Commentary: High Tech's Next Big Market? Try The Inner City

For years, policymakers and concerned members of the high-tech community have spoken of a digital divide--between technology haves and have-nots. But despite their concerns, the nagging disparity persists. If that doesn't change, the cyber ride that is propelling the U.S. economy into the next millennium could sputter. Indeed, if the technology revolution leaves low-income Americans behind, all of America will suffer.

Bill Clinton knows this. He has called for a bridging of the "racial ravine" that leaves many of the country's lower income African American and Hispanic citizens without the digital technology that middle-income Americans now take for granted. On Dec. 9, he planned to meet with such top high-tech luminaries as AT&T Chairman C. Michael Armstrong and America Online's Stephen M. Case at a national conference to discuss how to bridge the divide.

MISPERCEPTION. But more discussion of the problem isn't going to help. Nor are the welcome and generous gifts of computers and other gear that tech companies routinely make to inner city schools, libraries, and other institutions. What's missing is a committed effort to sell computers to these forgotten folks. Nothing fancy. Just a nicely targeted marketing campaign, and maybe a few inner-city stores, to demonstrate the benefits of the Internet. Simply put, companies ought to make the same investment in inner cities that they do elsewhere in the U.S. and overseas.

There's more money in these "blighted" areas than many businesses realize. Inner-city consumers there spend $85 billion annually, 7% of U.S. retail sales, according to a study by PricewaterhouseCoopers and urban-advocacy nonprofit The Initiative for a Competitive Inner City (ICIC). "There's a poverty perception of us as a community," says Darien Dash, chief executive of DME Interactive, a black-owned Internet-services and consulting firm in Englewood Cliffs, N.J. "It's the biggest misperception in Corporate America."

And there is evidence that these consumers, once they cross the digital divide, are lively cybercitizens. Only 24% of inner-city shoppers have access to the World Wide Web at home, compared with 41% of U.S. shoppers at large. But, according to ICIC, 30% of consumers in low-income areas have bought products online, vs. 27% of overall Web consumers.

These shoppers are also good prospects for computer stores. In Harlem, for example, residents could spend $344 million per square mile on such items as food clothing and consumer electronics--more than six times the $53 million average throughout the New York area, according to new ICIC data. Densely populated inner cities from Boston to Chicago show similarly startling retail demand. Suburbanites may have higher per-capita incomes, but the congested city neighborhoods can generate more sales volume. "The economic case is strong," says Carl E. Steidtmann, chief retail economist for PricewaterhouseCoopers. "When we present this data to our corporate clients we get this, `Wow, I could have had a V8' reaction."

So, why aren't PC makers and tech companies focusing on this underdeveloped market? Good question. The only PC maker to catch on so far is direct marketer Gateway Inc., which began a $2.5 million campaign in November to sell PCs and Internet service to Hispanics. Though it has yet to open a store in a Hispanic neighborhood, Spanish-language ads target Latin communities in Miami and Phoenix. "We saw a very large opportunity," says Theodore W. Waitt, CEO and founder of Gateway. "The Spanish-speaking population in the U.S. is in the top-10 markets worldwide, as big as the Canadian market."

Seizing the opportunity means marketing the lifestyle benefits of PCs more aggressively. Inner-city residents may become cyberfreaks when they discover that PCs are more than boring boxes. And computer marketers may find recruiting new customers a welcome change from undercutting one another to snag the same old ones. After all, the number of African Americans going online will soar from 23% this year to 40% in 2000, according to Forrester Research. Hispanic users will jump from 36% this year to 43%, while whites' usage will only climb from 34% to 44%. "Every white geek with an income of $100,000 is online," notes Larry Irving, president of Irving Information Group, a Washington technology consultant. "The low-hanging fruit has been gathered." Now, it's time to do some reaching.

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