Our Black Year
Page 28
It costs between $81,300 and $203,000 to start a Subway franchise.7 Using the upward bound of the Subway cost structure, the added $14 billion is enough to fund the creation of approximately 68,965 new franchises or more than two times the number of existing Subway restaurants all over the world.8
Further, each Subway store employs 8 to 13 people. Using the model we have created, the conservative estimate of 68,965 stores can create 551,724 to 896,551 new jobs (Exhibit 15).9
This model can be replicated for different franchises, across different industries, and for different business models. This model illustrates that with very small changes in consumption spending, the impact can be potentially far-reaching. Admittedly, Black entrepreneurs will have to make the first move and create quality businesses for Black consumers to patronize and find a way to capture the value of the Black consumer, which has yet to be done at scale. Despite this hurdle, it is clear that buying Black can create wealth and jobs for both the Black community and the community at large.
THE POWER OF THE BLACK CONSUMER
As previously discussed, the 2008 buying power of the Black consumer was estimated at $913 billion.10 To contextualize this impact, this buying power can be compared to GDP purchase power parity for some major world economies. If the US Black population were considered an economy unto itself, it would rank as having the sixteenth highest GDP compared with other countries.11
EXHIBIT 16 Gross domestic product 2008, PPP
The estimated Black buying power in 2013, over $1.2 billion, is more than the current GDP of Canada. Given the extraordinary buying power of the US Black consumer, Black businesses should make a concerted effort to understand how to attract and engage Black consumers. This consumer base is growing, young, and eager to purchase consumer products and services.12 Additionally, this kind of information may be successfully leveraged in making a case for the market potential for new business launches.
CAPTURING THE VALUE OF THE BLACK CONSUMER
Historical data illustrate that capturing the value of Black consumers has been difficult for Black entrepreneurs.13 Therefore, we would be remiss to ignore this obstacle in encouraging consumers to “buy Black” and Black entrepreneurs to launch more sustainable businesses. There are three key areas on which Black business owners and entrepreneurs can focus in order to capture meaningful value: awareness, accessibility, and absence (gaps in sectors served).
Awareness
Business awareness was a significant hurdle for the Andersons as they specifically searched for Black businesses. It is not a stretch to assume that this would significantly hinder a broader population of Black households from supporting Black businesses. As previously detailed, the Andersons used web research, personal referrals, and organization referrals to identify Black businesses. As illustrated in Exhibit 5, web research is a powerful tool for business owners to reach potential consumers. Businesses should leverage online Black business search engines and ensure that their business websites clearly highlight Black ownership. This will allow them to more easily reach a large Black customer base that is increasingly utilizing the web. The combination of a web presence and referrals provides consumers with a method of validating the service and quality of a business. This is essential for Black businesses to attract and enable potential customers to feel more confident about supporting them on a regular basis.
Once awareness has been developed, Black businesses must maintain high levels of quality and service in order to capture value and maintain it, which generates positive referrals. With the prevalence of social networking and consumer reliance on word of mouth, there is an incredible weight put on the quality of each individual experience. One negative review by a leader in an influential organization or a trusted community member can be detrimental to the long-term success of a Black business. In this study, 72 percent of the industries represented scored above average in their overall quality and service ratings, which means that there are Black businesses that are delivering at a level on par with or better than some of their nonminority business counterparts. However, building a sustainable Black business may mean reaching levels well above average. Ensuring high levels of quality and service will help break the vicious cycle with regard to Black business empowerment. High-quality products and services will help to pave the way for customers to become supporters and vocal champions of these businesses instead of averters.
Accessibility
A major issue encountered by the Andersons was the accessibility of Black-owned businesses. Exhibit 17 on the next page shows the locations of the Black-owned businesses against the location of the Andersons’ household. The Andersons sometimes had to travel at most 52 miles in order to purchase products/services from Black-owned businesses. This travel requirement would be difficult for the average family and signifies the opportunity entrepreneurs have in terms of serving the needs of minority communities. If entrepreneurs focused on establishing their businesses in primarily African American communities, they would receive a higher frequency of purchases and also capitalize on local residents who are unable or unwilling to travel long distances for their basic consumer needs.
EXHIBIT 17 Map of Andersons’ Home and Black-Owned Businesses Note: Anderson home is denoted by the triangle.
Absence
There were a significant number of gaps in availability of consumer products /services provided by some of the identified Black-owned businesses in the Chicago metropolitan area. As shown in Exhibit 2, product sectors where the Andersons were most noticeably affected were Clothing Merchandise, General Merchandise, and Restaurants. This means that dollars were likely left on the table during this Empowerment Experiment, and this represents a market for businesses to meet. Understanding the target market by utilizing tools such as surveys to assess their product/service needs is critical to identifying these gaps. Doing this enables growing businesses to determine the optimal mix of products/services to serve their target, which ultimately helps maximize the consumer experience, the dollars spent, and the likelihood of repeat business.
Many of the recommendations identified speak to existing business owners in terms of growing and developing their businesses. However, there is a great opportunity for Black entrepreneurs to capitalize on industries where few or no Black businesses currently exist. For example, The Empowerment Experiment illuminated a lack of Black-owned businesses within the Chicago metropolitan area in core industries such as Grocery/Produce, Insurance, and Luxury Retail. Increasing Black business representation in all industries is positive. However, targeting industries where there is severe Black owner underrepresentation provides entrepreneurs a significant value-capture opportunity. Industries where there is already a proliferation of accessible, well-advertised competitors will be harder for entrepreneurs to penetrate than industries in which a major need is going unfulfilled within the Black community. Entrepreneurs need only research the dynamics of their specific community to determine the gaps that need to be addressed and find convenient and unique ways to deliver to customers. Taking advantage of these opportunities will begin to lay the foundation for sustainable and differentiated Black businesses and ultimately lead to Black economic empowerment.
CASE STUDY WITHIN THE EMPOWERMENT EXPERIMENT
In-Depth Absence Analysis: Grocery Stores
The Andersons’ Experience
During The Empowerment Experiment, the Andersons struggled to find a Black-owned grocery store. Farmers Best Market, the sole grocery store they found, which was started by Karriem Beyah in 2008, has since closed due to high mortgage costs. Per Karriem, an individual needs “seven figures or more” to establish a grocery retail operation in the Black community. 14 Prior to Farmers Best Market, Chatham Grocery was the only Black-owned grocery store in Chicago serving African American residents for 25 years. However, it was sold to a Lebanese investor despite efforts to find a Black buyer. The country has seen a decline in Black-owned businesses after desegregation; the predominantly African America
n Garfield Park neighborhood in Chicago has seen a decline in retail stores from 900 businesses in the 1960s to only 89 in 2007.15 Neighborhoods that were once solely serviced by Black-owned grocery retailers are now food deserts—isolated geographic areas, typically inhabited by minorities, where there is no access to fresh foods.
The History
On a macro level, there was a time when Black-owned grocery stores were plentiful. According to the Encyclopedia of African-American Business , 6,339 Blacks were identified as being owner/operators of grocery stores.16 “In the early 1930s, grocery stores were considered the largest category of Black-owned enterprises.”17 An unfortunate by-product of the civil rights movement and the end of segregation, however, was the dispersion of the Black consumer. “The numbers and strong economic base in [B]lack communities, unified out of necessity during segregation, were diluted into mainstream.”18
At the beginning of the twenty-first century, there were only 19 Black-owned grocery stores in the United States.19 This number included the then successful Community Pride grocery stores of Richmond, VA, which were ranked number 44 on the Black Enterprise Top 100 Industrial /Service Listing for 2003.20 In 2004, Community Pride was forced to close its doors due to problems with its supplier.21
The Current Reality
Today, it is extremely difficult to locate Black-owned grocery stores. Our online search yielded three Black-owned grocery stores; however, we later learned that the telephone number listed for Food World (Southfield, MI) was wrong, and the Bravo supermarket in Harlem is actually Hispanic-owned and not Black-owned. The only Black-owned grocery store that is relatively easily found is Leon’s Thriftway in Kansas City, MO. This store was founded in 1968 by Leon Stapleton. He stated that when he started Leon’s Thriftway there were several Black-owned grocers in Kansas City, but now he is the only one left.22
According to the 2002 Census Economic Report, there are 9,016 Black-owned food and beverage retail businesses.23 This number may be misleading, as it includes businesses such as liquor retail stores and specialty food stores in addition to grocery stores. Even so, when compared to the total number of food and beverage stores in the United States, 148,901, Black-owned businesses only represent 6 percent.24 This is disheartening considering Blacks comprised 13 percent of the US population in 2002.25 This is also interesting given that Black consumers overindex in grocery purchases as compared with the rest of the population.26 These numbers demonstrate why the Andersons had a difficult time finding Black-owned grocery retailers. In order to reflect the percentage of Blacks within the United States, nearly 10,341 additional Black-owned grocery stores need to be opened. This demonstrates a significant opportunity for Black entrepreneurs to capture, as this is a market that is not being served by mainstream retailers such as Safeway. However, capital requirements need to be lessened by assistance from the Small Business Administration to allow Black entrepreneurs to open these retail operations as illuminated by Karriem Beyah’s unsuccessful efforts.
Implications
According to a report that discussed the successful creation of Minority Owned Businesses, “viable small businesses capable of expanding their operations and generating jobs commonly possess three traits: (1) involvement of skilled and capable entrepreneurs who have (2) access to financial capital to invest in their business ventures and (3) access to markets for the products of their enterprises.”27 By the expansion of certain Empowerment Experiment principles, with a larger, more geographically diverse sample, Black entrepreneurs may be able to make the case to themselves and investors that they will have access to the right markets and therefore acquire the needed capital.
Health crises within the Black community are often attributed to the lack of fresh food grocery stores in minority communities. For example, “In 2006 […] only 41% of stores in South L.A. sold fresh produce compared with 71% of stores that sold fresh produce in L.A. County.”28 With adequate marketing, appropriate pricing, and consumer-convenient locations, this is an opportunity for Black entrepreneurs to not only generate capital, but provide a more far-reaching community benefit.
CONCLUSION
The Empowerment Experiment has laid the foundation for leveraging the economic power of the Black American consumer. Although the breadth and depth of the experiment were limited, it reinforces key issues and opportunities within this large consumer base that have direct implications for the growth of Black entrepreneurs and ultimately for “self-help” economics. The research identifies the immense impact that can be implemented if Black consumers make a small change in their current shopping and purchasing habits and if Black entrepreneurs implement some of the lessons learned from the experiment. Ultimately, successful execution of The Empowerment Experiment on a larger scale, consistently, throughout the nation will create generations of financial stability and wealth in the Black population that have yet to be achieved.
APPENDIX 1 Full List of Industries Represented, Dollars Spent, and % of Total Dollars Spent
Sectors Dollars Spent %
Appliance Repair Service $465.00 0.95%
Automotive $8,903.23 18.19%
Bank/Financial Service $1,100.00 2.25%
Bookstore $58.74 0.12%
Child Care $17,857.50 36.49%
Cleaners $584.75 1.19%
Clothing Merchandise $1,955.55 4.00%
Cosmetics $111.94 0.23%
Education $2,700.00 5.52%
Entertainment $700.24 1.43%
Food Merchandise $4,379.47 8.95%
General Merchandise $1,601.49 3.27%
Hardware Merchandise $169.51 0.35%
Health Service $511.49 1.05%
Law Service $1,250.00 2.55%
Leisure/Hair Care/Spa $283.25 0.58%
Media/Printing $91.00 0.19%
Miscellaneous $300.00 0.61%
Real Estate $250.00 0.51%
Restaurants $5,233.51 10.69%
Security Service $359.00 0.73%
Shipping Service $13.22 0.03%
Transportation $65.00 0.13%
Grand Total $48,943.89
APPENDIX 2 Full List of Industries Not Represented
Limited Available Products/Services Sector
Sports magazine Entertainment
Carseats Automotive
Appliances Appliances
Bath rugs General Merchandise
Bedsheets General Merchandise
Children pajamas Clothing Merchandise
Children robes Clothing Merchandise
Women undergarments Clothing Merchandise
Women robes Clothing Merchandise
Basketball shoes Clothing Merchandise
Dietary vitamins (special) General Merchandise
Depilatory General Merchandise
Luxury housewares General Merchandise
Treadmill Fitness
Cellular phone service Phone Service
Property Insurance Property and Casualty Insurance
Utilities Utilities
Brand-name cleaning products General Merchandise
Hair clippers General Merchandise
Men suits Clothing Merchandise
Lawn treatment service Property Maintenance Service
High-end restaurants Restaurants
Groceries Food Merchandise
APPENDIX 3 Full List of Sources Used to Find Businesses
Finding Business Source Dollars Spent %
Business owner reached out to EE $332.94 0.68%
Knew of business before EE $2,696.50 5.51%
NA $1,496.49 3.06%
Newspaper / Magazine / Print $1,130.79 2.31%
Phonebook / Cold call $21.63 0.04%
PR firm $70.42 0.14%
Radio $130.00 0.27%
Referral–Business Owner $4,185.46 8.55%
Referral–Corporate $696.54 1.42%
Referral–Organization $6,167.32 12.60%
Referral–Personal $9,087.92 18.57%
Walk-by / Drive-by $652.50 1.33%
Web research $2
2,275.38 45.51%
Grand Total $48,943.89
APPENDIX 4 Complete Breakout of Rankings by Industry
APPENDIX 5 Black Purchases in 2008 (www.targetmarketnewst.com)
Products/Services ($Billion) %
Housing and Related Charges $166.30 33.21%
Education $71.00 14.18%
Food $65.30 13.04%
Cars and Trucks–New and Used $31.50 6.29%
Apparel Products and Services $26.90 5.37%
Health Care $23.90 4.77%
Insurance $19.00 3.79%
Telephone Services $17.20 3.44%
Household Furnishings and Equipment $12.90 2.58%
Contributions $11.00 2.20%
Media $8.30 1.66%
Personal Care Products and Services $6.60 1.32%
Travel, Transportation, and Lodging $6.40 1.28%
Consumer Electronics $4.50 0.90%
Miscellaneous $4.40 0.88%
Computers $3.50 0.70%
Gifts $3.50 0.70%
Beverages (Nonalcoholic) $3.10 0.62%
Tobacco Products and Smoking Supplies $3.10 0.62%
Beverages (Alcoholic) $2.80 0.56%
Entertainment and Leisure $2.80 0.56%
Toys, Games, and Pets $2.40 0.48%
Appliances $2.20 0.44%
Sports and Recreational Equipment $1.00 0.20%
Housewares $0.80 0.17%
Books $0.30 0.06%
Total $500.70