Why diversity and inclusion are key to growth as economy slows

To receive the Vogue Business newsletter, sign up here. Connecting with minority ethnic communities — or the global majority — is essential for brands to future-proof their business strategies, according to a new report from British advertising agency WPP. It’s especially important during periods of financial struggle, when consumers become more picky about where they spend their money. The report — based on a study of more than 8,000 UK consumers between 2020 and 2022 — shows minority ethnic groups feel undervalued by brands, particularly when buying luxury. However, the combined disposable income of these communities is expected to reach £252 billion annually by 2023, growing to £3.06 trillion in 2031 and £16.7 trillion by 2061, according to WPP. “If you can engage just 1 per cent of this audience, you could unlock £2.34 billion short-term growth by 2023, and given that we’re going into some form of financial crisis most businesses are going to be looking for growth,” says Karen Blackett, UK president of WPP. That figure rises to £12.3 billion by 2023 and £107 billion by 2061. “People are going to be changing their consumer habits and prioritising different brands. Speak to this audience, engage them and make their experience equal and you can unlock that money.” The data was gathered quantitatively and qualitatively, measuring brand value and consumer perception. It projects population, income and category spend (beauty, luxury, retail and high street, health, financial services and food and beverage) across six ethnicities — Black, Middle Eastern, South Asian, East and South East Asian, white and mixed ethnicity — over the next 40 years. Five in six minority ethnic consumers purchase luxury goods, compared with four in six white consumers, the report found. However, the research showed minority ethnic groups “are not feeling valued as customers”, says Blackett. “They’re not feeling welcomed or like they belong in terms of their experience, especially when shopping in-store.” To foster a sense of belonging, brands and retailers should ensure store staff represent the communities they’re trying to reach, that they offer product ranges that fit their needs and prioritise inclusive messaging in advertising, says Blackett. WPP found that consumers from minority ethnic groups are proportionately more likely to prioritise investment and building generational wealth. They also are more likely to demand inclusion and sustainability, and are looking for a challenger or courageous brand attitude, a modern approach and innovation. “With the minority ethnic working population of 18-54, we saw a lot of that audience is investing in wealth. So much of that audience is entrepreneurial and that’s reflected in their choices,” says Blackett. “Since they don’t necessarily have the heritage and tradition passed down to them on luxury brands [like their white counterparts], they want something that reflects their reality, which is investing in themselves, investing in wealth and wanting a brand that reflects innovation and modernity.” Luxury brands can tap into the opportunity in different ways, she says: luxury heritage brands can attract more minority ethnic consumers who are looking for investment pieces if they offer more innovation and inclusive messaging, while disruptive challenger brands can tap into these communities if they demonstrate the long-lasting value of their innovative approach. It’s not just minority ethnic consumers, either: 80 per cent of white consumers are concerned with racial equality, per the report, and 77 per cent say it’s important for brands to promote diversity and inclusion. Across all respondents, 80 per cent believe that brands should reflect modern society. “There’s been a preconception that if you focus on [attracting] minority ethnic audiences it’s going to exclude the white audience, but that wasn’t shown in our research at all,” says Blackett. “It’s not a coincidence that one of the brands which topped the minority ethnic audience and came second for the white audience was Fenty as consumers are looking for brands to be courageous, modern, intuitive and unique.” It’s essential for companies to understand that while non-white communities have shared experiences, different ethnic groups have cultural nuances and differences in their lived experiences which shapes their consumption habits, the report says. Brands shouldn’t just group them all together under “BAME” or “people of colour” if they want to truly understand these communities. Brands should start by evaluating first party consumer data. WPP broke its UK-based report into six ethnic groups, but companies based in other markets may choose to include other ethnic groups based on the average population. “It’s about looking at the breakdown of first party data to recognise the gaps you might have in understanding that audience, and trying to bring that audience in, as part of your product and communication development,” says Blackett. Keeping the communication with that audience at all times — especially during recessionary periods — will keep them engaged long term. The report warns that diversity and inclusion efforts must be viewed as a basis for business growth rather than strictly purpose-driven, or risk being sidelined during this and future periods of economic downturn. “Economic pressure can sometimes encourage brands to pull back from their ad spending as well as their community investment programmes, but that decision can have costly long-term impacts with BIPOC consumers,” says Damian Benders, general manager at My Code Media, a digital media company that helps brands to connect with diverse audiences. “We encourage brands to be smart with their spending while simultaneously carefully considering what it means to draw back on commitments.” Economic slowdowns are “actually the perfect opportunity for brands to prove that they have been receiving the message that inclusion efforts are one of the meaningful solutions to real business challenges”, he adds. Brand values are likely to be under greater scrutiny when wallets are tighter. “BIPOC consumers are becoming more and more savvy with respect to brand intentions,” says Benders. “Gone are the days where a flashy announcement or a one-off activation will persuade the target customer. Consumers are looking for continued investment in the communities they care about and are checking to make sure they can see that the brand’s values and actions match.” Investing in this level of consumer equality can lead to greater business success. “It should never be a conversation that is in a silo of corporate social responsibility. It should be considered a business imperative, such as your net sales, profit margin or cash flow projection,” says Blackett. Correction: Updates that capturing just 1 per cent of the minority ethnic audience can lead to £2.34 billion growth in the short term. A previous version of this article stated that increasing minority ethnic consumer audience by 1 per cent can lead to up to £4 billion growth. (15/11/22) Comments, questions or feedback? Email us at feedback@voguebusiness.com. More from this author: Tapestry lowers forecast on slow China recovery and strong US dollar Ferragamo revenues grow as tourism in Europe offsets China lag Adidas eyes ‘new era’ with Puma’s Bjørn Gulden as CEO

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