Target works to win loyalty of Hispanics

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Target wants to retain other key customer groups, from millennials to aging Baby Boomers. But Hispanics are a critical market for the company. They are the biggest and fastest growing minority group in the U.S, comprised of Latin American immigrants and their offspring, as well as Latinos whose families have been in the country for generations.
Image courtesy of Target

The profile of Target's customers is changing as the nation's Latino population surges.

"Digitally connected, time-pressured, savvy moms who are increasingly Hispanic" is how Target CEO Gregg Steinhafel describes the retailer's typical customer.

Target wants to retain other key customer groups, from millennials to aging Baby Boomers. But Steinhafel said Hispanics are a critical market for the company. They are the biggest and fastest growing minority group in the U.S, comprised of Latin American immigrants and their offspring, as well as Latinos whose families have been in the country for generations.

Large retailers like Target are working hard to win the loyalty and purchasing power of those more than 50 million consumers, particularly in states like Texas, California, New Mexico, Arizona, Nevada, Florida and Colorado, where more than a fifth of the population is Hispanic.

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Latinos in the United States have more than $1 trillion in annual buying power, according to the Selig Center for Economic Growth at the University of Georgia's Terry College of Business. According to its researchers, the U.S. Hispanic market is larger than the economies of all but 13 countries in the world.

Steinhafel wants Target to capture a big piece of that spending.

"We are going to source dominant presentations of Latino and Hispanic merchandise through the entire store," he said. "It's a big effort that we have internally to really stretch ourselves and jump way out in front."

AN APPEAL TO DIVERSE ROOTS

In markets with big Latino populations, many Target stores have bilingual signs and a product mix attuned to the preferences of Mexican, Cuban, Puerto Rican and other Latino customers, notes Nydia Sahagun, a multicultural-marketing manager for Target.

"Style, beauty, music, food are extremely important to that segment," Sahagun said. "So, we definitely ensure we focus our efforts around that, especially in top Hispanic markets."

That means stocking brands that resonate with Latinos, such as Goya, and providing a wider selection of rice, poultry, fresh fruits, flour and other staples popular with Hispanics.

Target strategically uses Spanish-language ads and social media to drive home its "Expect More. Pay Less" message. The company ranked 29th among the 50-largest advertisers in Hispanic media in 2011, spending $46 million, according to AdAge.

But in its bid to lure Latino customers, Target faces tough competition from Walmart.

Although neither company reveals sales or other measures of its performance among different demographic groups, Walmart projects that most of its sales growth will come from Hispanics.

"The Hispanic consumer is the biggest part of our multicultural strategy," said Walmart spokeswoman Delia Garcia said.

The Arkansas-based retailer has doubled its spending on multicultural marketing, with most the money going toward winning over Latinos. "Our strategy will evolve and develop so that we are responding and relevant in markets where the Hispanic population is growing," Garcia said.

In Houston and Phoenix, Walmart has opened Hispanic-oriented supermarkets called Supermercado de Walmart. They offer a full range of products that appeal to Latino customers. At all of its stores, the company also offers services that are popular with many Latinos, including check cashing, prepaid payment cards and layaway.

THE LANGUAGE HELPS

"Too often, companies do this in a way that's experimental. This has to be taken more seriously if they want to do it right. And those that do, do it right, will capture more of that growth."

Communicating in Spanish -- at least a bit -- is important. It shows respect.

"Even bilingual Hispanics or English-preferring Hispanics will see that signal that a company is sending," said Lee Vann, founder of the Captura Group, which helps clients reach Hispanics online.

Vann said social and mobile media are good tools to reach Hispanics efficiently because they don't require a great effort by retailers to communicate in Spanish.

"Hispanics are extremely active when it comes to social media and mobile," he said.

But Vann said there's generally not much incentive for big retailers to translate entire websites into Spanish, as only about a fifth of Latinos in the United States prefer to always communicate in Spanish.

"The market in the United States of people who need Spanish is relatively small versus the investment it would take to build and maintain a Spanish language site," he said.

Best Buy has a full website in Spanish. But company officials declined to discuss the company's efforts to reach the Latino market.

INVESTING IN A RISING MARKET

Hispanics had a median household income about $38,000 as of 2009, well below the overall U.S. median household income of nearly $50,000. But because of their relative youth and larger household size, the typical Hispanic household is projected to spend more over time than its white non-Hispanic counterpart.

"Cumulative lifetime spending for Hispanics is about $400,000 greater for the average Hispanic household compared to the average white non-Hispanic household," said Cesar Melgoza, CEO of Geoscape, which provides consulting and analytical services to companies trying to increase their business with minority groups.

To be successful with Hispanic consumers, Melgoza said, retailers should show respect for the values, needs and diversity of the nation's Hispanic population.

"There are many segments by language, by country of origin, by acculturation levels, socio-economic strata," he said. "Too often, companies do this in a way that's experimental. This has to be taken more seriously if they want to do it right. And those that do, do it right, will capture more of that growth."

Steinhafel, of Target, said he understands that.

"There's a big difference among Latino communities," he said during a recent speech. "There's Cubans, Mexicans ... We have to really lean in on all aspects. In the past, we would do things like put rice cookers on an end cap and say, 'Yep, we support the Hispanic community.' Going forward, it means not just the front end cap, it's the whole 24-foot side [of the aisle]." Melgoza expects future generations of Latinos will retain a strong cultural identity and commitment to their heritage, even if more of them prefer communicating in English.

For retailers that means Hispanics will remain a distinct market opportunity.

Melgoza said many immigrants are determined to retain many elements of their culture.

"There's a great acceptance of embracing your own culture, as opposed to assimilating and forgetting about your heritage," Melgoza said. "There's a greater desire to stay connected, whether it's through music, food or customs. So, there's sort of a lag affect in acculturation. You retain elements of a culture and that transcends language."