Abacus: The Impact of Hispanic Consumers on the Market
Throughout the last few decades, America has undergone a dramatic and transformative demographic shift, with Hispanics contributing greatly to this change. Today, Hispanics now consist of 17 percent of the population, nearly doubling since the year 1990 when they composed of just 9 percent of U.S. citizens. No other demographic group in the United States has seen this type of growth, thus begging the question, “how will the identity of the United States change with the inevitable and continued increase of the Hispanic population?”
Thru most of its history, the United States has largely been influenced by Caucasians in many different respects, ranging from culture to politics and even the economy. Though other groups have helped mold and shape the many facets of the American socio-economic sphere, it is unequivocal to state that whites have largely dominated in this regard.
While the population is still mostly white and will remain that way for at least the next couple of decades, many people are still trying to grasp and understand what the increase in the population of Hispanics and other minorities will mean for the United States. Look no further than my crystal ball to find the answers. Okay, I don’t actually have a crystal ball, but bear with me here. My budget doesn’t allow me to purchase a shiny, new crystal ball so instead I am going to transcribe everything onto this column.
One of the most obvious implications, due to the sustained increase of the Latino population in America, is the soon to be changed dynamic of the national economy. For example, data from the Nielsen corporation reveals that the growth of Hispanic buying power from the year 2010 to the year 2015 to be roughly at 50 percent. To put this into numerical terms, Hispanic purchasing power has increased from $1 trillion to $1.5 trillion in less than 5 years. Even with my limited knowledge of how the economy operates, I am supremely confident in saying that Hispanics have now become a major economic driving force based on the fact that the United States economy is approximately 70 percent consumer based.
Given that the spotlight is now firmly placed on the Hispanic consumer, many large corporations across the United States are beginning to pay close attention. They understand that there is a vast amount of untapped potential in the pockets of Hispanics. Yes, that sounded incredibly exploitative, but that’s capitalism for you. Either way, companies must now come to the realization that they no longer just catering to the Caucasian demographic as their primary consumers, rather, they must now concoct an alternative plan to successfully attract the Hispanic buyer. What works for one group may not work for the other.
Looking at demographic statistics and analyses, it is said that “60 percent of the U.S. Hispanic population is under the of age 35, and 75 percent is under the age of 45.” The most active consumers and contributors to the economy, not surprisingly, lie right in the middle of this range. As a result, IBISWorld, a leading research company that analyzes industry trends, says that there are seven sectors of the economy that companies should be focusing on if they want to attract the Latino population. They say we should look at residential buying, food (grocery and restaurants), retail (clothing and electronics), education (higher education and technical schools), financial services, transportation (automotive and airline), and entertainment and media industries.
Entrepreneurs and CEOs looking to understand the spending habits and proclivities of the Hispanic consumer should look no further than Texas, Florida, California, Colorado, and New Mexico, where the highest concentrations of Hispanics exist. For a company looking to reach its full market potential, these states provide a fertile ground for potential buyers. It would definitely be much wiser for a company to invest in these states rather than West Virginia, for example, where the growth potential for Hispanics is far lower.
Looking at the typical consumption patterns of Hispanics in America, it is stated that “Hispanics tend to shop less often, but spend more per trip, and are less likely to buy products at promotional prices.” While this statement may seem relatively innocuous, it presents a challenge to business owners. It forces them to create a stronger connection between the consumer and the place of retail because fewer trips mean less money being spent which then equates to less revenue being generated. The idea is to develop a stronger connection to the Hispanic consumer to draw them back into the store, thus creating more opportunities where the buyer would spend more money.
So, it is clear that companies need to do a better job of developing and fostering connections to their consumers if they seek increased business. How can they do such a thing? Well, when in doubt use advertising. While many of us detest advertising for ruining T.V. and the internet in an unholy fashion, it is still wholly effective in bringing potential consumers to the market. Why else would companies spend billions of dollars on it?
It is said that major companies are spending around $5.7 billion dollars on Spanish advertisement in hopes of reaching out to the Hispanic consumer base. While the impact of advertisement on the Hispanic population is just as significant as it would be for any group, there are certain stipulations. Hispanics, for example, enjoy ads 51 percent more when the language is in Spanish rather than English. In addition, when the ad is performed in Spanish, the person who watched the ad is 30 percent more likely to recall the product that was being advertised. Companies must be cognizant of the subtle cultural differences and tendencies of Hispanics if they want to succeed.
In terms of actual products, let’s take a look at the compounded annual growth rate percentages of beverages in the United States by demographic. The chart below shows that when it comes to tea, spirits/wines, coffee, non-carbonated drinks, juice, and carbonated drinks, Hispanics are drivers of growth. Why are beverages so important? Well, they aren’t that important, but singling out specific industries allows us to evaluate the impact that Hispanics can have on the economy as a collective. We see that Hispanics can be both the catalyst and the brake to the potential growth of a product or industry.
While Hispanics may have been viewed as insignificant in the past, this is certainly not the case today. Today, Hispanics are both influential in politics and the economy, driving the decision-making processes far more than anyone could have anticipated even just two decades ago. For companies looking to grow, this is particularly beneficial because it provides a great opportunity for new found market growth. Considering Hispanics are only going to continue to grow in numbers in the foreseeable future, both in population and economic terms, it would be insane to ignore the potential economic gains from tapping into this growing demographic. Hispanics will be the future driver of growth in the United States and it is about time we, as Americans, realize this and understand just how important it is to live in this period of history.