Why DEI is Good for Business

Several research studies have looked at how diversity, equity and inclusion (DEI) strategies that prioritize fairness and equal opportunity, and promote a workplace culture that values diversity, empowers individuals, and fosters a sense of belonging, are impacting today’s workplace.

A 2023 study by Pew Research Center found a majority of employed U.S. adults (56 percent) believe focusing on increasing DEI at work is a good thing. For the retail industry, in particular, there’s still room to grow and advance in this area. A 2021 McKinsey study reported only 16 percent of retail organizations viewed DEI as a top priority and only 36 percent were actively recruiting from underrepresented groups at that time.

However, a few retailers are leading the way and setting an example for the industry. Two DEI leaders in the retail industry are major beauty brand, Sephora, and clothing giant, Gap Inc. A study commissioned by Sephora revealed that three in five shoppers reported experiencing discriminatory treatment. The retailer’s DEI initiatives aim to "build inclusive environments for employees, consumers and communities." Gap Inc. is committed to "driving systemic change and enabling a culture of belonging for our teams, our customers and future generations.”

Retailers with effective DEI strategies benefit financially by attracting talent, reducing attrition and increasing motivation. In fact, companies with diverse management teams report innovation revenue 19 percent higher than those with below-average leadership diversity.

Below are four ways retailers can leverage DEI initiatives to benefit employees, attract customers, boost output and contribute to long-term financial success:

1. Improve employee retention.

Attracting and retaining employees is a continual and expensive challenge for retailers. By creating an equitable workplace, businesses foster higher levels of employee satisfaction and engagement, leading to elevated employee retention and loyalty. Companies with higher retention rates expend fewer resources and less energy on frequent hiring and training, resulting in lower overall costs.

2. Diversify the talent pool.

Businesses that prioritize DEI initiatives can benefit from access to more diverse employees. These team members bring a range of perspectives that can lead to increased productivity and improved business performance. Their varied viewpoints also frequently result in better decision-making and reduce the risk of groupthink, in which a herd mentality replaces creativity, critical thinking and individual responsibility.

3. Access new markets and drive customer loyalty.

By understanding and catering to diverse customer segments, businesses can expand their customer base and tap new markets. Employees with a variety of lived experiences offer a better understanding of these diverse customer segments. Furthermore, companies with strong DEI programs and a positive reputation for diversity and inclusivity attract customers looking for brands that align with their values, which leads to increased brand loyalty and improved financial performance.

4. Reduce legal expenses.

A company that values DEI may also be keen to offer diverse and inclusive policies and practices that comply with legal requirements and regulations. These can include anti-discrimination policies, fair-pay practices, and helpful accommodations for employees with disabilities.

In addition to improving pressing systemic inequities, DEI initiatives offer clear and proven business benefits. Companies that prioritize DEI initiatives are more likely to have above-average profitability, improved employee retention, increased access to a diverse talent network, and an improved bottom line. Furthermore, businesses that cater to diverse customer segments access new markets, increase revenue and improve brand loyalty.

Jasmin King is a manager of strategic services for The Lacek Group, a Minneapolis-based data-driven loyalty, experience, and customer engagement agency. The Lacek Group is an Ogilvy company.