By CultureBanx Team
- African Americans are the 2nd-largest consumer group, presenting businesses with a $300B opportunity
- African Americans will have $1.8T in spending power by 2024
At 47.8 million strong, African Americans are the second-largest consumer group, presenting businesses with a $300 billion opportunity stake in this community. Despite being 13.4% of the U.S. population, Black households accounted for just under 10% of the nation’s total spending on goods and services in 2019, according to McKinsey. However, if companies interpret this data as proof that there’s little profit in serving Black consumers, they are making a multi-billion mistake.
Why This Matters: A few years ago consumer expenditures by Black households totaled approximately $835 billion, and combined spending by all Black households has increased 5% annually over the past two decades. When you read that African Americans will have $1.8 trillion in spending power by 2024, it’s an incredibly impressive number. Even more so when you realize that’s more money than Spain, Mexico, Netherlands, Turkey, or Switzerland generate annually. It’s incredible to think that the collective purchasing power of Black Americans is greater than most developed nations.
There are two strategies for companies to pursue: expanding local access to goods and services and creating offerings that are better tailored to the needs and preferences of Black households to take part in this $300 billion opportunity. Nielsen’s research shows black consumers are tastemakers when it comes to setting the tone for mainstream brand choices. “Our research shows that black consumer choices have a ‘cool factor’ that has created a halo effect, influencing not just consumers of color but the mainstream as well,” according to ratings company.
Black consumers have a major influence on spending. With luxury items like watches Black people account for $60 million of the $385 million in overall spending. As for women’s fragrances they represent $151 million of a $679 million industry.
Years of underinvestment by the private sector has left some Black communities with a dearth of retail options and key services. Additionally, consumption by Black people has been constrained, and while it’s growing quickly that growth is starting from a lower base.
Situational Awareness: Despite our purchasing power being virtually unmatched, ad spending tailored towards Black consumers has steadily declined in recent years. Also, this demographic is 25% more likely to change buying behavior. If these companies did their research, they would know that the Black community is more likely to purchase a product or service that is more in line with their self-image, along with the huge untapped market opportunity that awaits them.
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