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African-American Buying Power

Last updated on June 13th, 2024 at 12:03 pm

In 2010, African Americans will constitute the nation’s largest racial minority market, but the buying power of Hispanics—an ethnic group—is larger. Despite the severe impact of the 2007-2009 recession, however, blacks’ economic clout will continue to energize the U.S. consumer market. The Selig Center projects that the nation’s black buying power will rise from $316 billion in 1990 to $600 billion in 2000, to $957 billion in 2010, and to $1.2 trillion in 2015.

The 2000 to 2010 gain of 60 percent outstrips the 49 percent increase in white buying power and the 52 percent increase in total buying power (all races combined). In 2010, the nation’s share of total buying power that is black will be 8.6 percent, up from 8.2 percent in 2000 and from 7.5 percent in 1990. African-American consumers’ share of the nation’s total buying power will rise to 8.8 percent in 2015, accounting for almost nine cents out of every dollar that is spent.

The gains in black buying power reflect much more than just population growth and inflation. Of the many diverse supporting forces, one of the most important is the increasing number of blacks who are starting and expanding their own businesses.  The 2002 Survey of Business Owners released by the Census Bureau in 2006 showed that the number of black-owned firms increased by 45 percent from 1997 to 2002, or about four and one-half times faster than the 10 percent increase in the number of all U.S. businesses. Also, their receipts grew slightly faster than those of all others.

Preliminary estimates from the 2007 Survey of Business Owners show that the number of black-owned firms increased by 61 percent from 2002, which is more than three times greater than the 18 percent increase in the number of all U.S. firms. Between 2002 and 2007, the receipts of black-owned firms grew by 55 percent compared to the 34 percent increase in receipts tallied by all U.S. firms.

Another positive factor buoying the group’s buying power is that African Americans are becoming more educated, so more of them now have jobs with higher average salaries. Census data show that the percentage of blacks over age 25 who have completed high school or college rose from 66 percent in 1990 to 79 percent in 2000 and to 84 percent in 2009. Despite these impressive gains, this number was still lower than the percentage of whites (87 percent) or Asians (88 percent) who are high school graduates. Also, the 2009 Current Population Survey indicates that 19 percent of blacks had a bachelor, graduate, or professional degree compared to 30 percent of whites or 52 percent of Asians. Nonetheless, the percentage of backs who had completed college in 2009 (19 percent) was much higher than in either 2000 (17 percent) or in 1990 (11 percent).

Favorable demographic trends help, too, since the black population continues to grow more rapidly than the total population. From 2000 to 2010, the nation’s black population grew by 11.9 percent compared to 7.7 percent for the white population, and 9.8 percent for the total population. Also, the black population is younger: the 2008 American Community Survey shows that the median age of blacks is only 32.1 years compared to 39.1 years for the white population or 36.9 years for the total population. Compared to the older white population, larger proportions of blacks will be entering the workforce for the first time or will be moving up from entry-level jobs. For example, 25.7 percent of blacks are in the 18-to-34 age bracket, compared to 22 percent of whites or 23.1 percent of the total population. This will provide an extra push to the group’s overall buying power. Conversely, fewer blacks have reached their career pinnacles, where the annual percentage increases in salaries often begin to taper off, or are of traditional retirement age. In 2008, only 8.7 percent of blacks were over 65, compared to 14.5 percent of whites or 12.8 percent of the total population. Moreover, blacks are consumer trendsetters, which isn’t surprising given that 28.1 percent of them are under 18 compared to 22.5 percent of the white population or 24.3 percent of the total population.

The youthful profile of the black population has its downside, however. Compared to people who are either more established in their careers or retired, young adults, regardless of their race or ethnicity, are more exposed to economic downturns. So, in this regard, black buying power is vulnerable to the effects of economic recessions.

Due the unusual severity of the current recession that began in December 2007, employment growth no longer can be cited as one of the forces supporting the gains in black buying power. From January 2000 through July 2010, the number of jobs held by blacks has decreased by 270,000. From its pre-recession peak in January 2007 through July 2010, the number of employed African Americans dropped by over 1.3 million and the black unemployment rate soared from 8 percent to 15.6 percent. The employment to population ratio for blacks stood at only 51.9 percent—it was 60 percent in 2000.

In 2010, the ten states with the largest African-American markets, in order, are New York ($91 billion), Texas ($72 billion),  Georgia ($66 billion), California ($64 billion), Florida ($63 billion), Maryland ($57 billion), Illinois ($46 billion), North Carolina ($44 billion), Virginia ($42 billion) and New Jersey ($36 billion). Of these, however, Maryland, North Carolina and Georgia are the only ones that did not rank among the top ten markets for all consumers.

One characteristic that sets the African-American consumer market apart from the Hispanic and Asian markets is that it is not concentrated in a handful of states. This vibrant consumer market is very widespread, and therefore is an attractive customer segment in many of the states. In 2010, the five largest African-American markets account for 37 percent of black buying power. The five states with the largest total consumer markets account for 38 percent of total buying power. Similarly, the 10 largest black markets account for 61 percent of the African-American market and the 10 largest total consumer markets account for 55 percent of total buying power.

In order, the top 10 states ranked by the rate of growth of black buying power between 2000 and 2010 are Montana (364 percent), Idaho (294 percent), Wyoming (250 percent), Maine (235 percent), North Dakota (217 percent), South Dakota (205 percent), Hawaii (189 percent), Utah (186 percent), Vermont (184 percent), and New Mexico (172 percent). All have flourishing African-American consumer markets, but none is among the nation’s 10 largest black consumer markets.

In 2010, the 10 states with the largest share of total buying power that is black are the District of Columbia (28.4 percent), Mississippi (24.9 percent), Maryland (22.4 percent), Georgia (21.3 percent), Louisiana (19.8 percent), South Carolina (17.8 percent), Alabama (17.6 percent), Delaware (15.2 percent), North Carolina (14.5 percent), and Virginia (13.3 percent).

The increases in African Americans’ share of the consumer markets in Georgia, Mississippi and Delaware were the three biggest share shifts in the nation from 2000 to 2010. There also was a 1.6 percent advance in Maryland and a 1.4 percent advance in Nevada. Indeed, the share of buying power controlled by black consumers will rise everywhere except for the District of Columbia (-7.5 percent), South Carolina (-0.7 percent), New York (-0.3 percent), California (-0.2 percent) and Illinois (-0.1 percent).

Due to differences in per capita income, wealth, demographics, educational attainment, occupational distribution, geographic distribution and culture, the spending habits of blacks as a group are not the same as those of non-black consumers. Thus, as blacks’ share of the nation’s total buying power expands, business-to-consumer firms can be expected to devote more resources to developing and marketing products that meet black consumers’ needs.

Despite their lower average household income levels, African Americans spent more than non-black households on electricity, phone services, children’s clothing and footwear. They also spent a significantly higher proportion of their money on housing, gasoline and motor oil. Blacks and non-blacks spent about the same proportion of their income on groceries, housekeeping supplies, furniture, floor coverings, appliances, men’s and boys’ clothing, vehicle purchases, medical supplies, tobacco products and life insurance. Compared to non-blacks, however, blacks spent much less of their money on eating out, alcoholic beverages, health care, entertainment, education and pensions.

The same survey indicates that black households are slightly more likely to have children under 18 (0.8 persons for blacks versus 0.5 persons for whites and others); and have only 1.3 vehicles per household compared to 2 vehicles for white and other households. According to the 2008 American Community Survey, 19.8 percent of blacks do have a car, and thus are much more likely to use public transportation to commute to work. Moreover, fewer of them are homeowners: only 45.6 percent of blacks are homeowners compared to 66.6 percent of the total population or 71.6 percent of the white population. The median value of homes owned by African Americans is $144,800, which is 27 percent lower than the $197,600 median value reported for the total population.

About the author

Shelby Team

The Shelby Report delivers complete grocery news and supermarket insights nationwide through the distribution of five monthly regional print and digital editions. Serving the retail food trade since 1967, The Shelby Report is “Region Wise. Nationwide.”

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