- McKinsey estimates $700 billion value can be created by companies that cater to Black customers.
- That wealth could also help solve the racial income and wealth gaps that exist in the US economy.
- Black households spent approximately $835 billion in 2019, making up only 10% of the nation's total.
As the era of Black Lives Matter sees more companies roll out initiatives to combat the massive income wealth and gaps between white and Black families in America, there's still plenty of room for improvement.
A report from McKinsey released this month highlights the reality of this vast economic inequality while quantifying opportunities for retailers who can address the problems.
Black people are more likely to be dissatisfied with their current offerings from retailers than white respondents, "especially in personal care products and services, banking and financial services, healthcare, and food," the consulting firm said.
What's more, Black consumers are 25% more likely than their white counterparts to change their buying behavior when their needs are not met.
"Black consumers are often willing to switch what they buy and even pay more for offerings that truly resonate. When combined with the effects of income parity and expanded access to goods and services in Black communities, there is an opportunity to unlock some $700 billion in value that would be shared by companies and Black households," the authors write.
Black consumers are not only more willing to switch the products and services they use, but they're also willing to "spend up to 20 percent more on average on offerings that are better suited to their needs and preferences," the study says.
According to McKinsey, Black households spent approximately $835 billion in 2019 - making up only 10% of the nation's total - largely due to lower income and wealth. However, years of "underinvestment by the private sector have left some majority-Black communities with a dearth of
These key services include banking and housing, to name just a few. Insider previously reported that Ally Bank will no longer charge customers overdraft fees, which disproportionately affect people with low income. JPMorgan Chase has also outlined policy initiatives designed to fight racial bias in the housing market.
Even for Black entrepreneurs hoping to address the inequalities, there are unique hurdles.
McKinsey says white entrepreneurs start their businesses with $107,000 of capital on average, while that number for Black founders is just $35,000, making it extremely hard for Black businesses to "survive" the startup stage.
For some founders, that's not anything new. Insider previously reported that Black and Latinx women raised $3.1 billion in venture capital in 2020. However, that still only counts for .64% of all venture capital investments over the past two 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.
"Hundreds of years of structural exclusion will not be simply erased, particularly when complex dynamics are at work," McKinsey says. "However, the status quo is not tenable for Black Americans or for the US economy as a whole. Some progress can be achieved quickly. In other cases, changes to entrenched systems and dynamics will take years to produce results."