KALAMAZOO, Mich. -- Pricing is the most important component of merchandising a supermarket to appeal to local ethnic tastes, according to a Spartan Stores executive who spoke at a seminar at the Western Michigan University Food Marketing Conference here.
Ed Thomas, vice president, retail merchandising, Spartan, said the Grand Rapids, Mich.-based company has been focusing on remerchandising its corporate stores to better serve tastes of the local populations in markets like Holland, Mich.
"There's a lot going on there in terms of diversity," Thomas told the gathering earlier this month. "There are lots of second- and third-generation Hispanics, and we were plain vanilla."
The company, which is both a wholesaler and a retailer under several different banners, launched its "neighborhood marketing" initiative last year after gathering extensive feedback from the local market. In many cases, the resulting changes it is making to its stores involve tailoring the merchandise mix to meet the needs of Hispanic consumers.
"We were missing about 12% of our customers," Thomas said. "The good news is, we brought them back."
In order to market stores to a particular ethnic group, only about 10% of the product assortment needs to be localized, Thomas explained, but that 10% is the most important component of the merchandise mix. Those products must be selected carefully based on local tastes and, most importantly, must be priced at a level that will attract customers into the store.
"If you don't have the price points, all you have is a bunch of bad commercials," he said. "You don't want to make money on these things; you want to make it a draw."
Pricing ethnic offerings too high not only won't attract those customers, but it also will "insult" customers and create a negative impression of the store in their minds, he said.
In order to establish price points, retailers should examine the market in which they operate closely to see which local merchants offer the cheapest prices, and then match them.
Offering low prices is especially important in merchandising Hispanic foods, he said, because the lowest-income consumers tend to seek the most authentic Hispanic products.
"As income rises, ethnicity becomes less important," he said.
He also said Hispanics tend to shift away from traditional methods of cooking as they become acculturated: First-generation Hispanics tend to buy flour and lard to make their own tortillas, while second-generation Hispanics are more likely to buy a "just add water" tortilla mix, and third-generation Hispanics readily purchase pre-made tortillas, for example.
Knowing the country of origin of the Hispanics in a store's market area also is critical, he said, as food preferences vary by region.
It also is important to staff the stores with Hispanic employees who speak Spanish.
"You have to have people in the stores that reflect the neighborhood you're in, or you're not going to have believability," he said.
In addition, because Hispanics often shop with their entire families, supermarkets should take extra care to make sure their stores are clean and safe, he pointed out.
Spartan's "neighborhood marketing" initiative also extends to other store features, Thomas said.
"You have to decide what your niche is and stick with it," he said. "If our niche is having the best meat department, and I don't have the best meat department, then I make it better.
"I find out what the customer needs us to have in that store, and I get it," he said.
Such a strategy can provide an effective platform for independents to compete against supercenters, he said.