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."
Amazon has made recent moves to bolster its Hispanic business. In March, the e-commerce giant began offering its Prime subscription in Mexico. That same month, the brand rolled out a Spanish version of its website. Visitors can toggle between English and Spanish with a simple click.
"With Amazon.com in Spanish, customers can find more of what they want," said an Amazon spokeswoman. And Amazon's influence with Hispanic shoppers is growing at a faster clip than with others, some research proves, even though the company has yet to roll out a dedicated Spanish-language campaign. In a survey last year, 17% of Hispanics said they will spend more on consumer-packaged goods on Amazon in 2017, versus 12% of non-Hispanics, according to market research firm IRI. Last year, 23% of Hispanics were shopping with Amazon at least monthly, compared with 20% of non-Hispanics, IRI found.
"Hispanics are more engaged in the entire shopping experience and have a much higher likelihood to seek out information online," explained Staci Covkin, a principal at IRI. "When we see a marketer go out of their way [with a Spanish-language site], that's when Hispanics are more likely to go to that site."
However, there is some spending uneasiness. Hispanics, as well as Asians, are more likely to postpone international travel than non-Hispanic whites because of concerns over the direction of the country, a ThinkNow survey recently found. "Nobody wants to travel and get stuck in a country where you don't live," said Carrasco.
Auto sales to Hispanics have also slowed. After outpacing the market for several years, Hispanic new car registrations fell by 3% in the first four months of 2017, while registrations to non-minority buyers were flat, according to IHS Markit. "There is a lot of skepticism, particularly around immigration and who can come over and who cannot, that has left a lot of people on edge," said Damon Lester, president of the National Association of Minority Automobile Dealers.
Other experts suggested that incidents of racist behavior within stores could affect retail sales. For instance, late last year, a video caught a white woman yelling racial slurs at Spanish-speaking JC Penney shoppers, saying they should "go back to where they belong."
"You see this played up on social media, you see it on Univision or on Telemundo," said Giovanni Villamar, managing director at Anomaly. "They cover this stuff, so I think there is a bit of a natural reaction to maybe just stay at home and do more online shopping." In some cases, undocumented residents are sending other people out to do their shopping, according to the Hispanic ad agency exec who spoke on the condition of anonymity. "Those people that are not legal, that are in fear of being exposed and going out shopping at retail, are sending family members that are legal," this person said.
The immigration debate is likely taking the biggest toll on sales along the border, said several experts. Isaac Mizrahi, co-president and chief operating officer of multicultural agency Alma and chair-elect of the Association of Hispanic Advertising Agencies, has not noticed a broad spending decline among Hispanics, but cautioned that the impact may be more severe where the population of undocumented Hispanics (by his count around 11 million) is higher.
Mexican residents could also be cutting back their cross-border shopping trips, hurting business at border-town malls. "There is a real Trump effect," Lopez Negrete said. "For a lot of people from Mexico, they are saying, 'You know what, we might not travel to the States for shopping.' I mean, they are pissed."
A woman who works at a clothing store at a mall north of the border town Brownsville, Texas, said, "They are just afraid to cross."
But the woman, who spoke on the condition that neither she nor her store be named, added that traffic overall hasn't been too bad. "We still get them," she said, referring to shoppers from across the border. "But when I first started working here, there used to be a bit more."