31 Oct 2013
- Written by Shartia Brantley/The Grio
Luxury spending power by African Americans is estimated to be nearly $90 billion, according to Diversity Affluence, a consultancy for upscale brands.
This includes affluent African-American households with an individual salary of $75,000 and households with income of at least $150,000.
Trying to protect its brand and sales, Barneys New York executives met with the Rev. Al Sharpton and other leaders from the National Action Network on Tuesday to address the allegations of racial profiling.
As Barneys and Macy's investigate these allegations their brands may be tarnished, especially with African-American luxury shoppers.
Andrea Hoffman, founder and CEO of Diversity Affluence, said, "African-Americans have proven to have political, social and economic clout."
Regarding spending power, Hoffman said consumers are moving toward more experiences whether it is in customer service, brand or store. This means quality treatment, food and products – the whole experience, Hoffman explained.
"Luxury retailers are not doing a great job of marketing to black luxury consumers," Hoffman said. She added that many luxury retailers and brands fail to do target; they have a "build it and they will come" attitude.
"African-Americans have an affinity toward limited edition, one of a kind, unique products," said Hoffman. That is what Barneys stands for, so naturally affluent African-Americans have an affinity for the retailer.
Loyalty is a word not often used today, however, that's not true for African-American consumers.
African-Americans tend to be more brand loyal than other groups, according to the 2013 African-American 360 study by NewMediaMetrics.
"African-Americans are either aspiring or trying to replicate something in their own lives," said Denise Larson, co-founder and president of NewMediaMetrics, regarding brand loyalty.
Her firm tracked emotional attachment or brand loyalty for numerous companies including fifteen retailers such as Macy's. Her study found that African-Americans were vastly more loyal to Macy's than the general population, 40.2 percent to 24.1 percent, respectively. African-Americans' emotional attachment for Target was 47.2 percent compared to 36 percent for the general population.
Due to the high brand loyalty among African-Americans, Larson said the bias allegations at Barneys and Macy's may have financial repercussions. "It's like biting the hand that feeds you," Larson said.
She said it is very important to nurture and not ostracize the people who are most loyal to you. "It's not only the right thing to do, but (having a bias) doesn't make sense or cents," she said.
There is a strong correlation between brand loyalty and sales. The more attached consumers are to a brand the more they spend. NewMediaMetric's data reveals brand loyal consumers translate into 47.2 percent more in sales. "The more loyal, the more they spend and the deeper they go into a product category," Larson said.
Executives at the corporate level may know this, but it may not trickle down to the store level. "This is traditionally the problem in retail, so many locations and employees," she explained.
So how can Barneys and Macy's protect its brand and sales?
Barneys has an opportunity to turn this into a positive and lead transformation in the industry, particularly in luxury regarding the "new" America, Hoffman offered. They should take the lead to start the conversation and be a part of the solution.
Hoffman suggests Barneys host an influencer luncheon with people of color to have a candid dialogue about solutions. "Barneys should understand royaltons; they are not minorities," Hoffman offered. Royaltons are a small group of affluent people.
Hoffman said Barneys may also want to look at their corporate board. She said they may need a proper facelift in order to be a forward-thinking, sustainable and profitable brand.
(Shartia Brantley is a producer and on-air reporter at CNBC. Follow Shartia on Twitter at @shartiabrantley.)