Brands building for scale should look to hypercultural Latinx consumers

As two female investors who themselves identify as hypercultural (HC) Latinx, we see much potential for brands and startups that invest in this demographic.

For the purpose of this article, we will focus on 13-to-25-year-old individuals who can trace their heritage to a Latin American country who have spent the majority of their lifetime in the U.S. Whether they were born in the U.S. doesn’t matter as much as how much time they have spent immersed in mainstream American culture. This is important to note because this demographic is largely defined by always having one foot in their parents’ native country and another in the United States.

In simplest terms: A Latinx person has origins from a country in Latin America, like Mexico or Brazil, while a Hispanic person has origins from a country where Spanish is the dominant language, such as Mexico or Spain. A Pew Research study found that one in four people who describe themselves as Hispanic or Latino have heard of the non-gendered “Latinx,” but only 3% of them use the term in everyday life.

So what makes the hypercultural Latinx so unique and worthy of pursuit? It’s not a secret that they have massive purchasing power behind them (a collective $1.9 trillion to be exact). However, they are also different from their mostly white counterparts in the way they vigorously engage with technology, their obsession with being online at all times and their unique shopping habits.

Hypercultural Latinx consumers are accustomed to being early adopters of new technology: 81% of them say they like to learn about the latest technology (overindexing their white counterparts by 36%). Latino households are filled with the latest gadgets and smart tech toys. Although we assume most Gen Zers and young millennials love technology, HC Latinx love tech at astronomical rates and shell out more dollars than their white, mostly monocultural counterparts.

This makes sense given that 60% of HC Latinx grew up in the internet age versus only 40% of their white counterparts. Across levels of HC Latinx income (or their parents’), there is always a budget for technology. In my own Mexican household (Ilse), I grew up prioritizing tech over other (sometimes more important) categories like books or vacations.

The online lives of the HC Latinx can be summed up by one statistic: 24% spend three hours or more on social media per day. compared to only 13% of their white counterparts. So much time is spent online by this Latinx youth that they are able to create a digital comunidad where they thrive socially and intellectually. This comunidad has so much influence in how the HC Latinx thinks about what they purchase and how loyal they are to the brands they buy from.

An example of these online comunidades include Bethany Mota’s fanbase whose followers are mainly Latinx youth. There’s also Mitu’s media brand who mostly engages Gen X and millennial Latinx living in the U.S. Another example lies in subreddit groups such as “LatinoPeopleTwitter” with 191,000 members.

When done right, brands who integrate with these comunidades can be rewarded with higher retention rates from the HC Latinx. So how can marketers reach these comunidades? By establishing trust and gaining the respect of these HC Latinx. Although trust can take time to be earned, marketers can shortcut this timeframe by partnering with influencers or community organizers HC Latinx already highly trust.

When a product has the “stamp of approval” from the HC Latinx’s tight-knit circle, the decision to purchase is made faster and more frequently. For this consumer, an important part of the purchase process is being able to give and receive advice (primarily through social media). In fact, 64% of HC Latinx agree that they read online reviews submitted by others before purchasing (overindexing their white counterparts by 28%). Therefore, a product referred to the HC Latinx has a higher likelihood of making it to the check out page.

While the HC Latinx represents second-generation Americans, they were born and raised by Latinx parents whose shopping behaviors are rooted in catalog sales, buying through personal networks and using the art of negotiation to barter prices. As YC Winter 2020’s Valienta startup understands: Direct selling represents $27 billion worth of goods, a sizable opportunity. Like the Avon woman in the U.S., the “Tupperware” way of marketing is still very much alive and modernized. The DM (direct message) feature across social media channels enables this group’s urge to get an instantly personalized response on inquired products and services.

The relation between Latino consumers preferring to buy products by friends or approved neighbors, and 60% of them growing up in the internet era as compared to their white counterparts is quite telling. If Gen Z prefers to text using photos and videos via social, we can assume HC Latinx prefers to shop via social, deepening their relationships with sellers. Having a personal sales channel with a real person at the end of the other screen and not an automated chatbox function is crucial to winning with this group. In my Colombian household (Kat), I grew up negotiating prices when shopping — both online and in-person. I would then tie the negotiation to the buying experience.

SMS marketing and the use of WhatsApp as primary channels is not as common for most GTM (go-to-market) plans — but it’s crucial when scaling with Latinos. It’s no surprise that 49% of U.S. Latinos are using the app representing the highest usage among any ethnic group in the country. WhatsApp allows for HC Latinx to connect with friends and loved ones in Latin America — for free. The preferred method of communication in Latin America has transcended borders and has increased the platform’s ease of use and connectivity among second generation Latin Americans — two other crucial value propositions.

While they also spend more time on social media than their non-Hispanic white counterparts, it’s for a number of reasons that are favorable to consumption. Latinx’ highest-indexing reason for using social media is to receive exclusive offers, coupons and other discounts and to gain access to VIP or members-only events (overindexing by 82%). Using WhatsApp and SMS marketing is a no-brainer when targeting this group.

With an average 82.9% open rate on SMS cross-industry, as compared to the 1%-2% CTRs (click-through-rate) across most growth-stage paid social channels, SMS offers greater RoAS (return on ad spend). Pairing the technique of SMS marketing with the popular WhatsApp platform is the perfect channel combination.

As brands and their subsequent investors look to scale with the HC Latinx in mind, remembering the diverse nature of the group is key. It is worth reminding ourselves that Latinx culture is embedded and very much embraced in American culture today. From the popstars we listen to or the Netflix shows we watch, there is a continuous rising demand for this type of diversity. It is not an emerging trend, but a growing group of people who have one foot in one world and one foot in another.

Whether racial, ethnic or subcultural, there are unique attributes that create a complexity like none-other. As they differ greatly from similarly aged U.S. groups, targeting them becomes a growth marketing exercise. However, with the untapped potential and the aggrandizement influence of the HC Latinx, founders and funders who can successfully target this group will uncover the fruits of this passionate yet hidden generation. As investors, we will certainly keep an eye out for these companies and hope to put our money where our mouth is.

Investing in the hidden generation