Donald Trump's anti-Mexican rhetoric might be dampening retail sales in border towns. But across America, Hispanic consumer spending is not about to fall off a cliff. It's just headed to Amazon.
The shopping habits of the fast-growing demographic are under new scrutiny following recent comments by Target CEO Brian Cornell that Hispanic consumers are "shopping much less" and "staying at home," a behavior he chalked up to a "cocooning factor." But while there is evidence of a slowdown in foot traffic across retail—especially along border towns due to immigration crackdown fears—the larger problem for big retailers like Target is a migration to Amazon, which is taking its own steps to attract the group.
"Latinos are not backing off" from spending, said Alex Lopez Negrete, president and CEO of Hispanic agency Lopez Negrete Communications, whose clients include Walmart. "The impact of e-commerce is absolutely undeniable." Another Hispanic ad agency executive, speaking on the condition of anonymity, called the notion of a slowdown "unfounded."
"All retail is off, period," the executive said, citing the Amazon effect. "The entire retail industry has been turned on its head."
Any shift in Hispanic buying habits will profoundly affect brands that keep spending more money to lure the coveted demographic. The buying power of the nation's 57 million Hispanics reached $1.4 trillion in 2016, or 10% of the U.S. total, according to Nielsen. It is expected to grow to $1.8 trillion by 2021. The 50 marketers that spent the most on Hispanic media shelled out $3.8 billion in measured media in 2015, up 2.6% from the year prior, according to the latest tally by Ad Age Datacenter.
Big retail marketers including Walmart and Kohl's have dedicated resources to their efforts, erecting Spanish signage in stores, while Target recently debuted its first Spanish-language back-to-school commercial. Target increased its Hispanic ad spend by 20% last year and plans to maintain the same level this year. "We recognize the importance of the Hispanic community here in the U.S.," a Target spokesman said, noting cultural connections like the brand's sponsorship of the Billboard Latin Music Awards. "We're really invested in getting to better understand this guest and in deepening our relationship with them."
The investment hikes are why Cornell's comments about a potential slowdown have drawn so much attention. In his talk July 18 at a tech conference in Aspen, Colo., he alluded to an 11% drop in shopping visits by Spanish-dominant households in November and December compared with the prior year, as tracked by market researcher NPD Group. But the statistic does not take into account e-commerce, which is steadily drawing more Hispanic dollars. Traffic to the Spanish e-commerce sites of a sample of U.S. businesses grew by 225% in the first six months of 2017 compared with the year-earlier period, according to data from MotionPoint, a 17-year-old technology company that helps with translation services for e-commerce sites.
"Hispanics are a younger demographic," said Mario Carrasco, co-founder and principal of Los Angeles-based ThinkNow Research, a Hispanic-focused market research firm, noting that a quarter of millennials are Hispanic. "They're more likely to buy stuff online. It's not that they're afraid to go outside."