Black buying power increases, but circulation of dollar within community remains low
Nov. 30, 2011 at 5:30 a.m.
Updated Dec. 5, 2011 at 6:05 a.m.
Black business Owners
The State of the African-American Consumer Report is the first of annual installments in a three-year alliance between Nielsen and the National Newspaper Publishers Association, showcases the buying and media habits and consumer trends of black Americans.
The full report can be accessed at http://www.nielsen.com/us/en/ insights/reports-downloads/2011/state-of-the-african- american-consumer.html
For more information on the African American Chamber of Commerce log onto: http://www.aaccv.org/
What is buying power?
Buying Power is not used as a measurement of wealth. It is defined as the total personal income an individual has available after taxes for spending on virtually everything that they buy.
Source: Selig Center for Economic Growth.
What blacks spend their money on:
Cell Phones - Asian and Latinos also spend a good portion of their money on telecommunications, but black households still have the edge.
Fashion - Blacks spent more on women and girls fashions than non-black consumers combined, and almost twice as much on footwear. Expenditure on men's gear was about the same compared to non-blacks combined.
Pensions and Social Security - Blacks spent 10 percent of their after-tax income on pension contributions in 2007.
Transportation - Black Americans lavish 17 percent on automobile purchases and upkeep.
Source: "Black Buying Power: Showing You the Money" by Donna Johnson and Boyd Klingler
Birdie Ross-Haith grew up patronizing black-owned businesses.
A native Victorian, Ross-Haith said her parents emphasized to her and her siblings the importance of supporting the black community by purchasing products and services from people who looked like them.
As an adult with a business of her own, however, Ross-Haith said that mind-set has seemingly fallen by the wayside.
"That's what's wrong with the black culture now. They don't try to help each other," said Ross-Haith, co-owner of B&B Handbags. "(Black shoppers) would come and look but never buy."
Ross-Haith's statements come on the heels of recently released data that reports black buying power has increased from $957.3 billion in 2010 to an expected $1.1 trillion by 2015. Although this data from the State of the African-American Consumer Report reflects a positive growth in blacks' disposable income, the growing failure of blacks to do significant business with other blacks casts a dark shadow over the news.
Money circulates zero to one time within the black community, compared to the more than six times it circulates in the Latino community, nine times in the Asian community and unlimited amount of times within the white community, according to the University of Georgia's Selig Center for Economic Growth.
NUMBER OF BUSINESSES
Between 2002 and 2007, the number of black-owned nonfarm U.S. businesses increased by 60.5 percent to 1.9 million, making these businesses one of the fastest growing segments of the economy, according to U.S. Census data.
This is more than three times the national business ownership rate of 18 percent.
Additionally, these black-owned firms employed 921,032 people, 0.8 percent of total employment, and generated $137.5 billion in receipts, 0.5 percent of all receipts, according to U.S. Census data.
The growth of black-owned businesses in the Crossroads has not fared as well, though, said Matthew Gaskin, president of Victoria's African American Chamber of Commerce.
Gaskin estimated the chamber is made up of at least 30 businesses, a figure that has remained stagnant the last couple of years.
He estimated the chamber's membership peaked about 2009 with 50 businesses.
A combination of business failure, owners moving from the area and owners deciding to leave the business have all attributed to the drop in membership.
MONEY COMES; MONEY GOES
A community's health directly correlates to how many times money circulates or recycles within that community, Jim Wyatt told listeners during a recent African-American chamber membership drive.
"Much like the blood in your body, the more it circulates the healthier your body. The less it circulates the more problems your body will have," said Wyatt, chairman of the Texas Association of American Chambers of Commerce and former Victoria city councilman. "African-American businesses and consumers have a catch-22 so-to-speak."
Blacks make more shopping trips than all other groups, but spend less money per trip, according to The State of the African-American Consumer Report.
While blacks in higher income brackets spend 300 percent more in retail grocers than any other high income household, a much higher proportion of black consumers shop at convenience-oriented formats, such as drug, dollar and convenience/gas stores, according to the data.
Additionally, a greater percentage of blacks spend more for consumer products than other ethnic groups. They lead in the purchase of entertainment, electronic equipment and a host of other consumer products including hair care, on which they spend a reported $7.8 billion annually.
Most of these purchases are made from retailers outside of the black community.
"This $1.2 trillion that is coming into our community is gong right back out. Very little of it is staying," said La Mancha Sims, co-founder of Triton Business Solutions, a small business development consulting firm headquartered in Atlanta, Ga. "If it flows in one pocket and not the other, we're going to be in the same position in 2020 or 2030."
Seth Forman, professor of public policy at Stony Brook University and author of the book "American Obsession: Race and Conflict in the Age of Obama" encourages more blacks to go into business for themselves to help further circulate the black dollar within their community.
"Because blacks were systematically prevented from owning property and commercial enterprises for several centuries, blacks are more likely than whites to prefer an activist government, and are more likely to look skeptically upon free-market competition, entrepreneurship and individualism," said Forman.
Sims said the circulation of money within the black community can also increase by mandating that businesses located within communities with a large black population give back to the community instead of taking all their proceeds elsewhere.
"They understand that," said Sims, 42. "We don't demand they do it."
IMPORTANCE OF BUYING POWER
With a buying power of nearly $1 trillion annually, if blacks were a geographical-fiscal entity, they'd be the 16th largest country in the world.
The latest hike in black buying power is not the first significant growth this community has seen.
Blacks' buying power rose 166 percent in 17 years, from $318 billion in 1990 to $845 billion in 2007, according to the University of Georgia's Selig Center for Economic Growth.
Black-expected buying power exceeds that of Asians, $775.1 billion, but falls below that of Hispanics, $1.3 trillion, and whites, $11.8 trillion.
The gains in black buying power reflect more than just population growth and consumer inflation, according to the Selig Center report.
The number of African-American households earning $75,000 or more grew by almost 64 percent, a rate close to 12 percent greater than the change in the overall population's earning between 2000 and 2009.
This continued growth in affluence, social influence and household income all contribute to the black community's growing economic power, according to the Selig Center report.
'SUGAR SWEETER THAN OURS'
"It's that mind-set that their sugar is a little sweeter than ours," said Sims, who spoke about the reluctance of some blacks to do business with other blacks.
Negative stigmas about black businesses being too pricey or offering service that is inferior and sub-par to non-blacks has permeated the black business community.
Valerie Reed, a 44-year-old sociologist and president and chief formulator of Valana Minerals, said the mind-set carries over from the days of segregation and slavery.
"In American culture, Caucasian-European culture is still seen as the ideal in so many ways," said Reed. "Social status level allows us to interact with the dominant group."
Reed said when a black business owner does something considered wrong, the thought is it happened because they are black, but that sort of reasoning is not done with other groups.
For the past eight years, Ross-Haith said she and her partner have sold their products at both private and trade shows.
Many times, black customers would stop by their booth and purchase nothing before proceeding on to a booth owned by a non-black proprietor and purchasing the exact same product sometimes at a higher price.
"We don't let it bother us," she said. "I've noticed we're just not as close as I feel we can be."
Out of their estimated 70 customers a month, she said only six or seven are black.
Wyatt said he implores blacks to give businesses within their community a fair chance.
"You go to Chili's and have bad service, but you go back. You go to Mumphord's and get bad service, and you never go back," Wyatt said. "We have to learn how to do business with each other and spend money with each other."
"We are consuming all of our income," said Wyatt. "We need to be able to generate wealth to pass down to the next generation."
Wyatt said this starts with blacks starting to invest in the community.
"I'm not saying if you make a $100 to put it all back into the black community, but let's start with $10 and see what kind of difference that makes," he said.
More investments in non-disposable goods, life insurance and other items that build equity, said Sims.
A stronger financial education among the community is also necessary, experts said.
"They categorize a lot of African-American students as being uninterested or incapable of working not to produce entrepreneurship," Forman said about universities and colleges that push black students toward degrees in black studies and social sciences. "Under the guise of diversity, they ill-equip many minority students."
Experts remain optimistic about the future financial health of the black community.
"Buying power is a great thing if you know how to use it and leverage it," said Sims.
"Now is the best time for us to impact our net worth as African-Americans."