Consumer goods marketers who wonder where their growth will come from in the future should explore multicultural markets. While sizable population increases among non-whites are a given, many marketers haven't awoken to ethnic buying-power growth.
The New America Marketbasket Index points out that household expenditures among multicultural families will grow faster than white households. The study, developed by New America Strategies Group and DemoGraph Corporation, looked at 13 different key areas of consumer spending, such as entertainment, clothing, vehicle, and home purchases, by race. It offers projections from 1995 to 1998 based on purchase behavior trends from 1992 to 1995.
The Index documents the accelerating purchasing power, financial strength, and upward mobility of African, Asian, and Hispanic Americans consumers by analyzing household spending, and tracks their per-household spending growth based on a weighted average of multicultural household expenditures compared to that of white households.
In 10 of the 13 categories, minorities posted stronger growth than white households. Only in restaurant expenditures, public transportation, and rent did white growth exceed that of minorities. Expenditures from multicultural households exceeded white households in five categories-groceries, entertainment, personal care products, clothing, and education.
Why the greater increases from minorities? Laura Teller, chief executive officer of Miami-based DemoGraph, attributes it to a strong economy, near full employment, and minorities having more money to spend. "A rising tide lifts all the ships," she said. "The economic expansion has more money flowing into those communities."
The study forecasts healthcare outlays and entertainment spending growing nearly three to three-and-a-half times faster in minority households compared to white families. Electric utility expenditures grew twice as fast in minority households.
"Grocery and clothing expenditures are higher due to the size of the households," Teller said, citing the fact that minorities have more family members in average households. Multicultural households also have more people contributing to the family income, especially in Hispanic homes, she added.
The study projected Asian Americans to increase average spending 17.7 percent from 1995 to 1998. African Americans were close behind at 17.6 percent, while Hispanic expenditure growth was 15.5 percent. Whites, meanwhile, spent only 13.7 percent more over the three-year period.
DemoGraph projected expenditure increases through extrapolating data from the 1995 U.S. Consumer Expenditure Survey, U.S. Center for Educational Statistics, the National Auto Dealers Association, and the Harvard Joint Center for Housing Studies. The company didn't factor out inflation since it believed that it affects all groups equally.
While some of the gains occur in smaller-ticket items, such as groceries and clothing, multicultural families tend to outspend whites in more expensive goods, such as cars and homes. Minorities plan to increase spending on vehicles by 37.2 percent, while growth for whites is about 13.4 percent between 1995 and 1998. Minorities will boost their spending on home ownership by 16.9 percent, compared to 12.4 percent for whites. The study said 40 percent of all first-time home buyers between 1995 and 1998 are multicultural consumers.
"Multicultural families are becoming part of the burgeoning middle class," Teller said. "Their first purchase is a car, and they also have a high desire to own their home."
Most of the expenditure increase from African Americans can be attributed to increased spending on clothing, entertainment, and health care. Hispanics are expected to have large increases in vehicle purchases, clothing and entertainment, while gains in Asian expenditures are in restaurants, vehicles and education. Whites spent more of their dollars in restaurants, clothes and public transportation.
For several demographic categories, expenditures on rent are expected to decline, due to those families moving into their first homes. Spending by African Americans on rent is projected to decline 13 percent, and 20.2 percent for Hispanics. Both whites and Asian Americans plan to increase average spending for rent by 6.3 percent. African Americans are expected to decrease spending on public transportation.
"Multicultural consumers are purchasing the good life," Teller says. However, an economic recession could definitely curb spending. Teller said that while Asian Americans save more than other minorities, African Americans and Hispanics have a smaller savings and income cushion if the economy falters. "Losing jobs would be a big shock to their systems," Teller says.