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Growing Store Brand Loyalty: Hispanic-Americans as a Target Market

The recently released U.S. Census data shows Hispanic population in the U.S. to be 50.5 million. This segment has grown by approximately 30 percent since 2000.

by Dr. Sri Beldona
Associate Professor, University of Dallas
Research Consultant Marketing Management Inc. (MMI)

The recently released U.S. Census data shows Hispanic population in the U.S. to be 50.5 million. This segment has grown by approximately 30 percent since 2000. This is by far the fastest growing ethnic segment in the U.S. and today accounts for 15.8 percent of the total population—a good 3 percent more than the African American segment. It is crucial for retailers to make strides to engage Hispanic consumers through strategic marketing and merchandising plans targeting their enormous U.S. spending power, which is estimated to reach $1.3 trillion by 2013.

A retailer’s private brand assortment of products may not be designed for a specific ethnic demographic, but merchandising and promotion may be tools that can help target these shoppers and build brand equity among them. The most influential ethnic demographic is the growing Hispanic-American shopper, which typically includes Spanish-speaking people. Spanish-speaking people are further broken down into sub-groups from Spain, Mexico, the Caribbean, Central and South America, and other Spanish-speaking countries. And among these sub-groups of Hispanic-American shoppers, each has very different shopping behaviors and preferences. But is tailoring a merchandising program to this growing segment really important and something retailers need to be ­concerned about?

For starters, Hispanic population in the country is now the ­second largest segment next only to Caucasians and is expected to grow more rapidly in the coming years. Secondly, this segment has a tremendous influence on our grocery marketplace. Estimates for year 2013 call for a total of $1.3 trillion in spending power by the Hispanic segment, a market that should not be taken lightly by any retailer. When such numbers are coupled with the population growth (29 percent of the U.S. population by 2050) it is easy to see why the Hispanic segment should be an integral component of a retailer’s broader strategy.

Understanding the differences in the shopping patterns may create opportunities to expand the value of the store brand in this growing segment. Prior research by companies such as Unilever have identified the key drivers of this market. The most notable of them are:

  • Low prices
  • Food ideas offered by stores
  • Unique/different items offered
  • Easy finding of items
  • Store layout

Similarly, the Hispanic shopping basket also was found to be driven by the following broad categories in order of ­importance:

  • Produce
  • Beverage
  • Dairy
  • Breadstuffs
  • Meat
  • Dry goods

One aspect that is unique to the Hispanic segment is their attitude towards store brands. On an average, store brands constituted 37 percent of their shopping basket compared to 25 percent of the national average.

While this information is valuable and much has been written about it in the past, the recent census figures have thrown a ­renewed spotlight on this segment. So what do these numbers and shopping behavior mean to a retailer? How should a retailer ­market and merchandise their products to cater to this rapidly growing and influential market segment?

Taking into consideration the findings of prior research, a ­retailer who wants to appeal to the Hispanic segment needs to have a strategy that at the least encompasses EDLP, in-store demos to entice product trials, bilingual store danglers/signage, bilingual in-store flyers, bilingual in-store announcements, etc. While the above components of a strategy are vital, they are not sufficient in giving a mass appeal and enticing Hispanic shopper. For retailers who want to go after this expanding segment, it might even make sense to have a designated day in the week that has a Hispanic ethnic note to it. In other words, having key end-of-aisle displays with Hispanic foods, stocking extra ethnic fresh produce, having a designated area within the store for in-store demos that have the ethnic note would be critical. Retailers who want to embrace this growing segment might also do well to introduce retailer-own brands in specific categories where there are very noticeable taste differences; for example, salsas, species, marinades, sauces, beans, tortillas, desserts, etc.

When it comes to reaching out to consumers and building a loyal base, many retailers have either deployed or are in the process of deploying smartphone applications. Such smartphone apps currently have taken the form of creating shopping lists, product search, product comparison, product location within the store, coupons, etc. So how should a retailer tackle such smartphone app strategy in conjunction with other digital media like Facebook, Twitter, blogs, etc.? The answer to this question might be surprising. As Austin Wright from RAPP notes, no one seems to have a real strategy on how to effectively roll such applications to the wider audience. People are still trying to figure out how to monetize such an approach. When it comes to the Hispanic market, Wright notes that the first generation Hispanics are not tech-heavy compared to the second and third generation. What would be ideal for this particular segment would be a lighter approach such as targeting them through the usage of Short Message Services (SMS) that are in Spanish. Many third-party providers such as NeoLane offer many customizable digital solutions that are multilingual. However, as we move to the second and third generation Hispanic segments, the notion of multilingual would not be a major issue to a marketer. For that matter, most of the current efforts should be ­focused on the first generation Hispanic segment, as second and third generation Hispanics are more likely to be acculturated and their shopping patterns, relatively speaking, are likely to reflect the shopping patterns of other non-Hispanics.

The Hispanic-American demographic segment will continue to grow, and retailers who want to be a part of this growth will need to at least modify their merchandising and promotional techniques as an initial step. But for retailers who want to take full advantage of this growing segment they might consider, as their long term strategy, developing Hispanic-American products under the ­retailer’s brand.

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