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.