Supplier Diversity Fuels Prosperity

Everyone wins when retailers collaborate with diverse suppliers. That’s because beyond business growth benefits, consumers see retailers’ commitment to diversity across the retail supply chain, so they feel represented, valued and more willing to buy, creating a cycle for positive social change and prosperity.

That’s why supplier diversity – sourcing products from minority businesses – has emerged as a leading retail trend and it’s gaining momentum. Diverse suppliers include vendor companies owned and operated by women, members of socially and economically disadvantaged groups, and veterans.¹  Supplier Diversity. Dun & Bradstreet. 2019.

Best of all, it pays off.

When retailers source products from diverse suppliers, these strategic partnerships can create a long-term competitive edge for retailers, suppliers and consumers alike.² Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008. According to recent research on supplier diversity programs:

• $3.6 million is added to the bottom line, on average, for every $1 million in procurement operation costs.”³ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008.
• 68% of companies surveyed cited both corporate social responsibility and alignment with workforce inclusiveness as primary drivers of their supplier diversity program.
• 53% of supplier diversity programs count small businesses in their diverse spend, giving smaller companies new opportunities to profit.

As 2020 approaches, retail buyers need to understand why working with diverse product suppliers needs to be part of their business strategy in the new year and beyond. 

Supplier diversity is a retail imperative
Experts predict the U.S. population will increase from 330 million in 2019 to 374 million by 2050, with the minority population accounting for nearly 90% of the total growth.⁴ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008. ⁵  United States Census Bureau. 2019 In parallel, minority-run businesses are starting up across America at unprecedented rates. ⁶ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008.

This growth is important because minority businesses create jobs in minority communities and increase spending power within minority families, who can subsequently buy more goods and services from corporations. (Wins all around!)

Minority purchasing power will surpass $3 trillion by 2030

Experts predict minority purchasing power will surpass $3 trillion by 2030, and they say exploring new markets through supplier diversity will be essential to continued prosperity and growth. ⁷ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008. Supplier diversity gives retailers the chance to gain a competitive advantage by infusing minority suppliers into their business processes to gain a sustainable competitive edge. ⁸ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008.

Notably, diversity is far from a short-term fad. Gen Z is the most ethnically and racially diverse generation in history. One in four is Hispanic, 14% are African-American and 6% are Asian, according to studies led by the Pew Research Center.⁹  Network of Executive Women and Deloitte. Welcome to Generation Z. Deloitte. 2019. Amid America’s growing Hispanic population and increased demand for ethnic products, Winn-Dixie opened Fresco Y Más branded stores in South Florida to entice Hispanic shoppers.¹⁰  Loria, Keith. How catering to ethnic populations can spice up shopping and profits. Food Dive. February 2, 2017.

To pinpoint diverse businesses as potential suppliers, retailers with supplier diversity programs often rely on business certifications. Certifications that help retail buyers discover and partner with diverse suppliers include:

• Small Business Certified – SBA(8)A Certified
• Women-owned Small Business (WOSB) and Women Business Enterprise (WBE)
• Small Disadvantaged Business (SDB) and Disadvantaged Business Enterprise – Government Certified
• Service-disabled Veteran-owned Small Business Concern (SDVOSBC) and Veteran Owned – NaVOBA
• Ethnic Minority-Owned – NMSDC Certified, State Certified Minority Owned and Minority Business Enterprise (MBW)
• Gay, Lesbian, Bi-Sexual or Transgender Owned – NGLCC certified

Profiting from partnerships with diverse suppliers
Retail companies that effectively adapt to demographic shifts will be poised to profit from growing demand for supplier diversity. Creating a diverse, inclusive supply chain results in more buying power, more affluent communities and economic growth.¹¹  Omni50 Top Corporate Awards. Omnikal. 2019.

Supplier diversity initiatives also help retail companies evolve beyond functional product benefits and emotional consumer benefits by supporting broader social benefits. Supplier diversity aligns with meaningful, lasting corporate social responsibility at a time when consumers increasingly crave purpose-led brands. Businesses profit while contributing to the greater social good.¹²  Supplier Diversity. Dun & Bradstreet. 2019.

“Supplier diversity is more than the right thing:
it is the smart thing.“¹³Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008.

A collaboration between retailers and diverse suppliers can lead to an improved top line, and product innovation and variety to differentiate their assortment, while connecting their companies to a broader audience of shoppers.

Retailers win, as one study found that a diverse supplier base can result in significant financial benefits for buyers. ¹⁴  Supplier Diversity. Dun & Bradstreet. 2019. Suppliers win by securing new contracts that fuel growth, resulting in economic gains for traditionally disadvantaged groups. 

Those who specialize in this area say, “Supplier diversity isn’t just a means to an end—for many professionals, it’s as important philosophically as it is financially.” The benefits of supporting supplier diversity include allowing diverse suppliers to grow, shrinking the inequality gap and helping diverse businesses compete alongside Fortune 500 companies – and win the bid. ¹⁵  2019 State of Supplier Diversity – Supplier Diversity Programs. CVM. 2019. Within the next few years, supplier diversity professionals desire “better resources to locate diverse suppliers” to help the suppliers grow in under-represented sectors. ¹⁶  2019 State of Supplier Diversity – Supplier Diversity Programs. CVM. 2019.

Retail companies invest in diversity
Leading retail corporations have set supplier diversity goals for their product sourcing and procurement efforts, including:

• Walmart: Showing supplier diversity leadership more than a decade ago, the world’s biggest retailer spent more than $3.9 billion with nearly 2000 minority-owned suppliers and used community outreach to help develop suppliers to help small businesses grow and foster economic opportunity in neighborhoods in need.¹⁷ Whitfield, PhD, Gwendolyn. Supplier Diversity and Competitive Advantage: New Opportunities in Emerging Domestic Markets. Graziadio Business Review. 2008. For its leadership, Walmart ranked #2 on the Omni50 Top Corporate Awards, which recognized companies that award business to diverse-owned companies, including product sourcing opportunities for an inclusive supply chain.¹⁸  Omni50 Top Corporate Awards. Omnikal. 2017. In addition, Walmart ranked #34 on DiversityInc’s Top 50 Companies for Diversity list.¹⁹  Levy, Sandra. CVS Health, Walmart among DiversityInc’s Top 50 Companies for Diversity. Drug Store News. May 9, 2019.
  
• Kroger: More than 30 years ago Kroger established a corporate-wide Supplier Diversity Program to foster the promotion, growth and development of minority, women and other diverse owned enterprises “to reflect the broad diversity of the marketplaces we serve.”²⁰  Supplier Diversity Program. Kroger website. Kroger ranked #13 on the Omni50 Top Corporate Awards.²¹  Omni50 Top Corporate Awards. Omnikal. 2019.
  
• Target: To promote supplier diversity, Target partners with the National Minority Supplier Development Council, Women’s Business Enterprise National Council, National Gay and Lesbian Chamber of Commerce, United States Hispanic Chamber of Commerce, U.S. Pan Asian American Chamber of Commerce and National Veteran Owned Business Association. Target ranked #14 on DiversityInc’s Top 50 Companies for Diversity list and #18 on the Omni50 Top Corporate Awards. ²²  Levy, Sandra. CVS Health, Walmart among DiversityInc’s Top 50 Companies for Diversity. Drug Store News. May 9, 2019.  ²³  Omni50 Top Corporate Awards. Omnikal. 2019.
  
• Walgreens: To access new and diverse suppliers with greater ease, the drugstore retailer has joined RangeMe’s sourcing platform, which streamlines new product discovery between product suppliers and retailers as part of the retailer’s corporate social responsibility strategy. “We’re pleased that the RangeMe platform allows us to find new ways to offer our customers great products,” said Carlos Cubia, vice president and global chief diversity officer, Walgreens Boots Alliance. ²⁴  Walgreens Commits to Supplier Diversity With New Retail Tech. RIS News. July 31, 2019. Walgreens ranked #24 on the Omni50 Top Corporate Awards.²⁵  Omni50 Top Corporate Awards. Omnikal. 2019.
  
• CVS: CVS Health was recognized by Billion Dollar Roundtable, a top-level corporate advocacy organization that promotes supply-chain diversity excellence, for spending over $1 billion with diverse suppliers.²⁶   Supplier Diversity. CVS Health. 2019. CVS Health ranked #1 on DiversityInc’s Top Companies for Supplier Diversity List and #34 on the Omni50 Top Corporate Awards.²⁷  Omni50 Top Corporate Awards. Omnikal. 2019. In addition, CVS Health ranked #27 on DiversityInc’s Top 50 Companies for Diversity list.²⁸  Levy, Sandra. CVS Health, Walmart among DiversityInc’s Top 50 Companies for Diversity. Drug Store News. May 9, 2019. 
  
• The Home Depot: To serve the needs of diverse consumers, the retailer partners with groups like the National Minority Supplier Development Council, the United States Hispanic Chamber of Commerce and the Women’s Business Enterprise National Council.²⁹  The Home Depot. Supplier Diversity. 2019. The Home Depot ranked #36 on the Omni50 Top Corporate Awards.³⁰  Omni50 Top Corporate Awards. Omnikal. 2019.

Major consumer packaged goods (CPG) suppliers also ranked well on the Omni50 Top Corporate Awards, led by The Coca-Cola Company (#8), PepsiCo (#11), Colgate-Palmolive (#12), Nestlé (#29), Kellogg Company (#39).³¹  Omni50 Top Corporate Awards. Omnikal. 2019.

As these trends show, supplier diversity efforts can make a profound difference in the lives of retail entrepreneurs and communities by helping to increase affluence among traditionally disadvantaged groups. Retail companies that adapt to inevitable demographic shifts and reflect their audiences will be the most prepared to profit from supplier diversity.