Are Hispanic Consumers Avoiding Stores?

Data signals significant downturn in recent months

Author: Andria Cheng

July 20, 2017

Add this to the retail worry list: There are signs that Hispanic consumers, dubbed the “new mainstream” by some, may be changing their spending behavior amid shifting immigration enforcement policy in the US.

In the year ended March 2017, total per-capita Hispanic consumer visits to US restaurants declined 5% to 177, compared to no change at 190 visits per capita for Non-Hispanic consumers during the same period, according to NPD Group’s CREST Hispanic foodservice tracking research, which measures actual restaurant visits.

Meanwhile, in another area of NPD research, analyst Matt Powell, who specializes in the athletic shoe and the general sports industry, began some investigative digging when he noticed that sales failed to pick up as had been expected in wake of a delayed tax refund and this year's late Easter. 

Here’s what he found from analyzing NPD’s consumer panel data, which tracks 2.5 million consumers in how they spend. While athletic and outdoor shoe sales to Hispanics had “good years” in 2015 and 2016, when sales were up “in the mid-teens” rate and outperformed other demographics, this group saw a sales drop in the “high-teens” rate so far this year through May, faring much worse than the other consumer segments.

I’ve never seen anything change this dramatically in such a short period of time.

“I’ve never seen anything change this dramatically in such a short period of time,” said Powell, an industry veteran with over 40 years of experience. “It’s nothing short of amazing.”

In an interview with eMarketer Retail, Powell said he is “reluctant to suspect” reasons behind the change. He said that across many categories NPD studies, a Hispanic consumer pullback also has been observed, albeit not as dramatic as what he’s seen on the athletic footwear side. Hispanic consumer spending as a percentage of the athletic footwear industry sales dropped to 20% of year-to-date industrywide sales from 23% of 2016 sales, he said, adding that this group’s pullback hurt brands including Vans, Nike, Skechers and Nike’s Brand Jordan.

Overall, Hispanic consumer visits to physical stores in the US declined 11% in November and December 2016 from the same period a year earlier, NPD data showed. The research firm said it doesn’t have any more current data.

“If there’s one thing that’s concerning to me and should be concerning to a lot of us (in the industry) is the recognition that over the last few months, the Hispanic consumer in the US is shopping much less,” Target CEO Brian Cornell said this week at Fortune’s Brainstorm Tech Conference. “There’s almost a cocooning factor. They are staying at home. They are going out less often. Particularly along border towns in the US, you are seeing a change in behavior. We are spending a lot of time thinking about how do we connect with that Hispanic guest and how do we address some of the concerns they have. We’ve seen a significant change as everyone in retail has with the way the Hispanic consumer in the United States is shopping in 2017.”

Hispanic consumers have been a key focus for retailers from Target to JC Penney. Nike last year designed a limited sneaker line in honor of the Latino Heritage Month. For this year’s back-to-school campaign, for instance, Target commercials are available in English and Spanish. “We continue to see the Hispanic consumer being a very important part of our future,” Cornell said at the conference. “We have a great relationship with Hispanic families and we are continuing to invest.”

While Hispanic consumers historically tend to be more optimistic than the overall US adult groups about the US economy and they’ve also traditionally spent more than other populations per household, the group hasn’t “seen the acceleration in confidence that’s consistent with the overall population” since the election, Pam Goodfellow, director of consumer insights at consumer research firm Prosper Insights & Analytics, told eMarketer Retail. 

Prosper Insights’ monthly survey of 7,000 consumers also found that between April and June, the percentage of Hispanic consumers indicating they’ve been “more practical and realistic” in their purchases also saw a “significant percentage rise,” Goodfellow said. In comparison, the survey didn't find “significant fluctuation” among the general population, she said.

Hispanic consumers are thinking twice about making purchases. 

“That’s a signal (Hispanic consumers) are more conservative and less likely to make impulse purchases,” she said in the interview. “They are thinking twice about making purchases. There’s something there that’s prompted them to think more practically….You can really infer about the politics and how it might affect their mindset.”

Nielsen projects that Hispanic buying power will rise to $1.8 trillion by 2021 from $1.4 trillion in 2016.

A pullback by Hispanic shoppers could have an outsized effect on the apparel market and on brick-and-mortar retailers. A report published late last year by the National Sporting Goods Association in partnership with Hispanic market research firm Culturati Research and Consulting, found that Hispanics enjoy shopping often as a social activity, especially for categories like sporting goods, and see shopping as “an opportunity to reap the rewards of hard work.”

For instance, 57% of the Hispanic shoppers said they “think shopping is a great way to relax,” versus 46% for non-Hispanics. Meanwhile, the study's consumer survey found 46% of Hispanics said they work hard so they “deserve to treat” themselves to nice things instead of saving, versus 33% of non-Hispanics who said so.

“Hispanic shoppers are more likely than non-Hispanics to view shopping as fun and to give in to the occasional splurge as a way to treat or reward themselves and their families,” the NSGA report said. “Shopping trips are often enjoyed as part of a family activity and reflect the importance of connectedness as a core Hispanic value.”

Hispanic consumers also skew much higher than other groups when it comes to shopping in physical stores for non-essential categories including shoes, clothing, home décor, sporting goods and electronics, Prosper Insights’ survey data showed.

For instance, in its July consumer survey this year, 65% of Hispanic consumers said they’ve shopped apparel and accessories in a brick-and-mortar store in the past 30 days, compared to 57.4% for overall adults 18 and older. That’s not to say they don’t buy online: the percentage of Hispanic consumers shopping online via desktops or mobile also is higher in several categories such as shoes and electronics, according to the survey.

“They are still visiting retailers for the experience of it” when it comes to discretionary categories, Goodfellow said. “When you look at any traditional retailers, foot traffic is a big issue. Any time you can identify a segment that’s willing to visit a physical store and still enjoys doing that, that’s a win for retailers and a demographic worth looking at.”

Photo credit: Flickr