Retail offers opportunities for business owners of all backgrounds to thrive by expressing themselves and providing the products and services in-demand in their communities. As competition drives innovative solutions, more entrepreneurs are using digital tools to grow their companies, particularly Black-owned businesses. With increased investment and resources, these entrepreneurs can continue to flourish.
According to a 2022 Connected Commerce Council survey, “85% of Black-led businesses use digital tools as important parts of their business operations.” In retail, this is especially useful, as creative strategies are a must to stand out from competitors.
The Pandemic-Era Rise in Black-Owned Businesses
At the beginning of the pandemic, many Black-owned businesses were forced to close down at disproportionate rates due to economic challenges. As the pandemic subsided, the rate of Black business ownership rose by 38% compared to pre-pandemic levels. Retail has been a top industry for the overall surge in new business owners over the last few years. And Black Americans, who are more likely than any other ethnic group to start their own businesses, played a big role in that surge.
Black women in particular are launching businesses at high rates — according to a 2021 Harvard Business Review survey — with 17% in the process of starting new businesses compared to 10% of white women and 15% of white men.
This upward trend — even amid ongoing socioeconomic disparities — has been attributed to improvements in opportunities for capital investment, educational resources and support from local communities along with an embrace of digital savviness.
For example, despite the economic instability of the last few years, an October 2022 Bank of America survey found that Black business owners were more optimistic than their counterparts about their business outlook. Over the next year, 72% expect their revenues to increase and 65% plan to expand their business, compared to 63% and 50% respectively of non-Black business owners.
This positive outlook is reflected in an openness to embrace innovative approaches – namely digital tools – which is essential to competing in the marketplace.
Hair and beauty brands like Mielle Organic, Shea Moisture, The Lip Bar and Carol’s Daughter are great examples of Black-owned businesses that started off small, used digital tools to build a loyal community of customers and successfully expanded their presence nationwide in both brick-and-mortar stores and online. Similarly, Bevel — a grooming line tailored to men of color — tapped into an underserved market and was eventually acquired by Procter & Gamble in 2018. Bevel is now available at Walmart, Target, CVS and Sally Beauty and offers a wide range of unisex products in skincare, body care and hair care.
Other notable brands that have leveraged niche products and social media marketing, and translated that into success include fashion line Anima Iris, restaurant and food chain Slutty Vegan, and Brooklyn Tea, a New York and Atlanta-based tea room that grew into a global brand, thanks in part to its use of Canva’s visual marketing tools.
How Digital Tools Empower Black Business Owners
A 2022 survey from the Connected Commerce Council shows that digital savviness has allowed many Black small business owners to expand their reach and grow their business:
- 85% of Black-owned businesses cite digital tools as a key part of their operations;
- 83% saw a “noticeable impact” when using digital tools to grow their business; and
- 80% consider digital tools important in driving revenue.
While offering support to brands looking to grow their online sales, e-commerce services and marketplaces like Etsy, Shopify, Amazon and eBay are highlighting the shops of Black-owned businesses so consumers can easily discover their products. Additionally, low-cost, easy-to-access digital tools such as social shopping, online advertising, inventory tracking, emerging AI platforms and office management systems can continue to help these businesses find more opportunities to succeed.
But there’s still work to be done in ensuring their success.
Even amid these promising trends, Black-owned businesses are facing some unique challenges. Currently, only 1% of venture-capital funding goes to Black founders, and some find it difficult to convince investors that their products can be marketed to a wide audience. Moreover, McKinsey reports that “only 4% of Black-owned businesses are still in operation after three and a half years, compared to an average of 55% for all businesses.”
The early months of the pandemic underscored these disparities. Black businesses took a significant hit at that time, with 41% closing— twice the rate of other businesses, according to April 2020 Census data. Many were unable to withstand the mandated shutdowns due to a lack of access to financial relief funds, long-standing racial wealth gaps, and other factors.
What’s Needed to Help Black Brands Grow Further and Thrive
Black brands can develop, expand and thrive with additional resources and investment.
And we have seen progress in recent years. For instance, McKinsey announced a $15 million investment in the Black Economic Development Fund in May 2021, supporting initiatives to address racial wealth and opportunity disparities. That same year, Seed At The Table, a capital crowdfunding platform for entrepreneurs of color, was launched by a collective of young professionals seeking to move the needle forward on business investment.
In October 2021, PNC Financial Services donated $16.8 million to launch the Howard University and PNC National Center for Entrepreneurship. The center will partner with other historically Black colleges and universities (HBCUs) to create a national footprint that has the potential to generate support for emerging Black business owners. And in November 2022, Robert F. Smith — founder of Vista Equity Partners – launched a program alongside investment companies Stackwell and Prudential that will provide qualifying HBCU students with $1,000 investment grants along with hands-on entrepreneurship education.
Ensuring access to more digital resources can also help increase Black business ownership, providing the tools needed to stay competitive. Amazon’s Black Business Accelerator is a great example; it offers access to strategic business education and coaching, and marketing and advertising support to better position Black-owned small businesses for success. Online marketplaces like eBay and Etsy have also created hubs and resources for Black brands, while social media like Instagram and Facebook offer special features and highlights for Black sellers as well.
Increasing resources for entrepreneurship overall will help unlock more competition among all businesses, further economic growth and financially strengthen diverse communities. As we see more Black-owned brands thriving in retail, this should not only be celebrated but supported and replicated through ongoing efforts to develop more opportunities.
Black entrepreneurs are embracing new digital tools to grow their brands. This innovative mindset is key to thriving in retail and reflects the competitive nature of the industry. Going forward, increasing channels for capital investment, hands-on business training and digital resources can open the door for more diversity among successful retail businesses — a great sign of a healthy, open market.