By: Gary A. Johnson, Founder & Publisher – Black Men In America.com

 

January 17, 2016 (Originally posted on November 5, 2010) {Click for original post}

 

How black people spend their money has been a hotly debated topic not only on this site, but in our office, at social events and in beauty and barber shops across America.  As we look at the year in review, this article has been the most read and commented article for 5 years running.  Once I learned that this was the most popular and discussed article on the website, I decided to do some research and share this information with others.  The first question that I wanted an answer to was: How long does money stay in the community?

 

A dollar circulates:

• 6 hours in the Black community
• 17 days in the white community
• 20 days in the Jewish community
• 30 days in the Asian community

Source:  NAACP

 

Compared to all consumers, African Americans spend 30 percent more of their total income — even though we make $20,000 less than the average household. A whopping 87 percent of annual retail spending consists of Black consumers! But where does our money go? Hudson Valley Press Online gives us the scoop via an article from Nielsen’s SVP of public affairs and government relations, Cheryl Pearson-McNeil.

 

When it comes to shopping at the mall, we make eight more annual trips than any other group pulling in an average of 154 visits. Blacks also patronize dollar stores the most; we make seven more trips than the average group making a total of 20 trips. Lastly, Black Americans made more visits to convenience/gas stores by a small margin: making a total of 15 annual visits.

 

However, African American trips to grocery stores and warehouse clubs (like Costco) are a bit more scarce. “Less time is spent at grocery stores, with three fewer trips. The exception to grocery store shopping, though, is with Blacks who earn upwards of $100K annually. We also make three fewer trips to warehouse stores and two fewer trips to mass merchandisers than the Total Market. However, more upper-income Blacks (73%) shop at warehouse clubs than non-Blacks annually,” Pearson-McNeil said.

 

But probably the largest retail disparity between African Americans and other groups rests in the hair and beauty industry. We spend about nine times more on hair care and beauty products in comparison to other demographics.  “In fact, 46% of Black households shop at Beauty Supply Stores and have an average annual total spend of $94 on products at these stores,” Pearson-McNeil says.

 

All the aforementioned figures were pulled from Resilient, Receptive, and Relevant: The African-American Consumer 2013 Report. With African Americans approaching $1 trillion buying power, one must wonder why aren’t marketers paying more attention to Black consumer trends.

 

The average Black household contains 2.57 persons. In addition, Black households averaged 1.25 owned vehicles. Most of these households were renters, living in apartments or flats. Their dwellings averaged 5.45 rooms (including finished living areas and excluding all baths) and 1.49 bathrooms. Black households’ annual expenditures averaged $36,149, which was 79.8 percent of their average income before taxes. The amount spent on housing ($13,530) consumed the biggest portion of annual expenditures, accounting for more than one-third of the total. This was followed by transportation ($5,946) and food ($5,825). The remaining expenditures made up roughly 30 percent of total spending: personal insurance and pensions, healthcare, entertainment, cash contributions, apparel, and education, in addition to personal care, tobacco, alcohol, reading, and miscellaneous expenditures.

 

Black Americans are just 13 percent of the U.S. population, and yet, we’re on trend to have a buying power of $1.4 trillion by 2019.  A new Nielsen study hints that marketers may want to start developing a better consumer-producer relationship with African Americans if they want to make big bucks. Titled “The Multicultural Edge: Rising Super Consumers,” the report finds that the Black American sweet spot, in terms of buying power, lies in ethnic hair and beauty aids (surprise, surprise). African-American dollars make up a whopping 85.8 percent of the industry.

 

 

Here are highlights of the spending patterns of low-income versus high-income Black households:

 

• On average, low-income Black households spent $16,627 in total annual expenditures, compared with high-income Black households who spent approximately $50,000 more.
• Housing was the biggest expenditure for both types of households. For the high-income Black households, housing was 34.2 percent of the total annual expenditure. For the low-income Black households, it was nearly half of the total annual expenditure, at 45.5 percent.
• Food was another large spending category for both types of households. However, it made up only 12.7 percent of total expenditures for high-income Black households, compared with 23.5 percent for low-income Black households.
• Transportation and personal insurance and pensions made up only 11.5 percent and 1.9 percent, respectively, of total expenditure for the low-income Black households. However, for the high-income Black households, these shares were 17.1 percent and 15.0 percent, respectively.
• Cash contributions, such as charitable donations, was a smaller expenditure category in which low and high-income Black households differed. Cash contributions were 2.1 percent for the low-income Black households and 4.6 percent for the high-income Black households.
• Among the remaining expenditure categories, alcoholic beverages, apparel and services, healthcare, entertainment, personal care, reading, education, and miscellaneous expenditures, low-income and high-income Black households had similar expenditure shares.
• Tobacco and smoking supplies was the only expenditure category in which low-income Black households spent both a higher share and a higher actual dollar outlay than their high-income counterparts. For low-income Black households, tobacco and smoking supplies was 1.5 percent ($248) of their total expenditure but made up only 0.3 percent ($218) of total expenditure for high-income Black households. 

Reginald A. Noël, “Income and spending patterns among Black households,” Beyond the Numbers: Prices & Spending, vol. 3, no. 24 (U.S. Bureau of Labor Statistics, November 2014),

 

 http://www.bls.gov/opub/btn/volume-3/income-and-spending-patterns-among-black-households.htm

 

According to Nielsen:

• Blacks are more aggressive consumers of media and they shop more frequently.
• Blacks watch more television (37%), make more shopping trips (eight), purchase more ethnic beauty and grooming products (nine times more), read more financial magazines (28%) and spend more than twice the time at personal hosted websites than any other group.
• Blacks make an average of 156 shopping trips per year, compared with 146 for the total market. Favoring smaller retail outlets, blacks shop more frequently at drug stores, convenience stores, and Dollar stores.
• Beauty supply stores are also popular within the black community, as they typically carry an abundance of ethnic hair and beauty aids reside that cater specifically to the unique needs of black hair textures. 

While the numbers indicate that Black folks are an important part of the buying public, companies spend just three-percent (3%) of their advertising budgets marketing to black consumers. According to Cheryl Pearson McNeil, a Vice President at Nielsen, “The Black population is young, hip and highly influential. We are growing 64 percent faster than the general market,” she explains.

 

However, Noel King, a reporter for NPR’s Marketplace, cautions companies against trying to reach Black consumers without knowing our needs.  “If you want to market to those groups, then you should know what particular group buys your stuff,” says King. “Blacks tend to spend more on electronics, utilities, groceries, footwear. They spend a lot less on new cars, alcohol, entertainment, health care, and pensions.”

 

Despite our collective buying power, statistical data reflects that much of that money is spent outside of the Black community and not with Black-owned businesses.

 

Compare these numbers about “dollar circulation” reported by the NAACP:

 

“Currently, a dollar circulates in Asian communities for a month, in Jewish communities approximately 20 days and white communities 17 days.  How long does a dollar circulate in the Black community? 6 hours!  Black American buying power is at 1.1 Trillion; and yet only 2 cents of every dollar blacks spend in this country goes to black owned businesses.”

 

If the “dollar circulation” data does not get your attention, consider the following information from an article written by financial expert Ryan Mack:

 

55 percent of African Americans are unbanked or under-banked meaning they do not have a bank account or the appropriate bank account (Federal Deposit Corporation Survey)

 

• “About a quarter of all Hispanic (24 percent) and black (24 percent) households in 2009 had no assets other than a vehicle, compared with just 6 percent of white households. These percentages are little changed from 2005.” (Pew Research)
• “The median amount Black households reported saving on a monthly basis is $189, compared to $367 among White households…. [This is] the first time in a decade that African-American households have reported saving less than $200 per month.” (Ariel Investments 2010 Black Investor Survey)
• “Blacks on the average are six times more likely than Whites to buy a Mercedes, and the average income of a Black who buys a Jaguar is about one-third less than that of a White purchaser of the luxury vehicle.” Earl Graves, Black Enterprise Magazine
• Although Blacks make up 13-percent of the U.S. population, just seven-percent (7%) of small business are owned by Blacks. Access to capital, clientele, and other resources hinder many Black folks from starting business, despite a long history of entrepreneurship. 

Highlights from “Big Spenders, Small Investors:  Blacks Have Little to Show for Hard-Earned Dollars”:

 

• African Americans consistently outpace the total market population in overall growth, smart phone ownership, television viewing and annual shopping trips according to the new study, “Resilient, Receptive and Relevant: The African-American Consumer 2013 Report,” a collaborative effort by the Nielsen Company in New York and the National Newspaper Publishers Association (NNPA), located in Northwest Washington, D.C.

• Black buying power continues to increase, rising from its current $1.1 trillion level to a forecasted $1.3 trillion by 2017.

• Despite the strong economic outlook, Blacks continue to spend most of their money outside of the Black community and, according to Nielsen and NNPA, advertisers have repeatedly slighted the black media, spending only three percent, or $2.24 billion, of the $75 billion spent with all media last year.

• Each year, Blacks spend more than $47 billion on Lincoln automobiles, $3.7 billion on alcohol, $2.5 billion on Toyotas, $2 billion on athletic shoes, and $600 million each year on McDonald’s and other fast foods, according to Target Market News Inc., a Chicago-based marketing research group.

• Blacks also spend wildly to keep up their appearances.  The black hair care and cosmetics industry counts as a $9 billion a year business, but while African Americans are spending the most, they are profiting the least, said officials from the Black Owned Beauty Supply Association (BOBSA) in Palo Alto, Calif.  Beauty product lines designed for African Americans were once 100 percent owned and operated by blacks, today other ethnic groups control more than 70 percent of the market.

• The current homeownership rate reveals that 73.5 percent of whites own homes while approximately 43.9 percent of Blacks are homeowners, according to the Harvard Joint Center for Housing Studies State of the Nation report for 2013.

• Sixty percent of Blacks have less than $50,000 saved in company retirement plans and only 23 percent have more than $100,000. 

The loyalty blacks have to their church also has proven costly, said officials at Faith Communities Today, a nonprofit based in Hartford, Conn.  A 2013 study revealed that Black churches have collected more than $420 billion in tithes and donations nationwide since 1980, an average of $252 million a week.

 

“What people fail to see and understand is that, the church pastors aren’t waiting for miracles to fund their lifestyles, they don’t have to pray, day in and day out, to make their ends meet,” said Northwest resident and author, Byron Woulard.  They are getting rich off God, not from God,” he said. Woulard, whose books include, the 2011, “Pawn Queen,” noted that the money spent tithing could buy as many as 93,333 homes valued at $150,000; pay for tuition up to $15,000 a year for 933,333 college students, and feed every homeless American for a year.  “It’s the best hustle on the planet. If you don’t get it here on earth, you’ll get it when you die and go to heaven,” Woulard said. “And, it just so happens that not one person in the history of this planet has died, went to heaven, and come back to tell everyone that it’s true.”

 

Stacy M. Brown’s article posted on the Washington Informer.com website concludes with what is described as an inescapable fact:    When black folks make money, they are quick to spend it!

 

According to Dr. Boyce Watkins, a Scholar in Residence in Entrepreneurship and Innovation at Syracuse University in New York, also known as “the people’s scholar,” “We don’t use money to invest or produce,” said Watkins, 42.” When we get our tax refund, we go straight to the store.”

 

With $836 Billion in Total Earning Power, only $321 Million Spent on Books while $7.4 Billion Spent on Hair and Personal Care Products and Services

 

The median household income for African-Americans dropped by 1.4% in 2009, but because of students going out on their own, and couples that started their lives together, the number of black households grew 4.2%. This increase meant that many household items showed big gains. For example, purchases of appliances rose by 33%, consumer electronics increased 33%, household furnishings climbed 28%, and housewares went up by 37%. {Click here for "How Do Black People In America Spend $507 Billion Dollars"}

 

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