• by Colin Kirkland , January 5, 2022

A recent report by management consulting firm McKinsey & Company finds that due to a rise in population growth and income growth from higher levels of education, Black consumers’ spending power will increase from $910 billion in 2019 to $1.7 trillion by 2030. 

This is a huge increase and brands should take notice. 

Amidst the diversified identity of the Black consumer –– categorized in 7 consumer segments across 12 neighborhood archetypes –– the report showcases this  widespread dissatisfaction with brands’ current offerings. 

Based on surveys of 1,565 Black consumers and 1,932 non-Black respondents in 2021, McKinsey found that 81% of Black consumers were willing to switch brands due to the lack of evidence of diversity, equity, and inclusion efforts –– most notably, marketing and outreach that do not showcase people they feel are representative to them. 

However, sixty-eight percent of survey respondents report remaining loyal to brands that do satisfy their consumer needs.

McKinsey’s report aims to define the diversity of the Black consumer while detailing strategies to help brands better attract them in order to gain significant revenue. 

McKinsey’s research revealed that Black consumers’ unmet needs are worth $300 billion per year in consumer spending.

This can be broken down to $260 billion that consumers are willing to reallocate, and $40 billion in new spending. 

The report gives staggering examples of the consumer inequity taking place across Black communities, as well as the benefits for brands that are willing to make changes.

For example, grocery and retail sectors can gain upwards of $45 billion in additional revenue by opening 10,000 new stores in predominantly Black metropolitan communities. By doing so, companies would not only be making money -- they would be expanding options for 10.5 million consumers of diverse races.

“In a world where maybe growth is modest or moderate, these granular growth opportunities to win with certain segments of the population become really really important,” says Shelley Stewart III, a McKinsey partner and leader of the firm’s Institute for Black Economic Mobility. 

With such clear incentives to appeal to Black consumers, it may seem strange that more companies and brands aren’t taking advantage of this opportunity. 

“Part of it is inertia,” says Stewart. With regard to the grocery sector, there are 8.3 million Black residents currently living in areas that are food deserts. Stewart suggests that it’s much easier for big grocery brands, or any company for that matter, to continue using an existing model. 

“If there are another 50 locations that seem attractive, that look very similar to where your stores are today, that may be the path of least resistance,” says Stewart. This leads to historically and systemically overlooked populations, such as Black consumers.

Stewart likens a changed business model to a new frontier. To pursue additional growth, he believes companies need to “look outside of the core.” 

Stewart says brands that have excelled in taking a holistic approach to inclusive go-to-market showcase a certain set of practices. “They have diverse folk working at their company; their philanthropic agenda is aligned with the issues that that segment of the population cares about; their products are tailored; their marketing and advertising feels authentic; and you see real outperformance,” he states. “The magnitude of that outperformance really surprised me.”

J.P. Morgan (who Stewart previously worked for) and Nike were two brands Stewart specifically said were successfully and consistently carrying out these practices. 

By including such a diverse breakdown of the Black consumer, McKinsey was also attempting to counteract specific racial consumer stereotypes. For example, the “extravagant Black spender,” who is thought to be spending money they don’t have. 

“We don’t find that in the data,” remarks Stewart. “At every income level, we found that Black consumers were on average more frugal than non-Black consumers.” He adds that given the income challenges in the Black community, McKinsey found that the majority of spend ends up going to basic needs.

Stewart wants to make sure readers don’t mistake the term “consumer” as a title given to someone buying only the latest gadget. Consumers also buy products that are fundamental to human dignity, such as housing, healthcare, food, and transportation. 

“I think we need more focus and more emphasis on that,” he adds. “The prize is large for getting it right.”

The report lists 10 racial equity goals that offer companies detailed ways in which they can create a more equitable workplace. Like hiring a diverse workforce with inclusive access to benefits and resources, instituting supplier diversity, aligning goals with environmental, social and governance (ESG) agendas and more.  

“Advertising and marketing to the Black consumer is one piece of it,” adds Stewart. “This alone is not sufficient to sustain their loyalty.” 

In terms of the pay off, investing in Black consumers, as well as McKinsey’s 10 racial equity goals, may have significant outcomes. The report suggests the addition of at least 79,000 Black-owned businesses, 314,000 more Black decision makers, and $26 billion in wages from those decision-making roles alone, along with other resources that can further help communities thrive.