A new report by management consulting firm McKinsey & Company is getting to the heart of what it means to provide racial equity for Black consumers. While Black Americans’ spending power is reaching upward of $910 billion, the report finds that we are more likely than our non-Black counterparts to live in what is considered a consumer desert.
The US Census Bureau recognizes that these consumer deserts are often found in urban census tracts. And previous research from McKinsey found that Black households are nearly two-and-a-half times more likely than white households to live in these areas where great disparities exist. Often these urban census tracts are also food deserts, medically underserved or facing a provider shortage, and characterized by high housing and transportation costs (exceeding 50 percent of the local median income). They gather that nearly 3 million Black residents live in these areas, and while the pattern exists in rural areas, the people are less affected.
The goal now of McKinsey’s Institute for Black Economic Mobility is to encourage consumer-facing companies to make significant investments to better serve Black consumers and garner a loyal following because of it. By 2030, Black spending power is expected to reach $1.7 trillion. Much of this will be driven by population growth and income growth due to higher levels of education.
Despite spending amongst Black consumers being rather high, the report shows that Black consumers are still dissatisfied with current offerings. The leading cause of dissatisfaction among Black consumers is a lack of evidence of diversity, equity, and inclusion at the companies they support, which is why according to respondents, 81 percent of Black consumers are willing to switch brands. That number is even higher for sectors like beauty where 83 percent of consumers say they would switch brands if they can find an alternative that better fits their identity.
Within financial services, roughly a quarter of Black consumers are not happy with the products and services that are being offered to support financial health and security, but the ones who are happy say they are loyal to the brands that satisfy them.
Overall, McKinsey surmises that Black consumers’ unmet needs are worth $300 billion per year in consumer spending. That breaks down to $260 billion that consumers are willing to reallocate and up to $40 billion in new spending.