The Hispanic Market Comes of Age
One topic that’s been on my mind lately is the growing Hispanic market in the U.S., and what its clout and purchasing power will mean for retailers — and, subsequently, for retail real estate — in the years ahead. “Emerging” is probably too mild of a word to describe the Hispanic market — exploding might be more accurate.
As of 2011, the U.S. Hispanic population was just shy of 52 million (17% of the total U.S. population). That’s up from around 35 million in 2000: an eye-opening 48% increase in just 11 years. By 2060, Hispanics are projected to make up 31% of the U.S. population. We don’t have to look decades down the road to get a sense of how important and influential the Hispanic demographic is for retailers, however: In 2013, Hispanic purchasing power reached $1.2 trillion, and it is projected that the Hispanic population will account for 11% of all purchasing power by 2017. It’s also important to note that the influence of the Hispanic market is being felt everywhere. While large Hispanic markets like Los Angeles and Houston lead the way, the Hispanic market is also growing dramatically in northern markets like Minneapolis, and smaller secondary markets like Omaha, Nebraska.
What is particularly interesting to me is how various developers and retailers are adapting (and, in some cases, not adapting) to this foundational shift in the nation’s demographic makeup. In my mind there are really two broad retail shifts in response to growth in the Hispanic market. One is the continued development and redevelopment of centers designed specifically to cater to and appeal to a Hispanic audience. Most of these are smaller centers and more modest sized formats, and they tend to feature Hispanic-friendly tenants. Often, they feature mom and pop chains, which can pose a bit of an issue for developers in this space. With a comparative dearth of national brands, securing sufficient credit and financial backing can at times become problematic. Hispanic supermarkets are often a big part of these projects (Houston-based Fiesta Markets is a good example), and smaller specialty bakeries and fish and meat markets are a popular choice.
The other significant trend to mention are the steps that national chains are taking to improve their standing and boost their appeal. While some brands — JoAnn Fabrics, Family Dollar, Ulta Beauty — have established themselves as effective co-tenants within a strong Hispanic market, many chain stores have never had an easy time appealing to minority communities. It’s actually far easier to list those chains that have been able to transcend ethnic, cultural and racial lines more effectively than others. MAC Cosmetics has been successful, as have Bebe, Charming Charlie, Forever 21 and Coach.
Compare the broad appeal of those brands to the limited cultural appeal of brands like Abercrombie & Fitch and American Eagle Outfitters. In cases where the appeal to Hispanic shoppers falls short, I see the most glaring failure on the merchandising side, which often reflects an inability or an unwillingness to understand, prioritize and address the needs of this market.
While some retailers are expanding their profile in the Hispanic community, it seems clear that (as of today, at least) the Hispanic population in the U.S. is currently growing at a much faster rate than the retail and retail real estate industries are adapting. There are some bright spots, however. Wal-Mart spent $66.6 million on advertising to Hispanic consumers in 2010, and they projected that they will increase that investment by 100% in 2014. Ram Trucks and Pepsi have both recently tapped Hispanic celebrities for big marketing campaigns. I expect to see more of this — much more of this — from a much broader range of national brands in the years ahead. I also expect to see more attention paid to the kinds of retail experiences and environments that Hispanic shoppers enjoy.
For myself, considering how fast the Hispanic market is growing, and as influential as it is now and will be in the future, I honestly don’t think retailers really have a choice in the matter. If they want to be competitive in the retail landscape of the not-too-distant future, the Hispanic market is a critically important piece of the puzzle.
I’d love to hear your thoughts on the matter — especially any examples you have personally witnessed of brands or stores engaging in Hispanic commercial outreach. What brands do you see making smart choices to expand their appeal? How have shifting demographics driven retail real estate trends in your area? Share your comments below or email me: [email protected].
Click here for past columns by Jeff Green.