Despite Challenges, Opportunities Growing for Black Business Owners
While the obstacles facing Black entrepreneurs as they found and grow small businesses are significantly greater than those of white peers (including less venture capital investment and greater difficulty getting loans), the consumer environment offers a bright spot that signals growing opportunity, according to recent data from McKinsey & Company.
Referring to the “age of the inclusive customer,” McKinsey finds that 68% of consumers say their social values guide shopping choices. Younger people are even more likely to say inclusivity is a key factor in their buying decisions. National Black Business Month may be just the time to raise the profile of your company with a more diverse audience.
Consumer-driven change
In a 2021 survey, McKinsey found that two out of three Americans said that their social values are shaping their shopping choices and that 45% (a number McKinsey estimates represents more than 100 million shoppers) believe retailers should actively support Black-owned businesses and brands. McKinsey describes the “inclusive consumer” as reaching across and influencing numerous demographic groups, being comprised not only of younger and more racially diverse members, but also men and women across ethnic backgrounds, income levels and age groups.
“The inclusive consumer is more likely than other shoppers to buy Black-owned brands out of a desire to support diverse entrepreneurs on their growth journeys and small businesses in general,” report author Pamela Brown, a partner in McKinsey’s New Jersey office writes.
The challenge for these consumers is finding the brands and products they want on store shelves. Fewer than half said they know which products on retail shelves are from Black-owned brands and a third don’t know where to purchase such brands. Many want more specific in-store and product labeling, recommendations from influencers and the ability to filter websites to find Black-owned brands.
Role of retailers
Many retailers are expanding the brands they carry to include more diversity and others are changing store layouts to more prominently feature more representative brands. The Fifteen Percent Pledge is a non-profit organization urging businesses to dedicate 15% of their shelf space to Black-owned brands in recognition of Black Americans making up 15% of the U.S. population. To date, 28 retailers, including Nordstrom, Sephora, Macy’s, ULTA and Gap have signed the pledge.
Many large companies are also more actively seeking relationships with diverse vendors across the supply chain. That includes where they purchase raw materials to where they advertise and who they contract with for services such as accounting, merchandising and commercial real estate acquisition. To learn more about how to become a supplier to large companies, mark your calendar now to attend our Fifth Annual Global Supplier Diversity Conference September 22. Registration opens soon.
To help customers and consumers find the diverse brands they want to support, Google is also introducing tools that enable Black-owned businesses to identify themselves in maps, listings and business profile searches. Google has also launched the ByBlack platform which includes a business directory created by the US Black Chambers.
Share your story
Inclusive consumers also want to know more about the people they buy from and to feel connected to the small businesses they support. This opens an opportunity for entrepreneurs to develop their own personal and brand stories in compelling ways that will resonate with customers. The opportunity to feel closer to a brand founder and to be involved in a more direct way in supporting a fledgling business is appealing to many consumers.
Consider using your website, advertising materials, in-store displays and even in-person business interactions to quickly share something of your personal mission, entrepreneurial journey and dreams as a small business owner. When customers know that your pickle recipe came from your great grandmother, that you were a professional singer before turning your artistic streak to office design, or that you launched an importing business with your best friend from college, they feel their dollars are supporting individual dreams.
Clearly identifying yours as a Black-owned business, woman-owned business, or diverse business can also help both consumers seeking inclusive brands and large companies seeking diverse suppliers find you more easily. Obtaining minority certification from an external party, such as the Small Business Administration (SBA), can also give potential customers the confidence to know you are the real deal. Minority certification is also available through your Monica Motivates, LLC, community and numerous small businesses hold certification through our organization.
Cautiously optimistic
Although the challenges to successful business ownership are formidable, and many of those have increased disproportionately for minority-owned businesses during the COVID-19 pandemic, most Black business owners are optimistic about the future. According to a survey completed by SCORE, more than half of Black respondents predicted their finances will improve in 2022.
“The evidence is overwhelming,” McKinsey concludes. “The inclusive consumer is leading the pack, influencing consumers across demographics, and voting with their pocketbooks for retailers that support diverse entrepreneurs and their products.”