Black-owned businesses have long benefited the United States’ economy. Despite their contributions and benefits, Black entrepreneurs still face greater challenges – particularly when it comes to securing funding – than their white counterparts. As awareness of systemic racism and economic inequality rises, shoppers are no longer content to spend their dollars as usual. Consumers – as well as retailers – are choosing to buy from Black-owned businesses.
The Gen Z Effect
Younger demographics are rapidly changing how everyone shops — especially online. Millennials and Gen Z shoppers are increasingly changing their buying habits to seek out and support businesses that share their values. In a recent survey, 55% of respondents reported paying more attention to brand values today than they did one year ago. Customers use brand values to make purchasing decisions. Additionally, 82% would pay more for a value-aligned brand, 43% of people would pay twice as much and 31% would buy the value-aligned brand at any price.
The pandemic accelerated change for many consumers as well, with 75% of US consumers trying a new shopping behavior in response to economic pressures, store closings and changing priorities. Reports show that 36% of consumers tried a new product brand, and 25% incorporated a new private-label brand.
Gen Z is more racially diverse than any previous generation, and as they shop for products, they support brands that represent that broad diversity. For instance, Black consumers are increasing spending each year, and they’re more likely to support Black-owned brands. As a result, marketplaces that feature products from Black-owned organizations are in high demand, and retailers are adding more offerings to cater to these demographics.
Discovering new brands is made simple with online marketplaces specific for Black-owned businesses. Instead of relying only on Google searches, hashtags or sifting through traditional marketplaces, many retailers are choosing instead to create a listing on a marketplace.
Official Black Wall Street (OBWS) is preparing to launch. It will offer an app and digital platform to connect consumers with Black-owned businesses from clothing, makeup, restaurants and anything in between. Customers will be able to search for companies in their area or wherever they travel to. The app also will allow customers to review businesses and save their favorites to return to again.
HellaBlack is an eCommerce marketplace that features Black creators and entrepreneurs launched in 2021. It’s a curated platform for Black fashion, beauty, accessories, art, and more. Creators who join the platform benefit from pooled advertising dollars and greater reach with an SEO-optimized brand page.
For shoppers interested in luxury fashion, Inkloo delivers emerging Black-owned fashion brands to consumers who want to authenticate their wardrobe. Their collections offer fresh looks and editorials from designers that give shoppers more than just clothing — they tell a story.
New Black-Owned DTC Brands Face Uphill Battles
After decades of asking for more representation from mainstream brands, many Black entrepreneurs decided to create the type of brand they wanted for their community and other consumers. According to McKinsey, nearly half (45 percent) of U.S. consumers agree that companies should pledge to support Black-owned brands.
Black entrepreneurs still face serious barriers to seeing their dreams come to fruition. For instance, Black Americans start more businesses than any other ethnic group, but their access to capital is limited. Their average capital is only about $35,000, compared with $107,000 for white entrepreneurs. And even more startling, only 47% of Black entrepreneurs had their loan requests approved, compared to 75% of white founders.
Of all the unicorns that flooded the market in the last decade, fewer than 2 percent have Black founders. In retail, only two of these unicorns were Black-founded — Pat McGrath Labs and Savage X Fenty. Despite the demand for Black-owned brands from consumers of all demographics, the market has been slow to respond.
Retailers and Marketplaces Pledge Continued Support
In response to this call from Black entrepreneurs and consumers, some marketplaces and brands are building new opportunities. For instance, in June 2021, Amazon’s Black Business Accelerator program committed $150 million in funding. They also provide access to financial support, strategic business guidance and mentorship and marketing and promotional support for third-party sellers.
Sephora was one of several retailers to take the 15% pledge — a challenge to dedicate 15% of shelf space to Black-owned brands. As part of their commitment, they invited Black, Indigenous and People of Color (BIPOC) founders to participate in their Accelerate program. The program is a six-month business boot camp dedicated to growing business skills and helping BIPOC founders succeed at Sephora. And the 15% pledge isn’t just a press release; the organizations that signed on to the pledge participate in quarterly reviews to demonstrate progress and collaborate on improving their processes.
As a result, Sephora, Ulta, Bluemercury and others have not stopped at the bare minimum of the 15% pledge. They continue to funnel support, mentorship and funding to Black-owned brands. This support, especially monetary, helps brands stay at the top of mind for other funding options. It also increases the likelihood that these brands will have longevity and shelf space.
Retailers and consumers have a part to play in elevating and supporting Black-owned businesses. Consumers can use Black-owned marketplaces and apps to discover new brands and return to old favorites.
Retailers and online marketplaces should commit publicly to specific, concrete actions that benefit Black entrepreneurs and brands. This allows consumers, shareholders and management to be accountable and not let diversity and inclusion take a backseat. Including more Black-owned businesses in retail offerings is not simply a trend, it should be a key component of any retailer’s strategy.