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Episode #2212
Black Buying Power
Holt: According to a new report by the North Carolina Minority Economic Development Institute black buying power will climb from $13.8 billion on 1990 to $35.9 billion in 2006. And it is further projected to rise to $47 billion by 2011. Meanwhile a 2001 federal survey found that minority families added on debt at a rate far greater than they increased their incomes and minority families also accumulated up to more than twice the debt of their white counterparts. What is the real meaning of buying power and how many of us have it? We’ll talk about it next on Black Issues Forum.
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Holt: Hello, everyone and welcome to Black Issues Forum. I am Deborah Holt. Today we are talking about the buying power of African American consumers in North Carolina. Reports confirm North Carolina’s black consumers are a substantial economic force throughout the state and for many businesses capturing black spending can make the difference between success and failure. But other question lie behind the issue of black spending and that is how are African Americans spending and how does this affect black wealth? To talk with us today about these questions and more we have the author of a new report that presents some revealing information about spending and the black consumer market. I would like to welcome Andrea Harris, Director of the North Carolina Institute of Minority Economic Development which released the report Black Buying Power in North Carolina. And Brandon Comeaux, a graduate student in public administration at North Carolina Central University who worked extensively on the NCIMED’s upcoming report on African American spending. Welcome to both of you.
Harris: Thank you.
Comeaux: Thank you.
Holt: Let’s first talk a little bit about the methodology of the report. How did you go about capturing the information, Andrea?
Harris: Well, generally we work very closely with Dr. Jeff Humphreys who is a professor at Selig Center. It’s part of the business school at Terry College of Business at the University of Georgia at Athens. Dr. Humphreys is known throughout the country as the person who does a lot of the buying power work and a lot of the projections around buying power. There really is no scientific way to be absolutely sure of the exact spending patterns. But if you take some of the census data and per capita income and other types of data he applies a formula that allows him to look at buying power and couple that with some of the other demographic information and get a better sense of at least projections around patterns of consumer spending around the country by state. What we do in North Carolina though is parting a little different way with Dr. Humphreys is we say, “Okay, we have all this information now. You have all this data around what’s happening throughout the country and in various states. But let’s take a step back and take a look at what’s happening inside every MSA and every county in the state of North Carolina.
Holt: And when you say MSA you mean?
Harris: The Metropolitan Statistical Areas, our urban centers. You know, like Raleigh and Cary and Greensboro, Winston. We have even Goldsboro now and MSA. But let’s look at what’s happening in these urban centers but also let’s look at what’s happening on a county by county basis so that whether it’s the business community, whether it is African Americans, Asians, any population of people where there is economic developers etcetera can get a sense of what is happening with consumer spending particularly among North Carolina’s growing racial ethnic minority population base. I often say that the people that we have, the eighth largest African American population, the fastest growing Hispanic population, the second fastest Asian population and the largest American Indian population east of the Mississippi. So what is happening inside these populations? The African American population in North Carolina is still the largest population base. So what is happening with the spending patterns and are there market opportunities there for us?
Holt: And, Brandon, you had a great part in this study as well. What was your role and what were some of the major findings that perhaps surprised you?
Comeaux: Well, I basically received the report from the SCEGO [ph] Institute and Dr. Humphreys and my responsibility was to go behind him and look at the data and just basically make sure that everything seemed correct and everything was in order. Some of the major things that we found in the report is that it really is a tool that lawmakers can use, that companies can use and that savvy small businesses can use to identify where minorities are spending their money and how to target those minorities.
Holt: Terrific. We are actually going to take a look at some of the major findings and the statistics from your upcoming new report. There was an older report I think done in 2004?
Harris: Right. We are doing those reports every two years now. We got to keep up with what’s going on in North Carolina a little further ahead of other states.
Holt: Well, let’s take a look at some of those numbers. In North Carolina black buying power will climb from $13.8 billion in 1990 to $35.9 billion in 2006 and it is further projected to rise to $47 billion by 2011. Let’s also note that black consumers account for 14.5% of North Carolina’s total buying power. In 2006 black purchases accounted for one out of every seven dollars spent in North Carolina. North Carolina ranks number eight in size. Number nine in market share and 33rd in growth rate in terms of African American markets in the United States and at $7.1 billion Charlotte’s metropolitan statistic area or MSA as Andrea mentioned earlier contains North Carolina’s largest share of black buying power for 2006. Raleigh’s MSA is number two at $4.1 billion. Greensboro’s MSA is number three at $3.3 billion. Fayetteville’s MSA is fourth at $2.8 billion and Durham’s MSA is fifth at $2.5 billion. Now there is a lot of spending going on.
Harris: Right.
Holt: The question is where are African Americans spending? I had actually read I believe some information from the Selig report that contradicted what I thought to be the case which is that African American spending in clothing and alcoholic beverages and so forth is actually down.
Harris: A lot of times people take the buying power information and start talking about African Americans in America spend more money than the size of some Third World country. And we can say some of that at the same time because I would say to Brandon or people would say that African American consumer spending is what? Larger than the state budget or something like that.
Comeaux: Twice the state budget.
Harris: Right, that’s right. So you say things like—but on the flip side when you take a look at where are the dollars really going, most dollars are still going for basic necessities, the basic necessities of shelter, or housing rather, transportation, food, utilities.
Holt: But how about spending for electronic gadgets? Video and audio visual devices?
Harris: When you look at that, yes. There will be more spending on entertainment at home. The difference is, you know, people start staying African Americans or people in low wealth communities spend more on electronics than others. And that is true. But what you find is that people with limited resources spend more on entertainment at home than they do entertainment away from home.
Comeaux: That’s right. In fact one of the specific market implications that the report indicated was that African Americans compared to non-African American groups spend less money on dining out, on alcoholic beverages and on outside entertainment, outside the home entertainment as Ms. Harris was indicating. So those are some interesting findings that we found.
Harris: But what that does say, so there are some implications for grocery stores. There is more people are—more people are financially strapped and the more people feel financial pressure, the more they eat at home as opposed to away from home. The market is growing though. So, still, there is market share to be captured in terms of food away from home. But more people also are spending more money on food at home and preparing meals. I think that’s a good thing.
Holt: I think so, too.
Harris: As long as they—I’m not putting down the other industries or the restaurants. I support them as well.
Holt: Yes, and hopefully that will make an impact on the number of grocery stores that are in these underserved communities and low wealth communities and I was going to ask you also what does this mean for other business, these numbers?
Harris: Well, I think if—as we were saying if enough Chambers of Commerce or economic developers or others start to look at what is happening with this market, then people can start to say, “Well, what is it, what part of this market can we capture?” If for example, if one out of every seven dollars spent is coming from an African American then what are they spending the dollars on and if this is a growing marketplace, how do we capture and retain some of that in our local communities to grow our communities? An example would be, yes, the whole notion of grocery stores. Is there opportunity for more locations of grocery stores in African American neighborhoods? Yes. I’d say if you step over in Durham and you look at what’s happening to the grocery store that is on Fayetteville Street, it is doing extremely well. There are opportunities for others whether it is in cleaning, whether it is in automobile services. Whatever those, particularly those basic necessities are, there are opportunities for people to go into those businesses and to locate such businesses in minority communities or in areas that have significant minority populations. I will say to anybody if you want to know what’s changed about the population and the demographics go in the stores, in the grocery stores and check out the shelving. So what’s new on the shelves? You know? So are you seeing more __ products? Are you seeing more products for the Hispanic community? What is changing on the shelf? What is even changing in terms of the fresh produce?
Holt: That is a very good question. Have you noticed changes on the shelves? I certainly have. I see a lot more ethnic products. There is a whole aisle for ethnic products. Brandon, do you want to comment on these changes, too?
Comeaux: Even the—your larger grocery chains have sections that are specifically for Hispanic populations. So there absolutely is a change. The growing population is being addressed I believe.
Holt: And I know another study that we talked about a little earlier in the year talked about the impact of the Hispanic dollar in our state as well. And it almost seems as if there is some concern about the competition for market share between African Americans and Hispanics. Who is spending more? Does it matter and I’m sure the report reveals those numbers as well.
Harris: Yeah, those numbers are going up dramatically as well. You know, and I think that people who try to create divides—I think that is unfortunate. Because I think that there is so much opportunity. YOU know, we are a state that is trying to position itself to be globally competitive. And I think one of the greatest assets that we have as a state is our growing diversity. I mean, if you want to be globally competitive you couldn’t ask for a better position than to have an increasingly racially and ethnically diverse population base. And to take full advantage of that. So I think that’s a tremendous plus. And there are also some synergies with these communities working together and coming together. There is more happening collectively than we will see happening that is separate and apart within the Hispanic or the African American community.
Holt: What are some ways that consumers can take advantage of the growing ethnic diversity that is present rather than focusing on, okay, there are more Hispanics than African Americans. They are spending more than we are at greater and faster rates. What do you think there might be for strategies for working to capitalize on those, Brandon?
Comeaux: Well, I think the more people become aware of studies like this and others that are out there, they are going to realize that these minority groups are a huge segment of the spending population and I don’t think there is going to be a divide. I think that people that are interested in doing business will be interested in doing business with everyone.
Harris: You know, people in business understand a dollar is a dollar. It is green and here is a market opportunity. What we have to focus on is not only how we capture more of these dollars, how we increase the quality of what’s provided but also how we give opportunities to people in these communities to own and operate many of these businesses and to take advantage of these market opportunities. Getting to one of the points I heard you make a little earlier, too, is we think this information is important so that people can see that there is opportunity to grow business. That because business is market driven. And business development among racial and ethnic minority communities clearly is an economic development strategy that we all should embrace. Because one of the things that it helps us to do is to get underneath this issue of the eroding network so we have some network challenges because there is limited net worth among the Hispanic community and among the African American community, among the Native American community. So we have to figure how to get beyond that as we start to deal with this issue of debt, we have to figure out ways to increase the net worth. Because debt is a problem and we do have a significant population of people who are debt strapped and I think a large part of that is because we have largely been a state of the working poor. And unfortunately many have found that among the working poor or the working class where wages have not necessarily increased as have the cost, have the cost of goods and services, that people need to have access to credit. And unfortunately what is happening in that process is that many of the products that have been provided that are out there for people who have some debt challenges are not necessarily most responsive products. People have found also that there is profit in poverty unfortunately.
Holt: Now let’s call a spade a spade. Were you talking about predatory loans?
Harris: I am talking about predators and I think with predatory lending people have found that there is profit in poverty and there is profit in making short term types of credit available or long term credit or even certain types of credit card terms available to people. One of the areas that I am most focused on now increasingly and Brandon and others know has to do with the terms of credit cards that are offered to students in college and the terms that are now on college loans such that if we have an eroding net worth base among homeowners because so many of our homeowners have ARMs. And on the flip side of that so many of our young people now who are going to be our leaders are going to be so strapped with student debt from credit cards and student loans and I think we have a responsibility to do a better job and have more responsible products particularly for our children, particularly for young people.
Holt: And as a young person, Brandon, I am sure you have gotten plenty of solicitations for credit cards in the mail. All of us do. Do you feel that there is information out there for you and your colleagues to be educated on the real dangers of credit cards and for the purpose of improving your spending?
Comeaux: Well, I don’t know that I can speak for everybody but I know that I am becoming more aware particularly working at the institute of the dangers that student face by getting these credit cards that they are not ready for. And I think that information is becoming more prevalent on the danger and people are becoming more aware. But I am not sure that we are where we need to be in terms of educating everybody on the dangers of these credit cards and other major loans that can get you in a lot of trouble when you graduate.
Holt: Speaking of education the institute actually is partnered with an organization or two to offer education for the community to help African American spending and spending for all consumers. Talk a little bit about those educational programs.
Harris: Well, we have an educational training initiative which is called Consumer Wise that we partnered with, as you know, Genworth Financial. And Genworth has reached out to lots of other partners, financial institutions as well as to sororities and fraternities to try to help better educate people around this whole notion of credit and access to credit and becoming homeowners and the like. And it has been extremely successful. As an outgrowth of that effort and the success of that effort, then we in turn, that’s how we in turn ended up with the whole initiative to focus on the colleges and educating students on college campuses. So now we have an HBC initiative where we try to get inside the colleges on the early end as students come in and give them a little information around credit, around credit scores, around terms on credit cards, around what it means when you get a new credit card as you walk on campus and you decide to charge this pizza. And so this $12 or $14 pizza might cost you $50 or $60 in the end by the time you finish paying for it on that credit card. To help educate them a little bit about that kind of thing. We are spreading that now to join with some other financial institutions and go on the ACC college campuses and we hope we are able in another year or two to be able to have a network across all of the college campuses so that when students come part of that student orientation is around wise spending and around a better understanding of debt and credit cards.
Holt: You talked about the power and we have been talking in this program about buying power, do you believe that in some ways being able to spend, even if it is on credit, makes some sort of a political statement or some sort of statement at all, Brandon?
Comeaux: I believe that any time you have any kind of economic clout people are going to be aware of that and they are going to take it seriously. I mean, spending money is power. So absolutely.
Harris: I think that young people feel, you know, they have such peer pressure in particular. So if people as you said, have access to credit then somehow they feel that they are more empowered and more privileged. You know, what gets marketed to young people today. There is so much around bling bling and what you are able to buy that naturally that has some influence on them. So we have to figure out ways to help them understand that being responsible doesn’t necessarily have to do with how much money you can spend or how many credit cards you can pull out because what’s really going to be the tell-all will be how well can you pay for them, how long it’s going to take you to pay for them. So let’s help you understand that you are a market opportunity for somebody. Somebody out here knows where you are spending your money. And somebody out here knows how to get to you. So, again, having some education around buying power. I would also say you people need to look at what a student is buying. You know, where are students? And there is information around the economic clout of students just based on student spending. So let’s take some of these students and put them in business so they can do some business with each other.
Holt: get that education through business. And you mentioned from the report that one of the kind of red flags to look out for are these student loans. Any other red flags or signs from your most recent study that is new information or that consumers particularly African American consumers need to be aware of. Especially as we head into this new year.
Harris: Right, especially as we head into the new year I would say that when we look at the fact that there are contributions, there are charitable, there is philanthropy that we are giving and I would encourage us to continue to do that.
Holt: We are giving significantly to churches and that is one of the major areas that has been found to be an area for black giving.
Harris: That’s right. So that giving continues and we need to encourage that and at the same time we are going to encourage greater savings whether it is through insurances or pension plans or whatever. But people need to also build a little bit more in terms of savings. So I would say that as far as the buying power. I would also say, though, that we can see given the increasing amount that is spent on shelter that housing is still a challenge and an issue. Access to decent, safe, affordable housing in our state is still really a major priority. And for a number of people who come out of limited resource or low wealth populations and who are homeowners I would say that the Center for Responsible Lending has some really frightening data that suggest that again, that over half of African American homeowners stand to lose their homes to foreclosure because of the terms of the mortgages that they have and this is across income lines. Over 40% of Hispanics stand to lose. So when we look at how much is being spent on housing we know we have some real challenge in terms of how we better respond to meeting the housing needs of people in a very responsible way. And how we also help save some homeowners.
Holt: And, Brandon, with your work on the study, is there any information that you learned that you are hoping that people who learn about the report will really take heart and focus on kind of use to change their habits if necessary.
Comeaux: Well, in terms of changing habits I am not really sure that the report makes any implications in that direction. But what I will say is that I hope this report gives businesses greater insight into exactly who is purchasing what and how they can better address the needs of these communities. And I would also hope that as Ms. Harris said we encourage saving and homeownership because homeownership is the key to building wealth and that is one of the biggest things to keep building this buying power.
Holt: And last 15 seconds, Andrea, if someone is interested in seeing this report, when and where?
Harris: And where? If someone is interested in seeing this report then we would say that by January the 12th, right, we will have a press conference to release the report. We will make it available on our website and we will make it available on disc and just a few hard copies because last time we did it there was such demand for hard copies. So that’s a good thing.
Holt: And we will certainly have a link to your website on our website.
Harris: Make sure you have all the copies.
Holt: Thank you so much.
Harris: And thank you.
Comeaux: Thanks.
Holt: I would like to thank both Andrea Harris and Brandon Comeaux for joining us today. If you would like to find out more about the report, get in touch with our guest or obtain a copy or a transcript of tonight’s show please visit us online at UNCTV.org/BIF and when you visit be sure to give us your comments and your program suggestions. You can also call us on the BIFline at 919-549-7167. For Black Issues Forum I am Deborah Holt. Thank you for joining us.
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