MEXICO CITY — Hispanic apparel sales are forecast to grow 1.8 percent this year to $34.2 billion as U.S. economic growth and rising incomes lift demand. However, they are set to underperform the general retail market for the first time in five years as President Trump’s deportation threats throw many Latino shoppers into “hibernation mode,” analysts said.
“Spanish-dominant household purchases are down double-digits, which is a problem, so this year we won’t see sales outpace the overall market,” said NPD’s chief retail analyst Marshal Cohen. “Day laborers in California, Texas, Arizona and parts of Florida and New York are in withdrawal from shopping. They are afraid of going out of the house, of driving.”
“It makes perfect sense given everything that is going on with Trump,” said an insider at the Illinois Chamber of Commerce, saying that the City of Chicago is seeing falling tax revenues from a decline in apparel and other consumption in La Villita, a predominantly Mexican community that is the city’s second-largest retail revenue generator after Michigan Avenue.
“We are seeing apparel and other consumption fall significantly,” said the source, who requested anonymity because she is not allowed to speak to the press. “People are coming out less because of fear of deportation and they are also boycotting U.S. brands.”
Other cities dotting the U.S.-Mexican border are also witnessing a drop in sales-tax proceeds as more undocumented Hispanics stay home or curtail border crossings, added the source.
The trend is hurting mall and off-price retailers accustomed to brisk sales from these consumers, who over the last few years have helped offset generally flagging sales at brick-and-mortar stores as more consumers switched to online buying.
Last year, Latino clothing, accessories and footwear sales grew 1.5 percent versus a 0.1 percent increase for the whole U.S. retail market, extending a five-year trend in which they outpaced the non-Hispanic segment, according to Cohen.
“Fashion remains a priority for Hispanics, which tend to stay more focused on their apparel and accessories needs versus non-Hispanics, who have been migrating toward travel, vacations, electronics and other lifestyle needs,” Cohen noted.
Demand for apparel was strong among the U.S.’s estimated 59 million Hispanics (made up of diverse English, bilingual or Spanish-dominant groups) until Trump was elected, he said. They began paring consumption after he won the White House, hitting discount apparel, personal-care and electronics merchants such as Wal-Mart, Target, Ross Stores, Kmart and Kohl’s. Major department stores have also suffered, especially Macy’s, which carries an exclusive collection by the Mexican singer Thalía.
Without the “Trump effect” and his tougher anti-immigration policies, the Hispanic apparel market would have gained 2.5 percent in 2017, eclipsing the 2 percent forecast increase for the overall U.S. market, Cohen claimed.
By sector, brands that make dresses, activewear, jeanswear and swimwear targeting the market are likely to suffer most as these categories are popular with Hispanics, the expert added.
Still, Cohen was quick to note that not all Hispanics are suffering from the Trump blues, which are affecting newly arrived and poorer Mexicans and Central Americans the most.
“If you are a South American Hispanic or a U.S. citizen, this is not a real issue. It is more of a Mexican border problem,” Cohen said.
He expects the non-Mexican or non-Central American segment to continue to outpace the market as more Colombians, Venezuelans and Brazilians enter the U.S., joining the other non-Mexican majority, Puerto Ricans. Non-Mexicans account for one-third of the Hispanic population, have higher spending power and consume more digital media, according to Latino advertising agency Alma.
To cope with flagging sales from Spanish-dominant households, off-price retailers are raising marketing spending and producing more localized advertising campaigns. They are also resorting to sharp markdowns and hiring more Spanish-speaking staff.
“Some stores have gone as far as opening after 8 p.m. to provide a safer shopping environment, especially in border towns,” Cohen said. “They are also putting Spanish ads on local papers and TV networks.”
Online advertising is also becoming pivotal as more of these customers stay home.
“Retailers are looking for new opportunities to target these consumers online. While Hispanics tend to shop in stores and malls, that trend could now change,” Cohen noted.
Cesar Rolon, chief executive officer of Imagen Marketing Consultants, which targets the Latino market, said apparel e-tailers must do a better job at luring Hispanics. For example, “Amazon does not market to Latinos at all” while Sears could do better to push its apparel lines in lieu of hardware or appliances, he said.
Rolon noted Wal-Mart, Macy’s and Kohl’s have been targeting the market more by offering higher store-card rewards, stronger coupons and cash-back rebates.
Wal-Mart is leading Hispanic sales by stocking the likes of Marc Anthony and Daisy Fuentes, tuning into Latinos’ love of celebrities, while Kohl’s is doing very well with the Jennifer Lopez line, Rolon claimed.
But Thalía’s Macy’s capsule has disappointed.
“They thought someone like Thalía would reel in the Mexican community but they can’t seem to move it through,” Rolon claimed. “The marketing is bad and the products are not very well made except the accessories.”
Rolon noted Macy’s Colombian singer Carlos Santana line has been a hit, showing how retailers’ celebrity choices can be a make-or-break bet.
Speaking of other market opportunities, Hispanics are becoming enamored by tech gear, especially Fitbands, Casio and other products linked to soccer and sports, said Rolon, who cofounded Latino Fashion Week in Chicago. Brands such as Adidas and Under Armour have caught onto the trend, largely eclipsing Nike to become favorite trademarks with Latinos, he added.
Other community favorites include Levi’s, Michael Kors, Claire’s, Apostrophe and Urban Outfitters, according to Rolon. Young girls are big on jeans and blouses while guys like polo-style shirts, designer T-shirts and sports jackets, he said.
On the other side of the spectrum, professional and upwardly mobile Latinas are becoming avid consumers of luxury brands, especially accessories, said other Latino Fashion Week cofounder Arabel Alva Rosales.
“A lot of Latinas in Miami, Chicago and L.A. are more comfortable with purchasing really high-end accessories designers like Christian Louboutin or Jimmy Choo,” Rosales said. “These are women who have grown in corporate America and have rising buying power.”
Brands like Jessica Simpson have also won fans by selling “very easy-to-wear shoes at a tenth of the cost,” compared to other upmarket labels, according to Rosales.
Her style is “very sexy yet sophisticated,” chiming well with Hispanic women’s penchant for chic apparel with a sexy edge, Rosales added.
Wealthier Hispanic women also particularly like Prada and Louis Vuitton, while Chanel and Dior win in the beauty aisle, she concluded.