RetailWire Discussion: BrainTrust Query: How is the recession changing Hispanics as consumers?

By David Morse and Maria Gracia Inglessis, New American Dimensions, LLC

How is the economy affecting the Hispanic market? The answer, at this time, may be inconclusive. In a recent article by Terry Soto, president & CEO of About Marketing Solutions, she cites data from Experian and concludes that Hispanics may be "recession proof" or at least "recession aloof." For example, 34 percent of Hispanics are optimistic about their finances in the coming year (compared to 25 percent of non-Hispanics), and 29 percent of Hispanics are more positive about the U.S economy (compared to 21 percent of non-Hispanics).

Hispanics may also be less burdened with financial difficulties because they are not as involved in some of the most problematic areas. According to Packaged Facts' analysis of Experian Simmons Summer 2008 National Consumer Survey data, 46 percent of Hispanics use credit cards compared to 72 percent among non-Hispanics, and only 15 percent of Hispanics own investments (compared to 43 percent of non-Hispanics). The Simmons data also highlight that Hispanics are more likely to rent their homes than non-Hispanics. This makes them less likely to be affected by the mortgage foreclosure.

There are some categories in which Hispanics are spending more than their non-Hispanic counterparts. According to the Packaged Fact Study, Hispanics spend more in:

Food at home (8.3 percent vs. 6.8 percent - of total annual expenditure)
Poultry (0.5 percent vs. 0.3 percent)
Fresh vegetables (0.6 percent vs. 0.4 percent)

That Hispanics spend more in food is not surprising. They have bigger households and like to cook from scratch. But interestingly enough they are also spending more in less expected areas, for example, in apparel and services (4.8 percent vs. 3.7 percent). What is more, Hispanic men are more likely to keep up with the latest fashion (25 percent vs. 17 percent). Also...

They like to experiment with new styles (26 percent vs. 14 percent)
Buy the latest fashion every season (17 percent vs. seven percent)
Enjoy any kind of shopping (28 percent vs. 13 percent)

More Hispanics say they buy recycled paper products (men 40 percent vs. 34 percent and women 45 percent vs. 39 percent). Also, Hispanics are more likely to claim that they would pay more for environmental friendly products (men 42 percent vs. 35 percent and women 47 percent vs. 40 percent).

But additional data from the Nielsen Homescan Hispanic Panel present a less positive view on how Hispanics perceive that the current downturn is affecting their lives. The data show that about half of Hispanics feel that their household is somewhat or much worse financially now than a year ago, and 37 percent feel that their or their spouse's job is not too secure or not secure at all. More than 70 percent feel that their level of savings to deal with potential disasters is not secure.

According to this study, not only do Hispanics have a less positive outlook, they have changed some of their consumer habits; for example, in the past three months they are eating at fast food restaurants less often (64 percent vs. 47.9 percent of non-Hispanics), and close to 45 percent are bringing lunch to work more often (compared to 36 percent of non-Hispanics).

Discussion Questions: Based on the data that's been cited, what advice would you have for marketers trying to reach Hispanic consumers at this time? What surprises you most - and least - about the data?

[Authors' Commentary] It is only natural to think that Latinos are feeling the effects of the global recession. On the other hand, it is also true that they are mentally and socially well equipped to go through economic difficulties. Their philosophy of living within their means, and staying away from credit is working as a buffer for their finances. They can also rely on their families and friends to create support networks. Finally, let's not forget that for many of them this is not the first time they've face economic difficulties. Most likely, Hispanics who grew up in Latin America have lived through economic hardships in their countries. Many of them came to the U.S. having very little, but with the determination for a better life. That aspiration does not seem to be changing. But to answer the question of how the recession is changing Hispanics as consumers, marketers need to keep their eyes open. The opportunities may arise from less expected categories such as green products and men's fashion.

The Hispanic (Latino) Market in the U.S.A.: Generational View, 7th Edition - Packaged Facts

Comments:

One thing that stands out to me recently was the issue of credit. The Hispanic gentleman who is completing a large landscaping project for me owns his own company and hires and runs his own crews yet he doesn't have credit. That makes it much more cumbersome for him since he has to have cash to pay for equipment and supplies up-front; the customer's front-end half payment gets eaten up by these costs and the back-end, more profitable piece is delayed (and could be denied if someone was playing hard ball about how the job was done).

You think about the obvious ways that the housing market has impacted retail in the home improvement area...I was speaking with someone just last night who confirmed that the men's workwear category is also suffering for the same reason. How can retailers make it easier for Hispanics to get credit and for the "un-banked" to run businesses and manage cash flow?

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Carol Spieckerman, President, newmarketbuilders

Well, before I pile on about Carol's landscaping project (I think I can relate just a little, living here in Los Angeles), I think there are several positives here for the Hispanic market. Since the majority has not relied upon credit, they are used to actually managing their money better than other groups. They will continue to grow in population at a faster rate and also continue to weather the economic storm better than other groups.

This is all goodness for retailers and CPGers alike. The Hispanic Market has a consistent ability to buy FMCCs and take advantage of the buyers' market that exists today.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

What is emerging in Hispanic marketing is the recognition of the Acculturated vs. the Unacculturated Hispanic; they really cannot be lumped together if one seeks a realistic picture of Hispanics in the U.S. What makes the difference (without going into more specifics) is if they've been educated in the U.S., among numerous other benchmarks. The point is that each of these groups consumes and behaves differently from the other. Providing statistics based on each separate group may yield different information of how the recession is changing Hispanics as consumers. A marketer needs to understand exactly what part of the Hispanic market is to be targeted if the customers are to be served correctly.

Bonnie Rubinow, President, Adelante Marketing Consulting

Interesting information. Much of it old news but its good review material. A lot can be learned from studying the economies of other Hispanic countries, particularly in South America. Unemployment is never a problem because everyone works. Often there are no social program safety nets therefore Hispanic people are forced to accept whatever employment they can find or create. While credit is not a big factor, the cash economy is. Products priced for the cash customer will be in more demand than for the credit customer. For example, a new small car for $15,000 cash will be more in demand than a $40,000 car for the credit customer.

I really thought Hispanics would view our economy in a more positive light. What most of us consider a bad economy looks pretty good compared to the economies south of the border. If that were not true we would have people trying to break into Mexico rather than go on vacation there.

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David Livingston, Principal, DJL Research

Interesting article, most of the statistics are somewhat old, yet it is interesting the more positive nature of Hispanics in the US is not that surprising. Hispanics tend to have a larger extended family and rely on them for assistance in times of economic downturn. They also live way below their means (typically) and send a good percentage of their income to their country of origin. They view it a privilege to be able to live in the US and their duty to support those who cannot.

It is amazing to me that "American Dream" or aspiration thereof seem to be much closer to the recent immigrant than to those who have lived here for longer periods of time.

Mark Johnson, President and CEO, Loyalty 360

Nothing surprises me about the data and implications. We addressed this issue on my company's website on April 14, 2009.

My advice to any marketers is to follow proper marketing disciplines when addressing the Hispanic consumer segment. Learn of your brand's relationship with the Hispanic consumer. The aforementioned is more relevant to your marketing programs and it often transcends the "acculturation" issues which often sends marketers in the wrong direction.

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Carlos Arámbula, Managing Partner, Arámbula-Phillips Communications, Inc.

Some of the statistics about Hispanics have little to do with Hispanics: they're applicable to other folks with lower incomes, too. It should not be surprising that a group with lower than average earnings spends higher percentages of its income on necessities such as clothing and groceries. And lower income people can't get as much credit as their richer counterparts, so they can't use credit as much. Since the Packaged Facts report is $3,850, for that price it ought to have some major surprises.

Mark Lilien, Consultant, Retail Technology Group

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BrainTrust Query: How is the recession changing Hispanics as consumers?

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