Hot New Data: Selig Center Tells You Which Multicultural Markets Are Exploding
By Jennifer Millman
August 01, 2007
Latino buying power will soar nearly 500 percent from 1990 to 2012, the largest increase of any racial/ethnic group, according to the latest data from the Selig Center for Economic Growth, the premier source for research on the multicultural economy at University of Georgia's Terry College of Business. Here's what you need to know about the new data and why it should affect your marketing strategy. Read the full release.
Read Selig Center director and study author Jeff Humphreys' guest column "The Importance of Buying Power" in the July/Aug. 2007 issue of DiversityInc magazine, available now online, and learn proven strategies for reaching multicultural markets.
Buying power, or disposable income, is the total personal income available after taxes. Total annual buying power in the United States will exceed $10 trillion for the first time in 2007 and $13 trillion in 2012. Multicultural markets, which will account for more than a fifth of total buying power this year, account for the lion's share of that growth.
Combined, black and Latino buying power is larger than the 2005 GDP (in U.S. dollars) of all but nine countries in the world, according to the annual report. Asians' economic clout is larger than the 2005 GDP of Switzerland and that of all but 13 economies in the world. Humphreys calls the growth "impressive." Companies seeking to expand their market share would do well to harness multicultural markets for growth, as indicated in the chart below.
"In 2007, the Hispanic consumer market in the United States is about the same size as Mexico's entire economy--in terms of its GDP (gross domestic product). The same can be said for the size of the African-American consumer market," Humphreys said in a statement. "And I'm becoming convinced the Asian market in America is reaching the point of critical mass, where their economic clout in a number of urban markets is going to create great opportunities for businesses to pay attention to their needs."
Here are some of the highlights from the latest research:
- Latino buying power will surpass $860 billion in 2007 and is projected to exceed $1.2 trillion in five years, which would make it the largest of the multicultural markets in 2012. The five fastest-growing Latino markets by state are Arkansas, North Carolina, Tennessee, Georgia and Nevada
- Black buying power will reach $845 billion in 2007 and will exceed $1.1 trillion by 2012--a 34 percent increase in that five-year period. The five fastest-growing black markets by state are Idaho, Nevada, Utah, Montana and Minnesota
- Asian buying power in the United States, which will total $459 billion in 2007, is projected to grow nearly as rapidly as Latinos' buying power by 2012--an increase of 46 percent. The five states with the largest Asian consumer markets account for 60 percent of Asian buying power: California, New York, New Jersey, Texas and Hawaii
- Native American buying power will total $57 billion in 2007 and reach $77 billion by 2012. Native American buying power is growing faster than U.S. buying power as a whole but will still account for less than 1 percent of the total in 2007. The fastest-growing Native American markets include West Virginia, Mississippi, Texas, Florida and Tennessee
- White buying power will total nearly $8.6 trillion in 2007 but is growing at a much slower rate than that of multicultural markets. It's projected to reach nearly $11 trillion in 2012--a 28 percent increase in that five-year period. Even the fastest-growing white market (Nevada) will grow more slowly than the 10th fastest-growing markets for blacks, Latinos and Asians, respectively
What's Driving Economic Growth?
The United States experienced its longest period of economic growth from 1990 to 2000, and GDP again is expanding, with analysts predicting a moderate-growth trend through 2012. What explains the upsurge in buying power among multicultural markets, specifically? It depends on the market, says Humphreys.
For Latinos, high immigration and birth rates have contributed to population growth that naturally leads to increases in purchasing power. In 2000, about one in eight people living in the United States were Latino, according to census reports. By 2012, that number will be one in six. Latino youth are also the fastest-growing segment of the U.S. population, and younger people tend to have higher levels of disposable income.
Economic growth for blacks is largely affected by the high rates of entrepreneurship in that community. Census Bureau data shows the number of black-owned businesses grew 45 percent between 1997 and 2002, a substantial increase over the national average (10 percent) and higher than the growth rates of businesses owned by Latinos or Asians. Higher education rates are also fueling blacks' growth in buying power. The nation's black population is younger than whites, and many young blacks are entering the work force for the first time at a time when employment opportunities are plentiful.
Asians report higher levels of education and above-average household income compared with other racial/ethnic groups; they're younger than whites and hold higher-level jobs, which indicates the trend toward growth in this market will continue. Census Bureau estimates show that the lifetime pay-off for a bachelor's degree compared with a high-school diploma is up to $1 million and the pay-off for an advanced degree versus a high-school diploma is about $2 million.
Nevada is the fastest-growing consumer market of all states, according to the report, which also breaks down buying power by state and racial/ethnic group. The state-by-state projections are analyzed by market size, growth rate and market share.
An executive summary of last year's report is available free on Selig's web site, where the 2007 report can be purchased.
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