COVID-19 spurred a seismic shift in buying behavior and fast-tracked years of change in the way companies across all sectors and regions do business. U.S. Commerce Department data reveals that consumer spending through non-store channels grew more than 30% in November 2020 when compared to November 2019 — the second-highest rate of any month since the agency began publishing data in 1992. In parallel, U.S. retailers experienced a boost of $152 billion in e-commerce sales in 2020.
As consumers overwhelmingly shifted their spending toward online channels during the pandemic, business owners had to pivot more quickly than they ever imagined. At the same time, Black business owners found themselves disproportionately affected by pandemic-linked business impacts. A recent study conducted by the JPMorgan Chase Institute found that Black-owned businesses often experience lower revenues, smaller profit margins and more limited access to cash. Between February and April 2020, more than 400,000 Black-owned businesses were shuttered and 41% of those permanently closed their doors. Furthermore, Black founders were also less equipped to handle mandated closures during the pandemic and had less access to relief, with about 58% of Black-owned businesses at risk of financial distress even before the pandemic and in many cases, unprepared to shift their business strategy and operations to meet the e-commerce experience consumers demanded.
#BuyBlack Sentiment Is Strong, But Barriers Remain
Following George Floyd’s murder and the widespread acknowledgment of systemic issues of racism in our country, we’ve seen a strong shift in consumer commitment to the #BuyBlack movement. Google search interest for “Black-owned businesses” in 2020 skyrocketed 600% compared to 2019. However, many of the obstacles that have impeded the progress of Black founders for centuries remain. Per McKinsey, “throughout the business-building process, Black founders face economic, market, sociocultural and institutional barriers, which are all linked to racial discrimination in the United States.” In addition, JPMorgan Chase Institute research found that Black-owned businesses today hold significantly less cash than white-owned businesses.
Five Strategic Opportunities For Black Founders To Enhance E-commerce
More than ever, there is strong support for diverse businesses. This has been amplified and accelerated, and it is here to stay. With such a positive focus on the Black community, this is an important time for Black founders to ensure their brand is doing everything it can to meet consumers where they are — which is online and through e-commerce. In my more than 20 years working in and with disruptive markets and business founders, I’ve observed five critical components for successful e-commerce strategies for Black founders to keep in mind.
Establish A Loyalty Program
Digital-first businesses must develop a robust loyalty program. On a large scale, think about airlines and credit card rewards. On a local level, this is your local lunch spot that has a virtual punch card so when you buy five salads, you get the sixth one free. The whole notion of loyalty is closely tied to e-commerce because of how businesses can retain customer information and keep them digitally re-engaging with the brand. Founders need to focus on their loyalty strategy by asking: What can I offer? What software and technology tools can help establish loyalty?
Integrate Consumer Feedback Into Your Marketing Strategy
A digital marketing strategy is essential in today’s online marketplace, and also a key component of loyalty programs. These two items should be working together to build a deeper and more rewarding consumer brand experience. Customer reviews are also a key element for founders to build into their digital marketing strategy. Since consumers seek out reviews to make buying decisions, positive reviews can be what sets your business apart from your competition. A solid customer review strategy includes regularly auditing your company and/or product reviews across platforms, posting reviews on your company homepage and integrating positive reviews across channels, including your website, or even your email signature.
When founders align their entire business around delivering a remarkable customer experience, it creates a consumer flywheel of momentum.
Communicate Your Brand’s Purpose
Recent research from Zeno Group reveals consumers are more likely to purchase, protect, champion and trust a brand that has a strong purpose. This means it is essential for founders today to identify and authentically articulate their brand’s values and purpose. However, this is only half the battle. Brands must live up to their commitments in real ways and show consumers how they are delivering on these commitments on a regular basis.
For e-commerce players, the market is global. If I am sitting in London and I see a cool brand on my Instagram feed that people are buying in New York, I am going to want to buy it — it really doesn’t matter for many where the company is based. Founders should be prepared to meet this consumer expectation by adopting a global business strategy. Some important steps to taking your business global include identifying markets of opportunity, leveraging local experts, learning or hiring those familiar and/or fluent with other languages and finally, integrating an international marketing strategy.
Seize The Moment
With such a big focus on #BuyBlack, many firms are committed to investing more in minority-owned businesses. JPMorgan Chase, for example, has made specific investments to support diverse businesses. In October, we announced a $30 billion investment over the next five years to provide economic opportunity to underserved communities, especially Black and Latinx communities. As part of this, we’ve invested $42.5 million to expand the Entrepreneurs of Color Fund to more U.S. cities. This new commitment, which combines low-cost loans, equity investments and philanthropy, will help reduce barriers to capital for underserved small businesses and founders to support their immediate needs and long-term growth.
You can learn more about the Advancing Black Pathways — an initiative that builds on our existing efforts to help the Black community chart stronger paths toward economic success and empowerment — and other community initiatives, by visiting jpmorganchase.com/impact.
Take Control Of Your Business’ Future
My role at J.P. Morgan Chase is to connect businesses with the innovation economy ecosystem and potential investors that make strategic sense for founders’ growth strategy. I believe Black founders have an opportunity right now to act and really consider their long-term business strategy and goals to determine what capital is needed to get them there. In addition, I encourage Black founders to seek support to maintain business longevity amidst future challenges and unforeseen crises. Founders should seek strategic business partners that have the resources to help them seize this moment, as well as plan for the future.
Opinions are the writer’s own and not those of AfroTech.
Alton McDowell is J.P. Morgan’s Co-Head of Technology and Disruptive Commerce – Middle Market Banking & Specialized Industries.