A report on minority buying power released Sept. 20 by the Selig Center for Economic Growth at UGA’s Terry College of Business projects disposable income controlled by minorities will continue growing at a faster rate than that of white households at least through 2010.
“The fast-paced growth of minority buying power demonstrates the increasing economic clout of minority consumers,” says Jeff Humphreys, Selig Center director and the report’s author. “One implication is that business-to-consumer companies do not necessarily have to look overseas to find booming markets, as there are great opportunities right here in America’s multicultural economy.”
Buying power, also referred to as disposable income, is the total personal income available for spending on goods and services after taxes.
With birth and immigration rates exceeding the national average and improving employment opportunities, African Americans, Hispanics, Asians and Native Americans should all experience above-average growth in buying power over the next five years, according to Humphreys.
The fast-paced growth of minority buying power is significant because the market share claimed by a targeted group of consumers directly affects the cost of providing them with goods and services. The higher the market share, the lower the cost of reaching potential buyers in that group, he says.
Humphreys is the author of “The Multicultural Economy: Minority Buying Power in the New Century,” a series of state-by-state minority buying power projections he began in 1990. Initially limited to African Americans, Humphreys eventually expanded his studies on minority buying power to include the nation’s most populous racial groups, as well as Hispanics, categorized by the U.S. Census as an ethnic group and not a racial minority. “The Multicultural Economy” estimates minority buying power by applying economic modeling and forecasting techniques to data from various U.S. government sources. The Selig Center model integrates statistical methods used in economic forecasting with those of marketing research. In addition to the state-by-state breakdowns, the 2005 report also estimates minority buying power in Georgia and Florida on a county-by-county basis and by Metropolitan Statistical Areas.
From questions to answers
In 1989, Jeff Humphreys received a seemingly ordinary phone call from an African-American businessman seeking estimates of the purchasing power of black consumers in Georgia.
“To my surprise, I was unable to find any useful information, and the phone call became the springboard to an exciting opportunity,” Humphreys says. “In less than a year, I designed the first version of the model that I now use to estimate the buying power of the nation’s major ethnic groups and races. That was more than 15 years ago.”
Now the Selig Center’s minority buying power studies are nationally known, and the 2005 edition of this expansive data book-and-CD package represents a comprehensive update of this popular series. The time series covers the period 1990-2009 and data are provided for the U.S. and all 50 states; Georgia and Florida data are delineated by county. The series features buying power data for African Americans, Asians, Native Americans, Hispanics, non-Hispanics and whites.
In addition, the package includes U.S. data by expenditure category for 2003 for African Americans, Asians and Hispanics.
As director of the Selig Center for Economic Growth-an endowed economic forecasting and market research center in the Terry College of Business-Humphreys is widely published in the fields of economic forecasting, market research, transportation and economic development. But he is nationally known for his detailed estimates of minority buying power.
“I am especially grateful to Lorena Akioka, Beata Kochut, Ian Armit and Mary Evans for their help in producing the book and CD,” Humphreys says.
Cash or charge?
Insights from this year’s report include:
- By 2010, the combined buying power of African Americans, Asian Americans and Native Americans will exceed $1.7 trillion, more than triple the 1990 level of $454 billion. That’s a gain of almost $1.2 trillion or 268 percent.
- Based on its size, growth rate and concentration, Georgia remains one of the nation’s most vibrant and attractive African-American consumer markets. Not only is it ranked fifth largest in African-American buying power, it’s also ranked fifth in terms of African Americans’ share of total buying power. One out of every five dollars spent by Georgia consumers is controlled by African Americans.
- Asian-American buying power is estimated at $397 billion for 2005, an increase of 240.4 percent since 1990. It’s forecast to reach $579 billion nationwide by 2010.
- In New Jersey, Asian Americans constitute 7 percent of the population, but they control 7.2 percent of the state’s buying power. Asian American buying power increased more between 1990 and 2005 (3.4 percentage points) in New Jersey than in any other state. In comparison, Californians with Asian ancestry make up 12.3 percent of the state’s population, but account for only 10.9 percent of its total buying power.
- California is the top-ranked state in terms of total buying power for every minority group except African Americans. (California is second in that category; New York is first.)
- Hispanic buying power in California for 2005 is an estimated $202.6 billion. On its own, California’s Hispanic buying power exceeds the total buying power (all groups) of 36 of the 50 states.