As a percentage of total spending, Latin American consumers typically spend most of their earnings on food and drink. Compared to U.S. consumers, these shoppers also face cheaper housing costs.
With apparel spending, the percentages vary and are on par with the U.S., but two countries — Brazil and Argentina — have significantly higher expenditures, according to the latest analysis of the region by Fung Global Retail & Technology analyst Deborah Weinswig.
In her report today, Weinswig noted that the region “has an expanding dynamic retail sector that relies on consumers who are anxious to spend their newly gained disposable income.” This follows a recent report that mergers and acquisitions in Latin America’s fashion retail sector are expected to gain steam due to a soaring dollar as well as soft economic conditions that create attractive opportunities.
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Weinswig’s overview of the consumer market in Latin America included a breakdown of spending categories. In Brazil, the region’s largest economy (and seventh largest in the world) has tumbled with real gross domestic product declining 3 percent in 2015 and it is on track to fall 1 percent this year, Weinswig noted in her report.
In South America’s largest country, consumer expenditures on apparel as a percentage of total spending are 4.6 percent, while housing garners 29 percent and food is nearly 17 percent. Transportation accounts for about 15 percent of spending while health care is 5.7 percent.
This compares to the U.S., where consumers spend about 33 percent of income on housing, 12.5 percent on food, 17 percent on transportation and 8 percent on health care. Spending on apparel is 3.4 percent — which is 120 basis points below what shoppers in Brazil spend.
In Argentina, the share of spending on apparel is even greater at 7.2 percent. There, shoppers spend a 34 percent of income on food and drink while housing garners 12.8 percent. Transportation costs are nearly 14 percent and health care is 8.6 percent. In Chile, there is a similar pattern with spending on food and drink taking 18.6 percent of total spending. Housing is 13.5 percent and transportation is 6.4 percent while health care is 6.3 percent. Apparel spending is 4.4 percent of total expenditures.
In Mexico, spending on food, drinks and tobacco accounts for 34.1 percent of total expenditures. Housing is about 10 percent while transportation is nearly 19 percent. Health care is 2.5 percent of total spending. Consumers spend 4.7 percent on apparel.
Weinswig also said in her report that “Argentina is emerging from a prolonged period of political and economic instability. Consumers are beginning to return to stores, and they are shopping more online.” She also said that the country’s e-commerce growth is 28 percent — the most robust in the region. With Brazil, the analyst said consumers there “seek out foreign brands as displays of wealth, and the upcoming Olympic Games in Rio de Janeiro present an opportune time for foreign brands to gain exposure in Brazil.”
Weinswig added that the retail sector in Mexico is “expanding rapidly” while the country’s “population is young, which means consumer behavior is evolving.”