We already know diversity in the office is beneficial because it leads to a diversity of ideas and opinions, but a new study found a similar correlation between diverse communities and retail chains.
A study conducted by a team that included Rutgers University professor Patrick McKay found that having a racially diverse workforce can improve retail sales performance.
In fact, McKay said, for each percentage point closer to matching the racial diversity of the community and workforce, a retailer can increase its sales by $67,000.
Yes, that is per percentage point.
But what was even more interesting, McKay said, was that, even if the community is not diverse, having a diverse work force can also have a positive effect on sales.
“Even if the neighborhood was mostly African-American or mostly white, the stores with a diverse staff still had stronger sales,” McKay said. “I believe this shows that a diverse staff brings different ideas about how to serve customers more effectively, which enhances overall sales performance.”
The study looked at 200 large, multistate retailer locations in 19 states in the Midwest and West that sell similar products to “big box” retailers like Wal-Mart, Kmart and Target. But the focus of the study was not on these national retailers, but rather a regional retailer that allowed the gathering of data, McKay said.
Even though that was a restriction, and put the focus of the study in less diverse areas of the country, the extrapolation could show even stronger results, McKay said.
“What we reported is underestimated. We will probably see stronger effects in more diverse places like New Jersey,” he said.
Diverse opinions in an office or on a board have proven to create better ideas, and the effect is similar in the retail setting, according to the study.
“There is a loss of information by a homogenous workforce who see things the same way. The out-of-the-box ideas are not there. That leads to a loss of sale,” McKay said.
For example, setting displays or finding merchandise that a particular community would want to buy are some of those ideas. Without products that cater to a diverse community, there are lost opportunities.
“A better relationship forms between the organization and the customers, and it becomes a source of repeat business. One of the biggest metrics is repeat business,” McKay said.
The conclusion is simple.
“A diverse workforce is good for business,” McKay said. “This study suggests that shoppers respond favorably to a store that mirrors the look of their community.”
The study is set to be published in an upcoming issue of the Journal of Management.