Our findings can help restaurants and OFD platforms better leverage geographic proximity between customers to promote repeat purchases.