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Retailers: Ignore Latinos at your own peril

Sabrina Korber
16/09/2014

CNBC.com

Link to Article:  http://www.cnbc.com/id/102001171#.

For retailers, there isn't one holy grail out there they can take aim at to spark sales. Instead, it's a matter of wooing customers through multiple means, sometimes reaching out to them group by group. Among the most promising demographic in the U.S. is the Latino population, whose buying power, experts forecast, will grow to $1.5 trillion by next year.

Macy's is already hot on the trail of the Latino market and is poised to launch its "Thalia Sodi" brand, named for the Mexican singer and actress, next year. Starting Friday, the retailer will also bring together influential Latinas to celebrate Hispanic Heritage Month at a handful of stores across the country.

Consumer goods companies, such as Kraft Foods, and real estate developers are also cashing in on the trend, though experts said simply having a proposition made for and by Latinos doesn't guarantee growth. Marketing to the group, experts have found, takes extra attention—and sometimes outside strategists—to help brands communicate effectively with the culture.

"It's not as easy as translating English to Spanish. The message has to be culturally relevant," said Bill Sussman, chief executive officer of Collective Bias, which publishes user-generated content for brands' advertising campaigns.

Sussman said his firm has found success in marketing to U.S. Latinos on campaigns for Tyson Foods, Walgreen and Kraft Foods, among others, because the message from its network of social bloggers taps into the group's heritage and culture. It uses unique and organic content that Sussman said speaks directly to the needs and traditions of the targeted group, starting with food and family.

A recent campaign for Kraft macaroni and cheese around the World Cup soccer games, for example, focused on making the meal your own by adding traditional ingredients to the food, such as chorizo.

"Retailers need to be more targeted and more innovative in the messages they're sending to particular targets. It can't just be a TV spot for the general market or an in-store circular to drive traffic. Those channels aren't nearly as effective," Sussman said. "Through digital and social media we have the ability now to be more targeted and segmented in the messages we use."

With Latinos, digital and social speak volumes when the message is on point. The group, as a whole, tends to spend more time online, and 80 percent of U.S. Latino adults use social media, according to a study by Pew Research. That compares with 72 percent for the country overall.

Another study, commissioned by Unilever, showed Latino consumers share via social media five times more often than non-Latino users, and are twice as likely to purchase the products they're sharing online.

Another of the population's nuances is that Latinos in the U.S. are younger than the general population, according to a separate study by Pew based on 2010 census data. The median age for Latinos is 27, while the median age for the overall U.S. population is 37.

"Just being a young population the needs of goods and services is different. A 28-year-old has different wants and needs and specific preferences than an older individual," said José de Jesús Legaspi, founder and president of The Legaspi Co., a development and brokerage firm that caters to the Latino culture.

The evolution of marketing to this community has been gathering steam since the 2010 census, which showed the nation's Latino population grew four times faster than the total U.S. population. Retailers finally began to realize the growing prominence and spending power of the demographic, Legaspi said.

His firm has seen significant interest from mall owners looking to attract the group, which tends to spend more than non-Latinos, he said.

"There's an assumption that Latinos may not have as much disposable income, but we have shown that the Hispanic consumer base will buy 20 percent more soft goods [shoes, clothing, etc., in dollar amounts] than the non-Hispanic consumer," Legaspi said.

By catering to Latinos, Legaspi said he's been able to improve traffic trends at his shopping centers, even when occupancy and sales were falling during the depths of the recession.

"We were able to stop that and also increase foot traffic, sales per square foot, [and] occupancy, and our malls outperform a lot of other malls in the surrounding geographic areas," he said.

Jesse Tron, spokesman for the International Council of Shopping Centers trade association—which offers programs to its members on how to cater to the Latino demographic—said marketing toward the group will continue to benefit businesses if it's done right.

The proof is in the numbers. According to a recent McKinsey study, retail spending by Latino consumers will nearly double over the next 10 years to account for almost one-fifth of total retail spending.

"If you're ignoring this demographic, then you're doing it at your own peril," Sussman said. "They're going to be big, they're going to be influential, they're going to continue to be powerful and they're going to continue to spend if you reach them with the right kind of messages that show you understand their culture and their heritage."

—By CNBC's Sabrina Korber

Sabrina Korber

CNBC Producer

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