November 16, 1999

Study: Inner-city residents often shop online

By RACHEL BECK
AP Business Writer

NEW YORK (AP) -- Merchants using the Internet could be missing out on a huge and lucrative market for their Web sites: inner-city shoppers.

A new study released Monday shows urban residents with access to computers and the Internet use the Web as often -- and sometimes more frequently -- as the general U.S. population.

The Internet is an easy way for these shoppers to get goods and services they can't find in their own neighborhoods, which generally aren't served by more traditional stores.

"Bricks-and-mortar retailers have virtually ignored the inner cities, so it is natural that consumers there would look for other places to shop," said Carl Steidtmann, chief retail economist at PricewaterhouseCoopers, which conducted the study with the Initiative for a Competitive Inner City, a Boston-based nonprofit group.

"The Internet opens doors for these people that they never saw before," he said.

The study of 1,159 inner-city households was done by mail last fall, and the results were compared with an existing PricewaterhouseCoopers database of shoppers nationwide.

The study targets urban areas where the residents have a median household income of at least 25 percent less than the city average, a poverty rate at least 50 percent higher than the city average or unemployment of at least 30 percent above the city average.

Consumers in America's inner cities possess more than $85 billion in annual retail spending power, but their demand for merchandise and services is largely unmet, the study found.

While some progress has been made in bringing chains including Sears department stores and Pathmark grocery stores into inner cities, most urban residents must rely on small specialty stores where they pay higher prices and find a limited variety of merchandise.

As a result, many inner-city shoppers turn to catalogs. They buy on average more computer software and hardware, cookware, furniture, toys and books through catalogs than the general U.S. population, according to ICIC.

Given that, it is no wonder they find the Internet attractive.

"Inner-city residents want the ability to buy things. They love brands. They love fashion. They want trendy merchandise," said Mohsen Moazami, vice president in the e-commerce practice at the retail consulting firm Kurt Salmon Associates. "But they can't find most of what they want near home. The Internet can provide all of those things."

The study found 30 percent of inner-city shoppers have a personal computer at home, compared with 50 percent in the general population. Twenty-four percent have access to the Internet at home, work or school, compared with 41 percent of all U.S. shoppers.

But those that do have computer and Web access on average use the Internet with the same frequency as most U.S. shoppers, the study found.

Of those inner-city residents online, 68 percent use the Internet at least three times a month compared to 69 percent in the general population. Thirty percent buy goods online, compared with 27 percent of the general population.

Analysts expect Internet use in urban America to rise sharply as computer prices continue to drop. Already, there are PCs selling for less than $500.

In addition, many technology companies and non-profit groups are working to get computers into urban areas and teach residents how to use PCs and the Internet.

While the urban market is expected to expand fast, online merchants have been slow to target it, experts said. Most have done little or nothing to promote their Web sites in such communities, while they have bombarded more affluent areas with billboards and mailings.

"There is a poverty perception in corporate America about these markets," said Darien Dash, chief executive of DME Interactive Holdings, Inc., a multimedia and consulting firm that helps companies target minorities on the Internet.