REwind for 10/20/08

Posted: October 20, 2008 in Commentary, Economy

I did this post back in ’06.

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Are they taking over or did we give them the keys?

“Betrayal epitomizes the historical occurences, which have hindered the recognition and respect of our greatness in the Black Hair Care & Beauty Industry today. Though many groups perpetuate crimes of economic parity, we are found to be the most guilty.

Black Americans handle vast sums of money, but somehow we have been taught to see our-selves as poor people. We are not poor–we just handle money poorly. Out of every dollar we spend, 95 cents is spent outside of our community and only 5 cents of every dollar within our own community…

If, we are in control of our money, we have only ourselves to blame for giving our economic power away. Many of us do not realize how much damage we cause when we choose to spend our money elsewhere. Likewise, we do not realize how economically empowering it can be to spend our money in the community.

Consider that other communities are thriving because they understand this principle. If we continue to choose “lazy economics” instead of “industrious economics” we will succumb to the pressures of the open market. Agressively, capitalizing on economic opportunities and not ALLOWING them to diminish, we improve our communities instantly!”

As a entrepreneur, I really took the issues raised in this documentary to heart. Couple that with reading the excerpt above and it just made it even more difficult for me to sit down to write this post. While the economics of the hair care industry may not be considered “blog material”, as I stated in an earlier posting this industry represents our last great opportunity to secure the financial independence of our community. To not take this issue seriously would be a costly mistake.

Identifying the gaping holes in our economic bucket

According to Black Issues research, Blacks account for roughly 13 percent of the U.S. population and 14.5 percent of apparel spending. Meanwhile, they earn the lowest median income when compared to other racial groups — $27,910 per household in 1999, compared to Whites at $44,366. (source)

Think about some of the billion dollar industries out there where Blacks have a very high participation rate and enjoyed much success: Football, Basketball and the music industry.

Football:

The National Football League is widely viewed as the most lucrative professional sports league, and ranks first in terms of annual revenue. Industry revenue for the NFL climbed 10.1% in 2000, to $3.602 billion. In 1998, the league signed a $17.6 billion television deal with four networks, dwarfing the television contracts of other leagues. The contract runs through 2006 and delivers $2.2 billion annually to the NFL, which equates to $70 million a year for each team.

Basketball:

“… the National Basketball Association is valued at $4.7 billion.” (source) (I don’t know if this figure includes high yielding portions of the industry such as television contracts and the sale of licened products).

The music industry (Hip Hop):

“Once a block party fad that started in the Bronx, New York, hip-hop is now a $4 billion-a-year-music industry that spans the globe. Although it has always been the voice of inner city youth and young adults, hip-hop has evolved to include the 25 to 34 year-old demographic segment. Proving its staying power, for the past five years hip-hop remains the top-selling genre over country music and is second only to rock music.” (source)

While Blacks are not the only ones that buy sneakers and sports gear, we have (and still do) contributed greatly to the success of sporting companies such as Nike:

(2003) Beaverton-based Nike Inc.’s fourth-quarter revenue jumped 11 percent to reach $3 billion and its annual revenue topped the $10 billion mark.

The footwear and apparel company’s net income of $246.2 million, or 92 cents per share, rose 18.1 percent from $208.4 million, or 77 cents a share, a year earlier. (source)

As I stated earlier, Blacks are some of the main contributors to these billion-dollar industries, but we have very little to show for it.

The birth of a Black-owned billion dollar industry

Many of you may have read the stories of the following two individuals, but there are some things in their story that are worth pointing out.

Annie Malone

Born in Metropolis, Illinois, Annie Turnbo Pop Malone was the eleventh of twelve children. Both of her parents died when she was young and she was raised with an older sister in Peoria, Illinois. She took an early interest in hair textures and during the 1890s began looking for a better method for hair care for black women. At the time many women were using soaps, goose fat, and heavy oils, anything to straighten their thick curls, often damaging their scalps in the process.

By the turn of the century, Malone had developed a variety of treatments and was the first to patent the hot comb (before Madame Walker). By 1902 she and her assistants were going door-to-door selling her Poro Products. Poro is a word that came from West Africa symbolizing physical and spiritual growth. Malone used the press extensively to publicize her products. Malone founded Poro College in 1917 in St. Louis, the first center in America dedicated to the study and teaching of black cosmetology. The school employed nearly two hundred people and ran a curriculum that taught the benefits of a solid public persona-the correct walk, talk, and style of dress. (source)

Madam C. J. Walker

After changing her name to “Madam” C. J. Walker, she founded her own business and began selling Madam Walker’s Wonderful Hair Grower, a scalp conditioning and healing formula, which she claimed had been revealed to her in a dream. Madam Walker, by the way, did NOT invent the straightening comb, though many people incorrectly believe that to be true.

To promote her products, the new “Madam C.J. Walker” traveled for a year and a half on a dizzying crusade throughout the heavily black South and Southeast, selling her products door to door, demonstrating her scalp treatments in churches and lodges, and devising sales and marketing strategies. In 1908, she temporarily moved her base to Pittsburgh where she opened Lelia College to train Walker “hair culturists.”

By early 1910, she had settled in Indianapolis, then the nation’s largest inland manufacturing center, where she built a factory, hair and manicure salon and another training school. Less than a year after her arrival, Walker grabbed national headlines in the black press when she contributed $1,000 to the building fund of the “colored” YMCA in Indianapolis. (source)

Since these days, the ethnic hair and beauty industry has exploded into a multi-billion dollar industry (I saw one figure that had it up to 5.1 billion). Pretty soon, black-owned beauty supply companies were popping up across the United States.

The biggest reason why black entrepreneurs of that day were so successful was because of the simple fact that there were no other options for Blacks to do business. What I find pretty amazing here is that despite that fact, these entrepreneurs still saw the importance of aggressive marketing plans that gave blacks a reason to buy “Black”. I’ll explain this further later on.

When progress becomes a footnote

As the times began to change along with old mindsets, White-owned beauty companies saw the missed benefit of competing for dollars in the now very lucrative Black hair and beauty market. Equipped with global market savvy, many of these large white-owned companies were able to out-maneuver many well-established black-owned companies. Below is a list of some of the most recent acquisitions of black-owned hair and beauty companies:

  • Carson Inc., creator of Dark & Lovely and Magic Shave for black men, acquired black-owned beauty company Johnson Products of Chicago in 1998. L’Oreal snapped up Carson two years later and merged it with Soft Sheen.
  • Alberto-Culver USA acquired Pro-Line, creators of the Just for Me and Soft and Beautiful brands.
  • Wella Manufacturing acquired the Gentle Treatment and Ultra Sheen brands created by Johnson Products.

Bolstered by their acquisitions, mainstream companies are pouring money into marketing and research to develop new products. (source)

Why the “African-American owned and opperated” tagline no longer works

With the globalization of the marketplace, Blacks no longer have to buy from Black-owned business. For the first time in our history here in the United States, now we can choose freely who we want to purchase our goods and services (a right that was fought for during the civil rights era). While this has been good news for the Black consumer, the news is not so exciting to many Black business owners who simply relied on their race to bring in the customers. Black entrepreneurs now have to compete alongside everyone else.

The problem that I see with many Blacks in the beauty and hair care (BHC) industry is that they are trying to compete head to head with Korean-owned shops by doing what they do–just selling the product. Here are some of the common complaints that I have heard from blacks that shop at Korean-owned shops:

  • Always being followed in suspicion that they will shoplift (unfortunately shoplifting by us DOES happen).
  • Language barrier
  • Non-personable

I heard of one story where the water pans that were used to wash feet at a local Korean-owned spa was never changed. Some even saw traces of mice feces in the water.

Despite all of this, we STILL shop at these establishments. Now is this typical of ALL Korean-owned shops? Certainly not. But the stories are all to common to dismiss as “coincidence”. On the flip side, here are some of the most common complaints that I have heard coming from those that have shopped at black-owned beauty and hair supply stores:

  • Higher prices
  • Under-stocked
  • Stores do not stick to their hours of operation

There is a Black woman that I know in the business that is seeing some awesome growth in her small HCB business for one main reason: she regularly takes the time to educate her customers on her product and why they should buy from her. She understands their needs and is able to address them in an effective manner. The more she goes to her customers, the more sales she makes. The other reason behind her success is that she is also a distributor (she imports her products directly from manufacturers in other countries–not here locally in the states–I know that is not possible with all beauty products). Her distributor status gives her the ability to keep her prices competitive while generating a good profit (this is why I highlighted those portions of those earlier excerpts on Madam C.J. Walker and Annie Malone).

More from T. Shawn Taylor (Chicago Tribune)

The concept of black consumer loyalty is largely a myth accepted by people who view the black community as monolithic and narrow-minded, critics say.

“There isn’t a whole lot of product loyalty,” salon owner Leigh Jones said. “Women buy what works.”

Lafayette Jones calls black consumers some of the most discerning and sophisticated consumers around.

“If you’ve been underserved as a consumer all your life, to get ordinary things, you have to do extraordinary things. Our consumers really know how to shop for what they want,” he said. Understanding how the black consumers moves and thinks, he said, will decide who survives in the competitive beauty market. “That’s going to be the secret to this game.” (source)

Taking control of our industry: What can be done

A while back my wife used to buy a certain hair product in Crenshaw, CA from a Black-owned HCB business. From what she communicated to my wife, her business was going great especially because of the regular sales she made to folks within the Hollywood industry. Well a year or so passed and my wife needed to go back to this store only to find out that not only was business not going so well, but someone who worked for her in her establishment decided to start their own business due to a disagreement. That individual opened his own shop about a block away. The last my wife checked, the first shop had closed down and the other shop appeared to be just hanging on. This is just one of many times I have heard stories like this coming from the Black HCB world. A stylist or a barber becomes one of the more requested, jealousy erupts, they leave to start their “own thing”. The cycle just replicates itself.

If you have not done so by now, I encourage you to read my previous posting that featured two articles on Koreans as small business owners.

In the “Black Hair” video that I mentioned earlier, a gentleman suggested that the only way this can be turned around is by initiating a boycott of these Korean-owned stores. In other words, if they refuse to carry products produced by us then we will not buy from them. I would take it a step further.

Now I am one of those people whose skin crawls everytime I hear the phrase “we have to pull our resources together.” I guess the reason why that phrase turns me off is because it is mentioned hundreds of times with little or no action behind it. Plus, I think in reality many of us (for good reason) just do not see that happening anytime soon. But you know what? Pulling our resources together is really the only way out of this predicament. On one hand, Black-owned HCB businesses must be willing to work TOGETHER even if it means that from time to time profit is lost (i.e. if you do not carry a product, instead of telling the customer to wait until you order it, refer them to another Black-owned shop in the area). For some, it might be wiser to just combine businesses instead of working alone. This has to be the norm and not just the exception. These businesses must develop creative marketing strategies that aggressively goes after the Black consumer.

Competitive prices

With many Koreans already in the distribution and (for some products) the manufacturer segment of this business, the only way that Blacks are going to increase their stake in the retail side of this industry is by Black consumers making it a point to shop exclusively at black-owned shops. The only way I see that happening is that if shops are willing to combine resources. It is far better to have few well stocked stores with a full staff than to have many stores scattered throughout the city that are barely breaking even. By buying exclusively from these Black-owned “super centers”, we would in effect create a shift in the industry that would once again favor the economic stability of our community. While I believe this would not force Koreans out of the industry, it would certainly force them to improve in the areas that I mentioned above.

A move like this will take great sacrifice. Are you up to the challenge?
 

 

In order for this to work, Black consumers would have to see this as a LONG-TERM investment. In other words, during the beginning stages, Blacks would have to be willing to pay the higher prices for a season before seeing the results I mentioned above. Over time the market will change in our favor. You have to think as an investor and not a consumer. This would be a very tall order for a mostly-consumer minded demographic whose tendency is to spend their money on depreciable (instant gratification) items. This is why it would be critical for Black-owned shops to make the sacrifices I suggested earlier. In the long run giving people top-notch customer service along with creative marketing techniques will alleviate some the reluctancy to pay extra.

So the question remains “Are they taking over or did we give them the keys?”. From the way it looks right now, we have given away not just the “keys”, but the whole key ring. Ultimately it is going to take the hand of the Lord to reverse our way of thinking.

Related Links

Check out the links at the official Madam C.J. Walker website

Dudley Hair products

Black Owned Beauty Supply Association (BOBSA)

Embracing `BLACK IS BEAUTIFUL’ – African American involvement in fashion industry, and consumer spending on apparel and beauty care products – Statistical Data Included

THE ‘BLACK HAIR’ INTERVIEW WITH ARON RANEN: The white guy who uncovered the Korean domination of the black hair industry

Big players woo ethnic beauty market

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Comments
  1. Kamau says:

    Black folks are a nation within a nation yet we don’t realize and most sadly we don’t act like it.

  2. S. Cain says:

    The devil is always in the details. The stuff marketed to blacks from these conglomerate companies are often chemically identical or near so, ingredient wise, to products for whites. Laureth? Come on, now. I use straight shea butter on my scalp, it is produced in Ghana. It lasts for months. Costs me $5 for 8 oz. Try it!

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