- McKinsey estimates that $ 700 billion in value can be created by businesses reaching out to black customers.
- This wealth could also help resolve the racial disparities in income and wealth that exist in the US economy.
- Black households spent around $ 835 billion in 2019, representing just 10% of the country’s total.
- See more stories on the Insider business page.
As the Black Lives Matter era sees more and more companies rolling out initiatives to address the massive income wealth and the gaps between white and black families in America, there is still plenty of room for it. improvement.
A report of McKinsey released this month highlights the reality of this vast economic inequality while quantifying the opportunities for retailers who can solve the problems.
Blacks are more likely to be dissatisfied with their current retailer offerings than white respondents, “particularly in personal care products and services, banking and financial services, health care and food,” said the consulting firm.
Additionally, black consumers are 25% more likely than their white counterparts to change their buying behavior when their needs are not being met.
âBlack consumers are often willing to change what they buy and even pay more for offers that really resonate. When combined with the effects of income parity and increased access to goods and services in black communities, there is an opportunity to unlock some $ 700 billion in value that would be shared by black businesses and households. Â», Write the authors.
Black consumers are not only more willing to change the products and services they use, but they are also willing to “spend up to 20% more on average on offers that are better suited to their needs and preferences,” the ‘study.
According to McKinsey, black households spent an estimated $ 835 billion in 2019 – representing just 10% of the country’s total – largely due to declining incomes and wealth. However, years of “private sector underinvestment have left some predominantly black communities with a dearth of retail options and key services,” he concludes.
These key services include banking and housing, to name a few. Insider previously reported that Ally Bank will no longer charge customers overdraft fees, which disproportionately affect low-income people. JPMorgan Chase also presented policy initiatives designed to address racial prejudice in the housing market.
Even for black entrepreneurs hoping to address inequalities, there are unique hurdles.
McKinsey claims that white entrepreneurs start their businesses with an average of $ 107,000 in capital, while that number for black founders is only $ 35,000, making it extremely difficult for black businesses to “survive” the Beginning phase.
For some founders, this is nothing new. Insider previously reported that black and Latin women raised $ 3.1 billion in venture capital in 2020. However, that still only accounts for 0.64% of all venture capital investments over the past two years. years.
Amazon is launching its own initiative called the Black Business Accelerator, pledging $ 150 million over the next four years to give black businesses access to education and mentorship.
âHundreds of years of structural exclusion will not simply be erased, especially when complex dynamics are at work,â says McKinsey. “However, the status quo is not tenable for black Americans or for the American economy as a whole. Some progress can be made quickly. In other cases, changes in entrenched systems and dynamics will put pressure on the ground. years of delivering results. “