Major Retailers Boost Entrepreneurship for Black Women as Job Gap Persists

Ulta Beauty has doubled the number of black-owned brands it offers.

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Major beauty retailers are boosting minority-owned small businesses as Black women’s entrepreneurship helps close the employment gap.

As of last year, 17% of black women in the US were in the process of starting or running new businesses, according to the Harvard Business Review. That beats the 15% of white men and 10% of white women who reported the same.

However, only 3% of black women reported having mature businesses.

And the traditional workforce unemployment rate remains high among black women, at 5.5% in March, compared to overall US unemployment of 3.6%, according to the Labor Department. The unemployment rate among Hispanic women during the same period was 4.2%. For white women it was 2.8%.

In an effort to help small businesses and promote entrepreneurial opportunities for blacks, major retailers such as Ulta, Sephora, and Target have created start-up incubators and diversity programs, providing mentoring, financial support, and new business opportunities.

This month, Ulta Beauty partnered with incubator Rare Beauty Brands and Black Girl Ventures, a foundation that finances and scales businesses founded by African Americans and Latinos, in the group’s second pitch competition for minority-owned beauty startups. The competition is a crowdfunded, live event in which founders create a three-minute pitch in hopes of boosting their businesses.

The first place winner will receive accounting advice, $10,000 and a spot on Ulta’s product shelves for at least six months. Winners are chosen based on audience votes. Voting among the seven finalists closed on April 14. The winner will be announced next week.

The competition also promises the opportunity to be a key mentor. Black Girl Ventures offers applicants training before launch, and Rare Beauty Brands works with business owners after their win.

“We already know that in the beauty industry, Black women are overspending on beauty products, and yet funding for Black women entrepreneurs is dramatically underdeveloped relative to what it should be,” she said. Rare Beauty Brands CEO Chris Hobson. “It’s less about adding brand value for us and more about fixing a mistake and a way to say ‘Thank you’ to a large portion of our consumers and try to be part of the solution here.”

Kim Roxie, founder and CEO of Lamik Beauty, the first black-owned clean beauty brand to be featured at Ulta, won last year’s launch competition from Rare Beauty Brands and Black Girl Ventures. She said the partnership with Rare Beauty Brands was transformational for her business.

“It was a game changer for me as a founder, and it was a game changer for my company,” Roxie told CNBC. “They allowed me to use their team in a way that I would have had to try to hire all these different people and it would have been out of my hands.”

“Somehow they took over and filled that void for me.”

Ulta Beauty has pledged to spend $50 million this year on diversity initiatives, including launching an accelerated program to support black founders and put money toward marketing their brands.

In February, the company said it is about halfway to reaching a goal of 15% minority representation on shelves as part of its broader diversity initiatives.

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Sephora runs similar accelerated programs for entrepreneurs, aimed at improving representation of BIPOC (Black, Indigenous and People of Color) founding brands. The company’s Accelerate program, which launched five years ago, received more than 600 applications from small business owners this year.

“The Accelerate program serves as a springboard for nascent brands to become visible, viable, stable and financially solvent,” said Rauvan Dulay, vice president of global marketing, business development and strategy at Sephora. “Business growth in communities of color creates jobs, opportunity, stability and generational wealth, with the potential for decades of positive impact.”

Big box retailer Target launched Target Takeoff in 2016 with similar goals but aimed more at mature consumer packaged goods companies. Five years later, the company added Forward Founders to its portfolio, an incubator initiative designed to engage Black entrepreneurs much earlier in their start-up journeys by helping them navigate critical stages such as ideation, product development, and the scale to serve mass retail, according to the company.

The incubator announced its second cohort in January.

“Target has a long and successful history of Accelerator programs and we saw an opportunity to do more and think differently about how we support underrepresented entrepreneurs,” the company said in a statement to CNBC.

Target’s Forward Founders program received about four times the number of applicants it anticipated this year, the company said. Tripled the size of the annual cohort and created an entirely new virtual program so all applicants could benefit.

— CNBC’s Melissa Repko contributed to this report.

Correction: The Black Girl Ventures launch competition is a joint effort with Rare Beauty Brands. An earlier version of this story misidentified the parties involved.

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