Addressing Racial Inequity in Beauty Is a $2.6B Opportunity, McKinsey Reports
Despite the commitments companies across industries have made in recent years with regard to diversity, equity and inclusion, meaningful change that supports Black beauty brands, Black beauty founders and the experiences of Black beauty consumers remains a largely untapped market.
A recent report by the McKinsey Institute for Black Economic Mobility has found that addressing racial inequity in beauty is a $2.6 billion opportunity.
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The report spotlights the barriers facing Black beauty founders and employees, from entry level to the C-suite, as well as friction points inhibiting the experiences of Black beauty shoppers.
The McKinsey Institute for Black Economic Mobility conducted more than 7,400 surveys among Black beauty consumers, as well as a virtual focus group of 110 Black consumers in the U.S. about their spending habits, satisfaction with current beauty offerings and what qualities and claims would persuade them to spend more on a product, among other topics.
McKinsey also visited 102 retail outlets across the U.S. frequented by Black beauty shoppers to assess how well product placement and accessibility in stores meet the needs of Black consumers.
“Instead of just doing interviews, we actually wanted to send people out to shop and look for products from Black founders, or products that Black consumers may be more interested in, to see how available they are — and if they found them, how knowledgeable the salesperson was about the product,” said Tiffany Burns, senior partner at McKinsey & Co., and one of the authors of the report.
McKinsey & Co. also interviewed more than two dozen beauty industry insiders, including retail executives, Black chemists and Black beauty founders such as Tracee Ellis Ross, Nyakio Grieco, Lisa Price and Desirée Rogers, about their experiences and the obstacles hampering the success of Black beauty brands.
Ross, who founded Pattern, a hair care brand for curly, coily and tight-textured hair, in 2019, spoke to the lack of available data that impedes efforts of Black beauty founders from the very genesis of their journeys. “What I discovered working in person and one-on-one with a chemist is that the efficacy of products is actually based on what straight, blond hair does,” Ross said in an interview with McKinsey & Co.
“The clumping, slip and hydration your hair gets — those three terms were something these chemists have never heard of — and if they didn’t know what those things were, there was no way to translate the information I needed.”
Rogers, who is the co-owner and chief executive officer of beauty brand Black Opal and prestige makeup brand Fashion Fair Cosmetics, noted that the responsibility of creating a more equitable beauty market cannot be solely placed upon Black-owned companies and entrepreneurs, and there is work to be done on all levels.
With this report, McKinsey & Co. pinpointed factors obstructing a supportive environment for Black beauty businesses and Black beauty consumers.
Among the key findings from the report:
The U.S. beauty industry was worth $60 billion in 2021, with a projected value of $73 billion by 2025.
Black-owned and founded brands only make up 2.5 percent of the revenue in the beauty industry, despite Black consumers being responsible for 11.1 percent of total beauty spending, and Black people making up 12.4 percent of the U.S. population.
Black consumers show an affinity and preference for Black beauty brands, and are 2.2 times more likely to conclude their products will work for them. However, only 4 to 7 percent of beauty brands carried by specialty beauty stores, drugstores, grocery stores and department stores are Black-owned or founded brands.
Black consumers are three times more likely to be dissatisfied than non-Black consumers with their options for hair care, skin care and makeup.
From entry level to the C-suite, and from retailers to beauty houses, only 4 to 5 percent of all employees in the U.S. beauty industry are Black.
Black-owned and founded beauty brands raise a median of $13 million in venture capital, substantially less than the $20 million that non-Black owned or founded brands raise. Yet today, the revenue of those Black-owned and founded brands is 89 times higher than what non-Black-founded beauty brands return over the same period.
75 percent of Black beauty consumers can be persuaded to purchase beauty products by ads that feature various skin tones across all races. Conversely, 75 percent can be dissuaded from purchasing a product when an advertisement does not reflect racial diversity.
Disproportionate private equity financing, lack of diversity among brands’ employees and advertisements and insufficient access to products and services are among the outstanding issues inhibiting progress for Black beauty brands and the experiences of Black beauty shoppers.
“Some of the key phrases when I was growing up that were a part of beauty campaigns, particularly around hair, were ‘easy, breezy, beautiful’ and ‘bouncin’ and ‘behavin’ — those were two things my hair did not do,” said Ross. “I was not trying to ‘behave’ my hair, I was actually hoping to support it and celebrate it.”
The report also outlines the disparity between the revenues of Black-founded brands that are not Black-owned, and of those that are, with Black-founded brands that are not Black-owned generating 82 percent of the total annual revenue of Black beauty brands at large.
The report outlines key initiatives that can be enacted by the beauty industry to help Black-owned and founded beauty brands attain their full revenue potential, support the success of Black founders and improve upon the Black beauty shopper experience.
Among those initiatives include minimizing the occurrence of “beauty deserts,” which are areas, often in majority-Black communities, where access to specialty and department stores and higher-quality beauty products is lacking.
Improving store associate training to better cater to the needs of Black consumers and ascertain appropriate product recommendations, as well as increasing the amount of shelf space occupied by Black beauty brands in retail stores to at least 15 percent, as is urged by nonprofit organization Fifteen Percent Pledge, are also vital steps to bettering Black shopper experiences.
The report suggests increasing the number of Black beauty employees across all levels and departments to at least 15 percent, noting that, “If the top 10 beauty retailers and top 10 beauty houses [by revenue] increased the percentage of their Black employees to at least 15 percent — matching or exceeding Black representation in the population at large — that would lead to 60,000 more Black people working in the beauty industry.”
The report states that if the beauty industry incubates and grows at least 500 Black beauty brands through venture capital, networking opportunities and mentorship, paired with the aforementioned steps, annual Black consumer spend can increase from 11.7 to 12.7 percent of total beauty spending — thus becoming parallel to the percentage of Black people in the U.S. — or, $9.2 billion of the projected $72.4 billion beauty market in 2025.
“I truly believe that this industry can be an absolute catalyst to help alleviate systemic racism in this country,” said Grecio, who founded her namesake skin care line in 2002, cofounded inclusive retail platform Thirteen Lune in 2020, and recently introduced the retailer’s first incubated brand, Relevant; Your Skin Seen, in an interview with McKinsey & Co.
“Everybody loves beauty — it’s universal, and it makes a lot of money, so it’s time to make it as equitable as humanly possible,” she concluded.
The full report, “Black Representation in the Beauty Industry,” is accessible on the McKinsey & Co. website.
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Inside Relevant, Nyakio Grecio’s New Beauty Brand
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