McKinsey Quarterly 2023 Number 1

showcasing what Black businesses are doing has good intentions. But race-based marketing is not enough. And we can’t “tokenize” Black founders and say they make products for only Black consumers. When companies do this, they leave significant value on the table. We have to treat Black consumers as core consumers, period, and ensure that their needs are met. It’s a $300 billion opportunity, and those who can figure this out will see real growth. At the end of the day, the Black brands that have had very significant success have had phe nomenal products with resonance across the - - general consumer population. Product orien tation also ensures that Black founders aren’t pigeonholed into only the Black consumer segment. The more we can lift up good products from Black founders and make sure they have their fair share of coverage across consumer segments, the more equitable the brand landscape. Equitable business embraces the fundamental belief that the Black consumer should be delighted. Equitable business means that a Black kid with a compelling product who wants to start a consumer business should have the same access to capital and markets as a White kid. We need to shift our outlook to say it’s not about Black brands; it’s about good brands. We’re still far away from leveling the playing field.

The first concept a retailer should adopt is an investor mindset for equity. Executives should be asking themselves, “How can we drive ROI and increase equity? What are the things my organization can do that will allow us to drive competitive advantage, create more value for our shareholders, and drive equity?” These things are not mutually exclusive. When we looked at venture capital investment in beauty companies, we found that only 4 percent of late-stage funded companies were Black founded. They received one-tenth the funding of their non-Black founded peers, yet their income was 89 times higher. The ROI here is powerful: imagine what the return would look like with parity levels of investment. The more you can align your overall business strategy where both increased equity and value creation are outcomes, the more it will become a sustainable operating model. The second thing companies should do is take a data-driven mindset and reconsider the metrics being used to make business performance deci sions. Traditional metrics can be myopic and - embed bias into performance outcomes, leading to missed opportunities for profitable growth. Take, for example, retail footprints. For store loca tion, there’s a historical reliance on the movement - of people and foot traffic. Population density in an area might lead you to believe there’s an oppor tunity to locate a new restaurant somewhere. And - you might dismiss neighborhoods that are less dense or look like they have less movement. But in those retail deserts, the unmet need is both significant and pervasive, which opens a potentially unseen opportunity. We have data that say Black consumers are willing to pay more for healthy food, so it would still make sense to locate there. If models tell us not to make certain moves, then maybe we need new models. Finally, companies and investors need to go beyond surface-level support. It’s great that people are excited about Black brands and want to feature Black founders’ stories. Everyone

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