Hispanics, a growing market

Posted on January 5, 2012 By Susana G. Baumann Business

Hispanic market buying power was expected to reach 500 billion. (AP Photo/Jae C. Hong, File)

Back in 2000, the U.S. Census was an eye-opener for many companies and corporations as well as advertising agencies and media. At that time, 38 million people were counted as Latinos, and the Hispanic market buying power was expected to reach 500 billion.

Ten years later, the U.S. Census Bureau reported that out of a population of almost 309 million, 16.3 percent –or over 50 million– was Latino or Hispanic. The reaction, as always, was that of panic and alarm. Hispanic advertising agencies received phone calls from their clients to “do more,” rushing campaigns to increase exposure, and then everything goes back to normal. But, is it worth to target the Latino market in the U.S.?

The reality of the numbers

Despite a Pew Hispanic Center new report stating that median household wealth among Hispanics fell from $18,359 in 2005 to $6,325 in 2009 –a scary 66 percent plunge compared to only 16 percent among white households-, the Latino market is still considered one of the fastest growing markets.

Moreover, their buying power is expected to grow according to other sources, such as the Selig Center for Economic Growth at the University Of Georgia Terry College Of Business. Latinos´ buying power has increased 108 percent in the past decade –around 7.5 percent or more than twice as fast as the buying power of the general population– reaching around $1 trillion in 2010, and forecasted to reach $1.5 trillion in 2015.

You might ask how it is possible that, having lost 66 percent of their median income, Latinos´ purchasing power is strengthening.  Population growth is one of the reasons, but not the only one. Other factors are early and full employment, closing the educational gap, a changing occupational structure, and shifting consumption and financial behaviors.

Considering that native-born Latino population growth was larger than Latino population growth due to immigration, Hispanics are rapidly acculturating to the U.S. general market trends. Second and third generations are now responsible for making purchasing decisions and they do not want to fall behind their American peers’ trends. An increase in spending on technology and transportation are just some of the consumer market trends Latinos are tapping into.

The expansion in second and third generation of native-born Latinos also helped to change the Hispanic landscape in terms of college enrollment. At the beginning of the 2010 school year, 12.2 million Latinos from 18 to 24 years of age were enrolled in school, according to the Pew Hispanic Center. One of the reasons, the report says, is that a greater number of Hispanic youths have graduated from high school, and are eligible for college.

Although almost 25 percent of the Latino population has fallen below poverty levels, the Latino middle and upper-class household income has increased. According to the National Latino Education Institute, more acculturated Latinos also follow national trends in financial planning by diversifying their portfolios, increasing their assets and investing in homeownership.

For less acculturated and foreign born Latinos, saving habits and a more moderate consumption behavior –Latinos tend to use more cash and less credit- also influences the way income is distributed in the household. In addition, a younger Latino population –average of 35 years old- are starting their work life at a younger age compared to white youth, contributing to the household income from an early age. Latinos also tend to do any type of work to make ends meet, depend less on welfare and more on family and community ties.

Since 2008, nearly 13 percent of new jobs held by Latinos were lost in the economic upheaval; however, self-employment is a growing alternative to private sector employment among Hispanics. According to the most recent Census Bureau Survey of Business Owners, Hispanic-owned businesses expanded at nearly twice the rate of the national average between 2002 and 2007, and the trend continues. Nearly 2 million businesses were owned by U.S. Hispanics with a total revenue of $273.8 billion. These figures are expected to grow to 3.2 million and $465.6 billion, respectively, according to the Selig report.

Either as consumers, clients or part of your workforce, you need to consider the growing buying power of Latinos if you want to establish your company within a market that cannot be ignored. Latinos are well-known for brand name loyalty but you have to gain their trust, and that is… another story.

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  • Victor

    There are a lot of great data points in your piece that point to the Latino manifestation of a total US national issue: income inequality. What happens in the economy and how the country addresses this huge issue in coming months will have a profound and lasting effect on what the plateau of normalcy will be and what consumer behaviors will evolve or become permanent as a result of the new normal. Some economists suggest that volatility and turbulence will be the new normal. Latinos will certainly not be imune to these matters.

    One aspect of what you put forth in this piece that I would challenge and open up for debate is the notion that Latinos are merely acculturating and becoming more a like to mainstream. Consistently in research we find that Latinos are carving a new end state in the process of “acculturation.” A new end state that is not a linear “from/to”. A new end state that also demonstrates that Latinos are influencing new standards of mainstream. At 50 million, Latinos are the size of a large nation. I make the analogy of how powdered ice tea is made in a big jar. If in a big jar of water you drop in a table spoon of ice tea mix, the water will dissolve it with minimal consequence to taste or appearance, for all practical purposes you still have water – one could say that the table spoon “acculturated.” But drop in a little over a scoop size and now you may not have full on ice tea, but the water certainly changes color and taste because the mix is of sufficient to provoke change in the water, you in effect no longer have water. In the US today, the Latino community have made it so we no longer have water. Consider that Latinos are “ice tea mix” that came both from outside and inside the “water.” So in short, I challenge the notion that Latinos are acculturating and merely conforming to the water. That may have been the case in the 80s and 90s, but 2020 and beyond is a whole new game in terms of the cultural impact and identity definition of the Latino community in the US.

  • http://voxxi.com/category/business/ Susana G. Baumann

    Thanks, Victor, for a thoughtful response. It has definitely prompted an idea for an additional article, in which I need to clarify the terms I used. For now, I would just transcribe what I have written on my book ¡Hola amigos! A Plan for Latino Outreach (p. 2), which explains the same concepts we are discussing about.

    Here it goes: “As Latinos enhance the social and economic fabric of this society, deep cultural transformations take place, not only in the way this community inserts itself into the host culture but also in the way the host culture reacts to this insertion. Feared by some, welcomed by others, Latinos have created the largest cultural impact in the history of the United States. This cultural impact assumes a variety of modalities and has a different dynamic, more than any other wave of immigration to this country. This process, defined in terms of acculturation or acculturative process, refers to the degree Latinos are influenced by mainstream American culture almost immediately upon arrival (Ainslie 2002).
    The term acculturation has been used to describe the changes that result from the contact of two cultures, the result of such changes (Kottak and Kozaitis, 1999), and the dynamics between immigrant populations and the host culture that receives them (Bourhis et al. 1996). Although ambiguous, this term has been used, redefined, and adapted to a variety of disciplines, such as anthropology, psychology, sociology, literature, and, lately, marketing. In this context, I will use the term acculturation to name the interchange of influence between two cultures without a subordination of one another, a definition that has also been called biculturalism or multiculturalism (LaFromboise, Coleman, and Gerton 1993). When one of the cultures becomes dominant, I use the term assimilation, which has also been defined as incorporation or fusion (Berry 1998).
    In terms of understanding acculturation as the result of cultural adaptation from one culture to another, I also support the term transculturation (Ortiz 1983), a two-way exchange of cultural characteristics that develops new configurations in both cultures. The changes in Latino marketing paradigms in the last decade are a living proof of this theory (Korzenny and Korzenny 2005).”
    I have to agree that in the 80s and the 90s, not Latinos but some advertising agencies were more invested in defining Latinos as a monolithic community: all Hispanics had the same values and behaviors, spoke either English or Spanish, were rich or poor, etc. History has shown, as you point out and I agree, that we are all but a black or white community, and that all color gradients and flavors are present in our vibrant culture. As you said, all shades of ice tea, some with lemon, some with sugar…

    • Anonymous

      It is very interesting reading and learning in detail about a group of people in our country. Normally there are statistics in articles and does not make one think in detail. It is very important to emotionally realize the difficuties and joys of people . The more we learn, the more we can help and benefit this populaion.

  • http://voxxi.com/category/business/ Susana G. Baumann

    Thank you, Anonymous! I like the idea of writing more about real life with the statistics that go with it. I also thank you for your willingness to help and benefit Latinos – I assume you are not- as Latinos contribute to make all our lives better every day. :)

  • nora catelli

    Leído desde España, este interesante artículo adquiere importantes resonancias, ya que en este momento de crisis europea es posible que empiece a existir un flujo de emigración española hacia Estados Unidos. ¿Cómo sería incluído este contingente en los censos; qué variaciones en expectativas académicas y laborales podría marcar? Me alegro de encontrar contribuiciones al análisis de sectores de población específica tan precisos y documentados como este de Susana G. Baumann.

  • http://voxxi.com/category/business/ Susana G. Baumann

    Gracias por tu comentario. No sólo se ve esta tendencia en la inmigración -que puede plantear ciertos obstáculos- pero vemos una gran cantidad de escritores, bloggeros y contribuyentes a revistas online y websites provenientes de España debido a la crisis económica. Será interesante observar esta tendencia y ver como los españoles se adaptan al mercado laboral estadounidense, que es bastante distinto en términos de demanda, exigencia y compensación.