6 Ways DEI Continues to Shape and Evolve America’s Retail Sector

From increased innovation and profits to a better overall customer experience, diversity, equity, and inclusion (DEI) programs can have a beneficial impact on retail businesses. But disparities in upper management, along with underlying racism that still exists in some store locations, show those efforts still have a long way to go.

For a better understanding of just how important the role of DEI is in the retail sector, here’s a look at some recent studies and research on the subject:

Representation in Upper Management Remains Unbalanced

 With more than 52 million workers representing every possible race, gender and ethnicity, America’s retail workforce is the most diverse and inclusive of any business sector in the country. But while the people filling stockrooms, running cash registers, counting inventory and ensuring all the other day-to-day necessities of a retail operation are getting done, that broad level of diversity doesn’t always carry through to upper management and corporate levels.

When the industry news site Retail Dive analyzed the most current data available from the Equal Employment Opportunity Commission, they found that the number of executives of color working in retail has hardly changed in the last decade. Despite the many diverse individuals working on-site within retail locations, 86% of all executives and senior-level officials and managers running those retail operations were still white, and two-thirds of those individuals were white men. Sadly, this isn’t unique for the retail sector — most organizations in other industries still have the same problem.

Retail Focus on Standard DEI Practices is Almost Nonexistent

Even with an incredibly diverse pool of workers working in retail’s non-management levels, messages of DEI and inclusion are also vastly under-utilized in most retail settings, according to recruiting software developer Lever. With an estimated 56% of all retail organizations openly recruiting workers at any given time, Lever reports that most employees working for retail operations or interviewing with for a new position are never made aware of any sort of DEI programs that exist within the business.

Lever also found that just 1 in 5 retail employees are offered bias training during their onboarding, while 24% of managers are coached to spot potential bias in their recruiting and hiring practices.

Pay Gaps Between Male and Female Workers Remain Lower Than Other Industries

 The retail sector doesn’t just have one of the most diverse and inclusive workforces of any industry, it also continues to have one of the lowest pay gaps between those workers. A report from the watchdog group Diversity in Retail confirms that “the retail sector consistently has some of the lowest pay gaps within the market.”

For the fourth year in a row, DIR reported that the retail pay gap between men and women and individuals of different races has continued to fall, reaching its lowest point ever in 2022. The change hasn’t come without work, however. The group attributes retail’s success in the area to more inclusive corporate policies, increased development of female talent, and increased high quality data analytics and reporting. The group also points out that because many retail companies have large workforces including a good mix of men and women, people of color and people of different ages, it can also be easier to balance pay levels for certain roles, keeping pay gaps to an absolute minimum.

Retail Innovation Spikes as Levels of Diversity Increase

As we’ve reported on frequently in the past, successful DEI programs can greatly increase a company’s profits — and that’s just as true in retail as it is in any other area. However, another less frequently reported benefit of a successful DEI program is innovation in leadership. Research shows that successful DEI programs create more successful managers and better leaders overall. And this too is just as true in retail as it is in other areas.

In a study of employees from more than 1,700 companies conducted in eight countries around the world, the consulting firm BCG found that companies where employees felt their management and leadership teams were the most diverse also tended to report the highest levels of innovation. This innovation led to both higher revenue and profits — 19% better on average among the most diverse retailers compared to those employees ranked as the least diverse.

Customers Notice, Too

More than ever, consumers are letting their own personal beliefs and values guide their shopping behavior. According to the multinational professional services company Accenture (ranked No. 1 on Fair360, formerly DiversityInc’s 2022 Top 50 Companies for Diversity list), it’s becoming increasingly common for people shopping in the retail sector — whether its groceries, consumer electronics or clothing — to decide where they want to make their purchases based purely upon what they know about a business’s diversity and inclusion practices. Research from the group shows that 41% of consumers have shifted at least 10% of the money they spend annually away from businesses they feel aren’t inclusive enough.

On the flip side, that consumer purchasing power also now appears to be shifting towards companies that most successfully share consumers’ inclusive beliefs. The same Accenture consumer purchasing study reported that 29% of consumers are more likely to shop with and support businesses that they feel support their own views on diversity and inclusion. Forty two percent of people of color and 41% of LGBTQ individuals told the group they are committed to supporting inclusive retailers whenever possible when making a purchase.

Still, the Customer Experience Needs Improvement

While retailers are successfully managing to increase diversity within retail operations and eliminate pay gaps, those gains aren’t always carrying over to all consumers. Using data pulled from the Journal of Consumer Affairs, management consulting firm McKinsey has reported that racism in stores continues to be a serious problem for a number of retail outlets. In fact, the group wrote that approximately one in three people of color has felt racial discrimination when looking at some retail advertisements. And once inside a store, that number grows exponentially with more than 60% of individual’s surveyed saying they have experienced at least some level of discrimination while shopping in a retail establishment.

Bringing all the pieces of a successful DEI program together takes hard work, regardless of your business sector, McKinsey added in their report.