The African-American Market
You don’t have to look overseas to find fast-paced growth; it’s right here in America’s multicultural economy. In 1990, the nation’s African-American buying power was $318 billion. Today, blacks have $845 billion in spending power, and by 2012, the number will be over $1.1 trillion.
The African-American market is huge. A few years ago – before oil prices went through the roof – our nation’s black buying power was about the same size as the combined GDPs of all the countries of North Africa and the Middle East.
The 1990 to 2007 gain in the nation’s black buying power amounts to a 166 percent increase, which far outstrips the 124 percent increase among the nation’s white consumers. But the percentage gain is much smaller than the 307 percent increase estimated for Hispanics and the 294 percent gain expected in the Asian consumer market.
The five states with the largest African-American markets are, in order, New York, Texas, Georgia, California and Florida. With the exception of California, African-American buying power is growing much faster than the buying power of white consumers: New York, 102 percent vs. 87 percent; Texas, 230 percent vs. 178 percent; Georgia, 259 percent vs. 152 percent; California, 103 percent vs. 115 percent; and Florida, 255 percent vs. 153 percent.
Georgia just overtook California to become the nation’s third largest African-American market – a major move given the vastness of the California market. The Peach State is the nation’s sweet spot when it comes to black spending power. Neither of the two states with larger black markets (New York and Texas) will see black spending power grow faster than in Georgia. African Americans account for 21 percent of Georgia’s total buying power – that’s up 5 percentage points from the 1990 share of 16 percent. No other state posted a larger gain in market share.
What’s behind the impressive growth of the nation’s black buying power? The increasing number of blacks who are starting and expanding their own businesses is one factor. Also, African Americans are benefiting from rising levels of educational achievement. Above-average population growth is another powerful driver.
From 1990 to 2007, the nation’s black population rose by 27 percent compared to 15 percent for the white population. A plus for future growth is that the median age of blacks is 31 vs. 40 for whites.
Compared to the older white population, larger proportions of blacks will be entering the workforce for the first time or will be moving up the early rungs of their career ladders – where year-over-year salary increases are the greatest. This will provide an extra push to the group’s overall buying power.
Also, a smaller proportion of blacks are at traditional retirement age: only 8 percent are over 65 compared to 15 percent of whites.
This youthful profile does have its downside. Compared to people who are either more established in their careers or retired, young people, regardless of race, are more vulnerable to economic downturns. So, black buying power is quite vulnerable to the effects of economic recessions.
Because the African-American population is so much younger, black consumers increasingly are setting trends for youths and young adults of every race and ethnic background. This isn’t surprising given that 31 percent of the black population is under 18 compared to only 22 percent of the white population.
The spending habits of the average African-American household differ from those of nonblack households. Despite lower average income levels, African Americans actually lead in some product categories. For example, when it comes to telephone services, the typical black household outspends the typical nonblack household.
Black households also outspend nonblack households on women’s and children’s clothing and footwear, and they spend a higher proportion of their money on groceries. On the other hand, blacks spend less on eating out in restaurants, vehicle purchases, healthcare and entertainment.
The bottom line? Anyone investing time or money in marketing or product development needs to consider the growing importance of the multicultural economy. The African-American consumer market offers many promising long-term opportunities.