Ethnic consumers are more open to trying new products and meal solutions, given the stormy economy
Amigos is a new retail banner that blends United Supermarkets' traditional services with an extensive selection of international foods and hard-to-find specialty items. The Lubbock, Texas-based chain is so optimistic about Amigos that it's opening a second store this month and is planning a third for 2009.
United is not alone in catering to Hispanics with a special format. Más Club is the name of a new Hispanic warehouse store Wal-Mart's Sam's Club plans to test in Houston in the first half of 2009. (See story, Page 31.)
The new format will be filled with authentic products from Mexico, and will require a separate membership. The 143,000-square-foot Más Club will offer fresh produce and meats, as well as Hispanic foods and international brands including beverages, spices and candy for both family use and small businesses. There is space for outdoor shopping and an event area.
The new banners typify the steps retailers are taking to cater to minority groups in search of customized service, authentic product assortment and appreciation for their culture.
To get the latest perspective on ethnic retailing, SN conducted a roundtable consisting of retailers and consultants. Participants were Sidney Hopper, chief operating officer of United's International Division; Juan Enchinton, director of innovation for United International; Tony Wilcox, head of store brands for Fiesta Food Warehouse, a 10-store retailer based in Ontario, Calif.; Anna Xie, senior manager of strategic planning and research, Intertrend, an Asian American communications firm; Terry Soto, president and chief executive officer of Hispanic consulting firm About Marketing Solutions; and Luis de la Mata, president of consulting firm Churchtree.
SN's Carol Angrisani moderated the roundtable. On the following page are excerpts from the discussion.
SN: How are these turbulent economic times affecting how retailers market to ethnic groups?
HOPPER: With the economy in the state it is, it's a great opportunity to reconnect with our guests, because people are dining out less. More people are coming to the store. There's also a lot of trading down.
I think one thing that has really been beneficial to us is helping them find solutions. Years ago, when we did samplings, somebody stood with a little cup and a toothpick. Now, we advertise a meal for four for less than $6. And in a display, we merchandise every item they would need to prepare that meal. It's a way to help us, but also help them during an economic time when they're having some struggles.
One place where we've had the greatest success is merchandising a unit in our fresh area, between produce and our foodservice and bakery departments. We bring something in from each department, including dessert. Right now one thing a lot of people would probably do without is dessert. So we try to put that meal solution in there that also allows them to afford a dessert for the family.
XIE: In the past, Asian Americans tended to just grab the brand or products that they are very familiar with. But in this economy, they started to be more open-minded to some substitute products. So if you have some products that are not imported from Asia but made in the United States with a more competitive price, now is a good time to let them know about it. Now they will be more open-minded and adopt the new product.
SN: Please comment on the importance of reaching out to various ethnic groups, whether it's Hispanics, Asians or any other ethnic group.
WILCOX: You want to go after every part of the pie you can nowadays, because if you're not, your competitors are right across the street going after them for you.
HOPPER: We're seeing, in a lot of pockets here, small independent [ethnic stores]. They provide a very comfortable environment, so you've got to find a way to bring that experience into a larger box.
SN: When we talk about ethnic marketing, most people immediately think Hispanic marketing. Do you think there's not enough attention given to Asian Americans and other ethnic groups?
XIE: Yes. I believe we should always give Asian Americans more service and attention, because this group is really a lucrative group. They have the highest income out of all of the ethnicities.
Also, they aren't as impacted by the bad economy, simply because they tend to have a savings mind-set. They are less likely to be in credit card or mortgage debt.
ENCHINTON: It's important not to take the cookie-cutter approach to every store.
We don't have the format where we just continue to replicate over and over without looking at the specific demographics and shopping patterns in that area.
SN: How important is it to have the right kind of staff to accommodate ethnic shoppers?
HOPPER: It's very important. We've tried extremely hard over the last year to make sure that our team members are a parallel vision of what the guest [makeup] is in that store. And we've gotten a lot of positive feedback from our guests for that reason.
XIE: We did a lot of research with the Asian-American market, and we talked to the customers. It showed that having Asian staff in the store is very important, because one of the big barriers for Asians to adapt to new brands or new products is language. So if the store can provide an in-language service, that will really be helpful for Asians to adopt new products and be loyal to American brands.
ENCHINTON: It's also important to understand the way people eat or prepare foods. Language is a big piece, but the culture is probably as big, if not bigger.
WILCOX: You have to educate your workers so that they know, for instance, that the guanábana, a fruit for South Americans or Central Americans, is the same thing as a large cherimoya, a fruit for Mexicans, as well as soursop, which is what Asians buy. It's the same fruit, just a different name.
DE LA MATA: It's important to understand the sub-segmentations of the cultures. Take Hispanics: We speak the same language, but there are quite a lot of differences from one country to another.
[Hispanics] not only want you to have their products, they also want to know that there are people in the store that are part of their local community and know them and their family. You don't necessarily have to have the lowest pricing. You don't necessarily have to convert your store into one particular nationality or message. You just need to make the shopping experience a very favorable one.
It's wrong to look at Hispanics and assume that the father is the main breadwinner and the mom is the one who stays home cooking and cleaning. I think that is changing very quickly because of their economic situation.
Hispanics are looking for semi- or almost-prepared foods that the mother can personalize by adding two or three different ingredients. Convenience is important, because they don't have the time to start from scratch.
SOTO: It's important to understand what the specific needs are of the community in terms of products and merchandising. Day in and day out, the challenge is actually being able to implement it, everything from identification, procurement and actually creating the mechanisms. Retailers should allow some minority vendors to do business with them.
ENCHINTON: By offering a convenience product, it opens up the store to any ethnic group that doesn't know quite how to prepare it.
DE LA MATA: Sampling is important, because when Hispanics sample a beverage or a food product, there is almost a 30% conversion rate if they like the product and it has a competitive price. Again, it doesn't need to have the lowest price, but it has to be competitive.
WILCOX: The perimeter is where we make very big money. But you can't just focus only on the perimeter, because you're going to miss that guy that only ran in for the beer and is going to grab a bag of Frito-Lay chips on the way out the door. There's much more profitability to be had by going after every part of the business that's in your store.
SN: Wal-Mart is increasing the number of its so-called “stores of the community,” which carry merchandise that represents the local community. What does that say to the food retail industry about the importance of ethnic marketing?
HOPPER: Wal-Mart is obviously very successful. But they're not going to put in a full-service meat counter and have fresh cuts and thin cuts like we're going to do. So I think for us it's a huge advantage, because we're small enough to do that.
DE LA MATA: Right now Wal-Mart is capturing quite a lot of the Hispanic customers. The big advantage of the independent supermarkets is that the periphery is where they can make it count. This is where they can have the products that are going to appeal to different ethnic customers and the community.
SN: Was there any specific merchandising approach or product mix approach that you tried that didn't work with your ethnic customers?
HOPPER: One thing we learned early on was we had to do a better job of understanding who was shopping our stores: Was it first generation, second generation, and what was their level of acculturation? The reason for this is that with some shoppers the brands didn't resonate as well as they did with others.
SOTO: When some of the larger retailers tried to go after this marketplace and bring in an assortment that was relevant, a couple of things happened. Take produce, for instance. They might bring in a particular type of chili or particular type of fruit. And more often than not, produce items tend to be merchandised and priced as specialty items.
Now take dairy. A large retailer might bring in something like a liquid yogurt, or even some of the regular yogurt, and they will price it at 20 or 30 cents above what the consumer might find at their local independent store. That's a big deal, because Hispanics are buying six or 12 per shopping trip.
ENCHINTON: One of the things we've done is we've gone into integration. It didn't make sense to us to have a Mexican section within a store that's catering to that ethnic group. So we've gone out and integrated all of our products so that we don't have those specialty destinations anymore. It's actually part of the main line and everyday pricing in our stores.