The age of the inclusive consumer is here. Nearly half (45 percent) of consumers in the United States agree that companies should pledge to support Black-owned brands, suppliers, and vendors (Exhibit 1).1 Sixty-eight percent say their social values shape their shopping choices.2 This sentiment is matched by the growing support for Black-owned brands by trendsetting publishers: nearly every leading fashion magazine, from Vogue to Teen Vogue, publishes lists of top Black brands and designers.
The rising demand for inclusivity on retail shelves is more pronounced when we look at the coveted Gen Z consumers, who influence over $800 billion on retail each year,3 as well as Black households, with consumer expenditures of around the same. In a sign of what’s to come, 90 percent of Gen Zers (those born after 1995), believe companies should address racial equality,4 and Gen Zers are 1.4 times more likely to say that inclusivity is one of the most important factors in their buying decisions.
A survey of US consumers this year showed that Black consumers are far more likely to say that the products and services available today do not meet their needs, particularly in the personal care, financial, healthcare, and food industries. In the beauty industry, 92 percent of Black consumers say that supporting Black-owned brands is important to their buying decisions. Black respondents also noted that they did not see themselves in marketing campaigns, and that many companies lack a commitment to social justice. Survey results indicate that Black consumers are willing to shift about $260 billion of their annual spending to companies that better meet their needs.
Supply of Black brands is lagging due to systemic challenges
Despite rising demand and a clear consumer call for change, Black brands encounter outsize challenges to scaling and meeting the demand. While Black Americans are more likely to start businesses than any other ethnic group, they are up against tougher challenges from the get-go, with capital of only about $35,000, on average, compared with $107,000 for White entrepreneurs. Only one percent of venture-capital funding goes to Black founders,6 and many say they lack the social capital and networks they need to tap flexible capital to invest in technology, R&D, and innovation. Convincing partners and investors that products by Black-owned brands are for everyone is a battle that Black entrepreneurs face daily.
Too often, these and other barriers lead to shortfalls: just 4 percent of Black-owned businesses are still in operation after three and a half years, compared with an average of 55.5 percent for all businesses.7 Of the “unicorns”8 that have emerged in the last decade, less than 2 percent have Black founders (Exhibit 2). The last decade saw only two Black-founded unicorns in consumer retail—Pat McGrath Labs and Savage X Fenty—both brands riding the tailwinds of celebrity.
In a world where brands are growing faster, Black-owned brands face barriers to growth despite starting businesses more than any other ethnic group.
With retail disruption in full swing post-COVID-19, leading retailers are starting to act
COVID-19 has provided a once-in-a-generation opening to reimagine how retail meets evolving consumer preferences, such as representation and inclusivity in retail. Margin pressures are rising in the retail industry, and while the pandemic has raised the stakes, it has also required retail brands to revisit strategies, marketing approaches, product and service portfolios, and more. Without the ability to lean on business as usual, retail leaders are taking steps to experiment and invest for the long term. To close the gap between supply and demand for Black-owned brands, for example, some are moving upstream to find brands instead of waiting for brands to come to them.
Amazon launched the Black Business Accelerator program in June 2021, committing to provide $150 million along with mentorship, marketing, and promotional support to Black-owned third-party sellers. Sephora invited eight brands with Black, Indigenous, and People of Color (BIPOC) founders to participate in the company’s six-month Accelerate Incubator Program, which includes “an intensive boot camp” to help participants master business skills.
These retailers are leading the way by taking hands-on approaches to help Black founders scale to meet rising consumer demands. READ MORE
By Jocina Becker, Pamela Brown, Tiffany Burns, Jihye Gyde, and Tyler Harris, representing views from McKinsey’s Retail Practice.
Source: mckinsey.com
“My biggest mistake is not recognizing the power of compounding and the ability for it to build wealth, and therefore, not investing early enough,” she says. “To me, if there is one thing that can change our society, our economy, and the world, it is getting more money in the hands of women.
Indigenous Americans make up less than 1% of board members for major, publicly traded businesses, according to DiversIQ analysis. Only five people among the 5,537 board members for the S&P 500 identify as fully or partially American Indian or Alaska Native.
These three questions can not only play a pivotal role in strengthening an organization’s DEI culture; they can also serve as team-building exercise. The process of evaluating one’s understanding of DEI principles promotes open discussions, knowledge sharing, and alignment within the team.
