Terry Soto Hispanic Retail 360 Summit August 9-11, 2009 Las Vegas, Nevada

1. The Transformation of the Hispanic Shopper in Changing Times: Opportunities and Implications for Retailers Terry Soto Hispanic Retail 360 Summit August 9-11, 2009 Las Vegas, Nevada

2. Content • The New Hispanic Mindset • How Are They Coping? • Implications and Opportunities • Looking Forward

3. Macro Trends in the Hispanic Market • The state of the U.S. economy, the housing crisis, loss of jobs, and immigration fears are forcing Hispanics to redefine their notion of the American dream. • Risky sub-prime loans and foreclosures are causing Hispanics to be disproportionally affected by the economic downturn. Culture Shock SM IMPACT:fear, instability, distrust, skepticism Source: Iconoculture

4. The New Hispanic Mindset

5. Culture of Fear is Being Experienced Due to Hispanics’ Current Reality • Beyond the economy, many Hispanics feel they’re under attack • If illegal, they’re constantly worried about deportation and the further economic impact on family • Fearful Hispanics are retracting from public life and going into the shadows • The impact is being felt in the business sector • Even legal immigrants are being affected because likely someone they’re related to or know is being affected by immigration raids, and even they feel threatened. Source: Iconoculture

6. The Dynamics of Trust And Relationship Are Changing • The culture of fear Hispanics are experiencing is affecting the trust levels they have in individuals, companies, brands and even products • Hispanics are feeling victimized in many ways by society, institutions and even marketers • They are now requiring a transparency in communications and are no longer taking messages at face value  Source: Iconoculture

7. Currently Reality is Driving an Increased Desire to Be Control Of Their Lives • Hispanics have experienced a growing sense of consumer empowerment • Driven by more efforts and resources to engage them in U.S. life and systems • But their currently reality is resulting in an increased desire to be control of their lives • It's no longer about building consumer confidence through external resources, but rather through internal efforts • Hispanics are now giving high priority to closing the information gap by becoming more knowledgeable consumers Source: Iconoculture

8. The Redefinition of the American Dream: Embracing New Aspirations • The grim reality has forced many Hispanics to re-analyze their vision of the “American Dream” • Hispanics’ aspirations are changing. As they look to (and need to) make more responsible decisions, aspiration is taking a backseat to practicality • Focus is shifting from the material acquisition to the experience (always been important, but now it's a priority) Source: Iconoculture

9. Recent Immigrants Are Also Struggling With Their Life Plan (In the U.S. vs Back Home) • Culture Shock is taking on a new meaning; Hispanics are being forced to embrace a new way of living that contradicts tradition (women working outside of the home, men taking on a bigger role in the home) • This is exacerbating the culture shock they are living, and the desire for going back to 'the way things were’ (from a culturally traditional standpoint). • This sentiment has driven many Hispanics back to their home countries • The biggest point of pain is that they are being forced to change almost overnight — they’re no longer doing it on their own terms ? Source: Iconoculture

10. New Responsibilities: Everyone Has a Role • Hispanic women are bearing the brunt of the slowing economy • More are crossing the border to reunite with families and to work to bring in much-needed income • Supporting themselves and family in both traditional and non-traditional jobs • Female Day Laborers is a Growing Trend Source: Iconoculture

11. The Current Reality is Driving A Return to the Security of Home and Family • In changing times, the Hispanic Family more than ever represents the fortress that protects against the unpredictable, the foreign, or the unknown • Bicultural Hispanics returning to multigenerational living • Young adults are returning home or deciding to stay at home longer • In spite of changing family structures, the need for what family provides remain strong Source: Iconoculture

12. The Possibility of Leaving a Legacy is Being Threatened • Although Hispanics are focused on the present, living and enjoying life today, they are also concerned with the security they want to leave behind • Legacy has become an increasingly important value for Hispanics because it signals opportunities for future generations. • But. the current state of the economy is making it difficult for Hispanics to stay positive about the impact they can have on the future Source: Iconoculture

13. How Are Hispanics Coping?

14. Role of Community and Collaboration in the Evolution of La Voz (The Voice) • Hispanics have found strength in the recognition of being the nation’s largest minority • Immigration as an issue has caused a cultural shift with Hispanics • They have joined together, organizing themselves and forming a unified voice on a myriad of issues • They understand their political and economic clout and they're not taking this standing lightly • This movement has generated a feeling of empowerment and has solidified a Pan-Hispanic identity Source: Iconoculture

15. Immigrant Values Are Also a Strong Source of Empowerment • Their most important characteristics is their tenacity • They are determined and they have goals • They will continue to be driven by commitment to families in the U.S. and back home Source: Iconoculture

16. Catalysts of Change • Hispanic leaders are leading the way and are responding to community concerns at a National and Local level • Leaders who have done well in the U.S., recognize that now is the time to give back • They are giving back to their communities, not only in the U.S. but also their home country Hispanics in the United States, are looking to the Obama administration to resolve the economic crisis and address everything from immigration to education. Source: Iconoculture, Mindel Oxygen, Revisiting the Hispanic Consumer

17. Innate Sense of Optimism and Resiliency • Current feelings of fear and instability are familiar to many Hispanics — many have faced similar challenges and hardships in their home countries • Their previous experiences give them a more optimistic outlook regarding this economic crisis • Their life here is not what it was in their home country • That said, this consumer still feels dire about their current situation Almost half of Hispanics believe that their financial situation will improve in 2009, compared with only a third of the general U.S. population. Source: Iconoculture, Mindel Oxygen, Revisiting the Hispanic Consumer

18. Opportunities and Implications

19. Three Major “Consumer” Mindsets Have Evolved • Each of which represents a different set of answers to two fundamental questions: • who is to blame for my current negative circumstance? • what am I going to change to respond to the New Economy? Source: Iconoculture,

20. The Hard BargainConsumers using new economy attitude and tools to protect as much of their old economy lifestyle as they can • Hard Bargain consumers: • worry that they’re at the mercy of the larger economy • face difficult decisions about whether and how to spend their money • are certain they’re not responsible for their negative circumstances • To gain back control, they are seeking ways to drive their own hard bargain • Hard Bargain sensibilities have driven an awareness among Hispanics that they've given too much control to external sources. But the blame is not on them — they were going along with what was presented to them • Upwardly mobile Hispanics fear losing everything they've worked hard for. Many don't want to have to sacrifice things that are meaningful to them. • Hispanics will take control over their situation through values of reality, savvy and responsibility Relevant Values: reality , thrift , savvy , responsibility , entitlement Source: Iconoculture

21. Differing Definitions of Savings • Transactional Savings • Cost at the register, discounts, coupons, etc. – willing to trade down on shopping experience • Accrued Savings • Bank of America’s “Keep the Change” program – a savings enabler • Gas Card Awards Accruals – accrues points then automatically delivers a transactional savings as you’re pumping gas • Sanity Savings • Why is an IPhone worth paying a premium? “Unclutters my life making life more sane” • Great camera, Not just any MP3 player, Access to real internet, Hundreds of applications, Trusted brand Relevant Values: reality , thrift , savvy , responsibility , entitlement Source: Iconoculture, Pew Research Center

22. Redefining “Added Value” • Hispanics are scrutinizing every purchase for cost and value • They want their dollar to be “earned” like never before • They expect their patronage to be “rewarded” • Deals and Discounts • Loyalty Programs • Frequency/Volume Discounts Relevant Values: reality , thrift , savvy , responsibility , entitlement Source: Technomic Consumer Survey, May 2009

23. The Uncertainty PrincipleConsumers struggling to steady their rocking boats in a churning, unsettled new reality • Uncertainty Principle consumers: • don’t know which way is up • are confused about their spending, but also about their worth • aren't certain who’s responsible for their negative circumstances or what to do about it • Old rules are gone. New rules have not yet replaced them. • Lacking control and feeling anxious, they’re seeking understanding but also security, comfort and simplicity • Uncertainties around trust are driving Hispanics to create new ways to identify trustworthy sources • These consumers are seeking a realistic and practical call to action that will ensure they are taking appropriate measures to be control Relevant Values:comfort , control , identity , understanding , change Source: Iconoculture

24. Bridging the Trust Gap Distrust in messages Distrust in complexity of language Distrust in pricing structures Distrust in how products work Relevant Values:comfort , control , identity , understanding , change Source: Iconoculture

25. The Great Concession Consumers accepting the New Economy as an opportunity to build a more authentic happiness • Whether only semi- or fully consciously, Great Concession consumers are discovering that de-consumption is bringing them a different — perhaps better — life. A somewhat unexpected discovery • To gain control over their lives, they're taking this colossal pile of lemons (the economic meltdown) and making karmic lemonade • Great Concession Hispanics are driven to go back to the way things were (culturally) • They will embrace tradition more strongly in many different ways (values, expectations, family) Relevant Values:simplicity , wisdom , self-sufficiency , practicality , individuality Source: Iconoculture

26. Companies Which Respond to New Economy Values Will Be Rewarded • Hispanics are placing great importance on identifying key sources of information they feel are credible, relevant and trust worthy • Transparency from their “sphere of influence” is more pressing than ever • Greater expectations of influencers to provide honest, easy to understand information and to serve as facilitators • Increased expectations on influencers to connect the dots on key issues by providing a call to action (leading them) Relevant Values:comfort , control , identity , understanding , change Source: Iconoculture

27. There’s No Way Around It: Big Business Must Revaluate As Well • Revaluation at the consumer level will require corresponding revaluation of goals, expectations and approaches among corporations and brands • Survival will require a recalibration of margins and sales goals, bonuses and salaries that will be long-term in the U.S. • Survival will require an acceptance that margins and sales targets based on old paradigms are no longer valid Source: Iconoculture

28. How Will This Look? Nondiscretionary Goods and Services • Businesses in nondiscretionary goods and services like food have an advantage, but will have to compete at the most brutally literal level: price • Hispanics can’t live without eating, but they will become even more ‘mercenary’ about seeking bargains and stretching dollars Plan to Do More of This Year Source: Iconoculture, Technomic Consumer Survey, May 2009

29. How Will This Look? Discretionary Goods and Services • Businesses in discretionary categories have opportunities to sell to consumers based on perceived value and ROI • Chief among these will be “cost per entertainment hour,” in which consumers evaluate a purchase based on the amount of fulfillment — entertainment, satisfaction, positive memories — derived from the purchase measured against its cost Plan to Do Less of/ Not at All This Year Source: Iconoculture, Technomic Consumer Survey, May 2009

30. Low Cost Per Entertainment HourHigh ROI Grand Theft Auto $500 MM in First Week of Release “Hundreds of Entertainment Hours” Success of Nintendo’s Wii console; real growth and record sales in the fourth quarter of 2008, and continuing into 2009 Source: Iconoculture

31. Big Businesses Must Fundamentally Realign Their Concepts of Growth and Profit • Hispanics must see Big Business “sharing their pain,” not profiting from it • Succeeding with the new Hispanic consumer will require “leaving money on the table” “The Korean automaker Hyundai announced that it would allow customers to return their new cars if they lost their jobs in 2009.” “Similarly JetBlue will now refund any tickets held by customers who get laid off.” Source: Iconoculture, Pew Research Center

32. Looking Forward Long after the recessionary economy has been resolved, the cost-savings measures that Hispanic consumers have adopted will remain Hispanics are no strangers to cooking at home and their increasing desire to re-trench in immigrant values will make the home, family and friends experience ever more important and comforting Though less leveraged and less cash strapped, Hispanics’ lower access to credit and lower likelihood of using it, will continue to drive “a live within one’s means” mentality Hispanics’ orientation to legacy in both the US and Home countries will continue to drive greater savings and dollar stretching behavior An evolved sense of reality and control will continue to calibrate Hispanics’ expectations and aspirations Hispanics — regardless of income level — are already doing all of the above with a vengeance. We expect to see much more of the same going forward Source: Iconoculture, About Marketing Solutions

33. Thank You! Terry Soto President & CEO Direct Extension: 818-842-9688 Cell Phone: 310-713-0241 terry@aboutmarketingsolutions.com www.aboutmarketingsolutions.com

34. Terry Soto, Author and President & CEO About Marketing Solutions, Inc. • Management consulting firm specializing in Hispanic Market Strategy • Consult across industries including retail, financial services, automotive, apparel, packaged goods and healthcare • Author of, • Grow with America – Best Practices in Ethnic Marketing and Merchandising • Marketing to Hispanics : A Strategic Approach to Assessing and Planning Your Initiative • Hispanic Market Strategy lectures at NYU and Pepperdine business schools • Frequent speaker at industry and corporate events, a resource to trade publications • Native of Ecuador, grew up in central Los Angeles and I’m completely bilingual and bicultural