Black spending power projected to reach $1.1 trillion
Black consumers are wielding power and influence in the marketplace like never before. All while spending their way to a major milestone.
The Nielsen Company, a global information and research firm, projects black spending power will reach $1.1 trillion by 2015. Despite this looming thirteen-figure impact, many black consumers do not understand the full extent of their power says Cheryl Pearson-McNeil, senior vice president of public affairs at Nielsen.
“Do I think we’re interested in learning more about it? Absolutely.”
Some companies struggle to tap the real power of black consumers. The lack of understanding cultural nuances of African-Americans, Asian-Americans and Latino Americans results in a general market advertising approach Pearson-McNeil explains. “The African-American community isn’t a monolithic group.”
In 2011 advertising targeting black consumers across television, radio and magazines reached $2.1 billion, according to Nielsen. This was a modest increase from the year before and was just 2 percent of the $120 billion spent on advertising that year.
Headwinds such as high unemployment among blacks may not have an adverse impact on spending power. The national unemployment rate is 7.6 percent while black unemployment stands at 13.7 percent. African-American unemployment has historically been higher than the national rate since tracking began.
“Blacks are still spending whether employment is there or not,” says Pearson-McNeil.
Where you wield your power counts
As incomes continue to rise in black households, consumer packaged goods companies are taking note and adapting to a savvier and more vocal consumer. Total aggregate Black household income totaled $696 billion in 2012.
Vera Moore founded her eponymous company Vera Moore Cosmetics thirty-three years ago and also serves as president and CEO. She says manufacturers are focusing on providing more ethnic-focused products for consumers who are more aware of their spending power.
This increased awareness stems from higher self-esteem and more education Moore explains. “They know the power of the dollar.” She says black consumers are more supportive of black retailers and products now than in the past due to better quality products. “Often times we spend the money and it doesn’t come back to the community.”
Social media influences spending
“Black consumers are learning more and more everyday about their spending power,” says Richelieu Dennis, chief experience officer at Sundial Brands which makes SheaMoisture and Nubian Heritage hair and skin care products.
Social media has become a major driver of how and where consumers decide to spend their money.
“Social media is the great equalizer,” Pearson-McNeil says. The increased use of smartphones by blacks is driving influence. The ownership rate of smartphones grew from 33 percent in 2011 to 54 percent in 2012 for blacks, according to the Nielsen study. Increased smartphone ownership is directly related to higher Twitter usage among this group.
“It goes back to connecting with people that look like you,” Pearson-McNeil says.
Dennis has witnessed the power of social media first hand. He says black women are heavy users of social media which has given them a vehicle to exchange ideas and solutions. “The internet not only liberated them from the lack of information, but gave them access to brands that speak to them.”
“Social media has been the cornerstone for growing our business,” Moore says.
Social media is the new word of mouth for harnessing Black spending power and influence.
Shartia Brantley is a producer and on-air reporter at CNBC. Follow Shartia on Twitter at @shartiabrantley