Black Spending Power to Hit $1T by 2015, But Black Wealth is...

Black Spending Power to Hit $1T by 2015, But Black Wealth is Dropping

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Yesterday, Black Enterprise analyzed a 2012 Nielsen study that concluded that African American buying power will reach 1 Trillion dollars by 2015.  The BE piece tackled the data from the perspective of how marketers and advertisers have taken this group for granted, but maybe shouldn’t given all the money it has to spend.

Mainstream underestimation of Black spending potential is an important observation to point out, as I myself have argued that more businesses ought to be investing in emerging markets (those in predominantly minority communities, in business owned by minorities and those servicing minority communities).

However, barely beneath the surface of what maybe should be an optimistic report is an underlining distressing story.

Should we be proud of just making up 13% of the total population yet spending at a rate of growth that outpaces the remaining population by 30 percent?

While it is wonderful to acknowledge the report’s data which shows that the Black American demographic is younger, more educated and have higher incomes than commonly believed, what can be said about the fact that we aren’t retaining that wealth for the long term and at a rate sufficient to pass down wealth to subsequent generations?

And it is getting worse just as this report shows we are spending more, a more recent report from the Urban Institute released in April reveals that the Black –White wealth gap has widened significantly over the past half decade.  It noted that in 2010, white families earned, on average, about $2 for every $1 that black families earned, a ratio that has been the same for the past 30 years.   And in terms of assets, cash savings, homes and retirement accounts, subtracted from debt like mortgages and credit cards, white families have six times the wealth.

And for all the spending we are doing, it’s not necessarily going to help black businesses either.

Although Blacks make up 13% of the US population, they own merely 5% of all US firms and only 1.8% of companies that employ more than one person, a Small Business Administration Report states.  And Black owned firms are not necessarily the most profitable either. More than half of Black-owned businesses had less than $10,000 in business receipts in 2002, compared with one-third of White-owned firms and 28.8 percent of Asian-owned firms.

The report further found that on average, for every dollar that a White-owned firm made, Pacific Islander-owned firms made about 59 cents, Hispanic-, Native American-, and Asian-owned businesses made 56 cents, and Black-owned businesses made 43 cents

And in this economy where sequestration is affecting contractors, it is key to note that minority firms depend more heavily on government contracting opportunities than do non minority-owned businesses, according to a 2012 report.  Thus, minority-owned small businesses are suffering the most under austerity cuts.

Of course, it is fair to note the role of institutions like slavery in the gap. Black workers were prevented from earning money for their labor and to build wealth to pass down. Later, institutional discrimination played a part, like that which prevented blacks from benefiting from free education via the GI Bill of the  1940s and 1950s or from the Homestead Act which awarded whites virtually free land.

But since then and despite ongoing discrimination and racism as impediments, there should be an examination into whether leanings toward instant gratification  purchases as opposed to saving and investing in homes, businesses and other sustainable areas are dooming our  prospects to build wealth.

Thus, Nielsen 1 Trillion spending and buying power by 2015 prediction is not necessarily good news when turned on its head,and juxtaposed with a not so good Black financial outlook.

That report should not be a call for marketers to spend more time and energy trying to convince us to buy their stuff, but rather a call to arms to better educate ourselves on saving and growing money so that it lasts longer than one pay period.

50 COMMENTS

    • first i would like to thank the author for giving us an eye opening into their eye’s and how they capitolize on our wealth!! i been one of many speaking on this same subject for yrs,
      if we don’t build up our own ppl. buy black and build by communities.

  1. Black Spending Power to Hit[$1 trillion] by 2015,But Black Wealth is Dropping,mainly because the importance of a Strong Financial Foundation,starts with a Strong Financial Education. We should invest in how to handle our finances,with the ability to Read Numbers-Financial Literacy,and Investment Strategies-The Science of Money Making Money.The Awareness of Accounting,Corporate,State and National Rules and Regulations.Play Within The Rules..It is this Basic Foundation,or The Combination of These Skills,That is Needed to be Successful in The Pursuit of Wealth.

  2. TC 381

    The Number 381 is significant in that it represents a time frame. I believe if we focused on a particular area of business and channeled our finances in that area, we can make significant inroads in that area, much the same as we did in Montgomery in 1955.

    Lets take Detroit for instance. A city that is predominantly Black. The Beauty Supply Market is controlled by Asians. We keep that industry in business, yet we are only consumers and not owners. If we focused our finances on that market place as Entrepreneurs and built a network, we could take over the Beauty Supply Market in Detroit.

    We are the major consumer of those products. Yet we line the pockets of others with our dollars. People who don’t live in our community, who don’t shop in our community and the only investment is to take dollars out of our community.

    Don’t misunderstand me, this is not an attack on Asians. No, It’s an alarm for Black people. We are a Nation within a Nation! If we were a separate Nation. We would have the 16th largest economy in the World.

    • I normally don’t comment on post like this. But you hit it right on the head. Having this same debate with older people right now. How many of us call the number on a empty storefront in the neighborhood. See how much it is to rent. You never know what could happen.

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  5. Black spending power don’t mean nothing when you are merely being “PACED”. Nations are not economically ranked by how much they spend but how much they manufacture and produce. They must compete against others who are the sources of your consumptive habits. You have to take away a portion of the pie slice they currently are obtaining from the black economic market that makeup the whole pie. This pie is already sliced up by competitive entities and they are not giving away you must take by competition. Blacks can not go to an Asian wholesaler and buy from them to retail what a Asian retailer is presently selling to meet the demands of the black consumptive market. The Asian wholesaler will not give what you need at “family prices” to compete against their family. Another point Blacks do not have an sufficient number of viable businesses that can hire them. White companies (and other ethnic group firms) will only hire that preverbal percentage amount leaving many blacks out in the cold. They want hire your children over theirs so forget about that equality song nor will this problem ever go away.

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  10. Very well written, the greater issue is FINANCIAL LITERACY. Spending power is only one aspect of that greater issue. Historically and in the present, there have been major barriers that deny that black American demographic the opportunities invest our money where it has the most potential to multiply. Those barriers are in place to keep the class and social structure in the same order. In order to surpass the economic barriers, we have to build are own institutions and infrastructure that functions outside of the greater American economic base. To ensure this, we must also work to concentrate our population into specific regions within this country, our state, or our city. That how we can build safeguard that protect our dollars from infringement by businesses and other entities that don’t have any interest in our welfare.

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