Let's kick it up a notch - vertical integration in African American businesses - Brief Article

Black Enterprise, April, 2001 by Feona Sharhran Huff

African American businesses embrace the practice of vertical integration

A&B Books is among a growing number of African American businesses that have begun to embrace and practice vertical integration, says Claud Anderson, Ph.D., author of the forthcoming book PowerNomics: The National Plan to Empower Black America (PowerNomics Corp. of America, 2001) and president of the Harvest Institute, a Washington, D.C.-based black think tank.

According to Dr. Anderson, whose seafood company, PowerNomics Enterprises Corp., is listed on the New York Stock Exchange, vertical integration is a must-have as a power and survival tool, and urges those African American business owners who haven't caught on to do so. Anderson, whose publishing company, PowerNomics Corp. of America, vertically integrated more than eight years ago, affirms that the adoption of this business practice will afford entrepreneurs the chance to ultimately control their market.

However, he argues that vertical integration won't work unless people "ethno-aggregate" [a term he recently coined that means concentrating one's resources]. "You must know how to control everything from the bottom to the top. This can only be done in those areas where you have a decided, noticeable competitive advantage, and African Americans have that advantage in areas such as the retail, leather, and seafood industries," he says. "Blacks consume three to four times more seafood than other groups, yet for every $9 that we spend, others are spending $1. We have to be able to control that industry from the boat to the throat," says Anderson.

Five years ago, Eric Gift made a business move that helped to expand his company's capabilities and increase his revenues by $1.5 million. In 1995, Gift, CEO of A&B Books, a New York-based family-owned retail bookstore and distributor, ventured into book publishing for the first time.

"A lot of people would come into the store asking how they could get their books published," Gift recalls. He immediately saw this as an opportunity to offer an additional service that would make A&B Books even more marketable, satisfy the requests of novice authors, and keep his business thriving for future family members to one day run.

To date, Gift has published over 200 titles, increasing sales to $3 million in 2000. The latest publication, Baggage Check by Curtis Bunn, is a novel devoted to deciphering male and female relationships as told by three 30-something African American men.

Every phase of A&B's operation takes place on company grounds, from employing a publicist to soliciting authors and editors to distributing books.

In analyzing A&B Books, Dr. Anderson points out that Gift is beginning to master his market's competitive edge. As a result of having total autonomy over who he publishes and where the books are distributed, Gift is able to control pricing, marketing, and with whom he does business.

An additional aspect of vertical integration that Dr. Anderson says African American businesses unfortunately have not yet tapped into--but is crucial to the community--is doing business with other African Americans.

"This," he says, "is how the race can build an economic empire and keep resources in the African American community." Instead of opening up additional beauty salons, says Dr. Anderson, "you should patronize the ones already established and encourage the owners to buy their supplies solely from you. At that point, you can set up your distribution company. The Koreans have done it with the nail and hair business. Arabians do it in the oil industry. We are ostensibly the only people who don't pool our resources together."

Once this is accomplished, Dr. Anderson says, African American businesses will have truly embraced the principles behind vertical integration.