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THE ETHNIC MAEKUP GROWSMORE RETAILERS ARE USING ETHNIC HBC PRODUCTS TO ATTRACT A WIDER ARRAY OF STEADY CUSTOMERS

In an era of unsurpassed competitive pressure, supermarkets are struggling to find ways to attract the largest number of customers possible.By finding specific niches to target, supermarkets can ensure customer loyalty based on more than just price, and this could be the key to success in both volume and profitability, said Dr. John Stanton, professor of food marketing at St. Joseph's University,

Michael Slezak

May 2, 1994

10 Min Read
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MICHAEL SLEZAK

In an era of unsurpassed competitive pressure, supermarkets are struggling to find ways to attract the largest number of customers possible.

By finding specific niches to target, supermarkets can ensure customer loyalty based on more than just price, and this could be the key to success in both volume and profitability, said Dr. John Stanton, professor of food marketing at St. Joseph's University, Philadelphia.

One way supermarkets can lure specific consumer groups into their stores is by stocking and promoting ethnic health and beauty care products.

Retailers, wholesalers, manufacturers and academics polled by SN agreed that ethnic HBC is a growing category that is demanding increased attention. And while many supermarkets continue to ignore ethnic HBC,

others capitalizing on the category have been delighted to find increased sales results and positive customer reaction.

"Stocking [ethnic HBC] is definitely increasing in importance. Probably more than it's ever been, and I've been buying health and beauty aids for more than 19 years," said Wanda Lovelace, HBC and general merchandise buyer and merchandiser for Jons Markets, a 10-store operator in Los Angeles. "But it depends on where your store is located. Most of our stores are in Hispanic areas, and in two of our stores we carry products for black consumers."

"My stores are located in predominantly minority, African American neighborhoods, so naturally I'm going to have those products," agreed Quincy Mason, vice president of operations for Community Foods, a seven-store independent in Baltimore that trades as Super Pride Markets.

Retailers said they felt stocking ethnic HBC was a good way to fill the needs of customers and increase store loyalty, especially in areas with large concentrations of a specific ethnic community.

"When dealing with the type of clientele we have, especially a lot of people coming up from Mexico, that are used to certain products they had at home, they get very excited when they can find it here," said W.R. "Bill" MacAloney, president and chief executive officer of Jax Markets, a four-store retailer in Anaheim, Calif.

But all stores aren't capitalizing on the ethnic HBC trend.

"There was one store in the middle of a Spanish neighborhood, and they only had one sign in Spanish. It read, 'The safe cannot be opened,' " said Stanton. "You say to yourself, why would a Hispanic person come into that store? That is blatant disrespect."

It only takes a small gesture to sway ethnic customers either positively or negatively, Stanton added.

"One thing supermarkets can do is make the shopper feel more comfortable and delight them in the store," he explained. In a Hispanic neighborhood, Stanton said, supermarkets can use simple features like Spanish signs, a full line of Hispanic HBC and Spanish-speaking employees to convey a message that that base of customers is important to the store.

In the ethnic HBC category, said one manufacturer, supermarkets must be very alert to consumer needs or else risk losing business to other classes of trade.

"Be very aware of how you take care of [the ethnic HBC] section. It needs to be well stocked, well managed, have the right mix and be current. It needs to communicate to the shopper, 'We understand your needs, we want to appeal to your needs and we're happy you're in the store,' " said Denise Gardner, vice president of marketing for Soft Sheen Products, an ethnic HBC manufacturer in Chicago.

"I react to this personally, as do a lot of consumers. A lot of food stores have the wrong mix of products. They have products my grandmother uses, that I'd never touch. And that says something to me," she added.

Many food stores, however, rely on their wholesaler or rack jobber to keep the ethnic HBC mix up-to-date.

As one vice president of a small California retailer who wished to remain anonymous said, "Our ethnic HBC selection is based on demographics, but we count on our wholesaler to fully service the area. We give some input, but we pretty much leave it up to them to set it up and to put in the products they know are selling."

MacAloney of Jax Markets agreed. "Our wholesaler does a good job in procuring the items and keeping tabs on what the top-selling items are." But he added that the retailer must stay on top of ethnic HBC trends, too.

"We constantly have to monitor our competition and make trips to Mexico to find out what is selling there," said MacAloney. He said the wholesalers from Mexico his chain deals with also "keep us pretty well informed on what the key items are."

Nonetheless, Gardner said a trap for supermarket retailers is to rely too heavily on the information their wholesalers supply.

"You don't just give the wholesaler carte blanche. You have to hold them accountable. Retailing today works on such margins you have to make sure every element of your mix is working for you. You can't afford to be throwing money away," she said. "Part of the primary way to evaluate a wholesaler's performance is through the sales rep and the profitability of the section. But retailers also need to evaluate the performance of ethnic HBC and of their wholesalers, based on shopper evaluation, because it is a traffic-building, image-building section for the African American consumer," continued Gardner. "It's not a grand, expensive thing; you could interview a handful of shoppers and get some direction and information."

Stanton of St. Joseph's said he agreed that ethnic products can truly make a statement to ethnic consumers, and the ethnic HBC category is one of the easiest areas to relay this message.

"It's a little hard to have ethnic paper towels. But I think ethnic HBC can really be used as a positive statement of their total commitment to the various communities," Stanton concluded.

Peter Madkin, national accounts marketing manager at Soft Sheen, said many chains overprice and underpromote ethnic HBC, but "you find a few unique ones." The commitment to ethnic HBC must go further than simply stocking the products, however, since promotion and advertising can prove essential to a chain's success in ethnic HBC. Many of the country's large chains actually have been the most progressive in the category.

· Pathmark has been very price-competitive with drug stores and mass merchandisers in its area on ethnic HBC, said one industry source. The Woodbridge, N.J., chain also tied in with Black History Month in February by releasing glossy, in-store coupon books.

· A source requesting anonymity at A&P's Farmer Jack division in Detroit has said his chain has set up temporary price reduction programs on ethnic HBC and targeted niche audiences with specialized radio ads.

· Several chains are now tying ethnic ads into their rotos, offering special supplements in bag stuffers or fliers and are doing tailored programs that tie back into community activities.

Sheina Waddell, assistant buyer for ethnic retail at Harris Beauty Supply in Alexandria, Va., noted that "the three grocery chains we work with do print advertising, whether it be a flier or a newspaper ad or the grocery store's internal newspaper. And radio tags, too. We try to get as much advertising for our grocery chains as possible through our manufacturers." Madkin of Soft Sheen said many food retailers attempt to get margins of "as much as 40% to 45%" on ethnic HBC, but the most successful supermarkets have cut their profits and realized a higher turn in the category.

While pricing and promotions are among the keys to any category's sales, many food retailers have been reluctant to give promotional space to ethnic HBC. And the image of supermarkets as a destination for ethnic HBC has suffered as a result.

Waddell said food retailers need to change their top management's philosophy about ethnic HBC before the products can really fulfill their sales potential.

"Our chains have been very good with that. I know of some other grocery store chains we don't service where that philosophy is not presented and they may only have two shelves or three shelves or not even that for ethnic," she said. "They may think ethnic is not profitable."

Ethnic HBC often does not get an opportunity to be merchandised off the shelf, said Waddell, because endcaps and tower space is so precious.

"Some grocery stores are more aggressive than others, but mass merchandisers are definitely more willing to give up the floor space for promotional items and promotional activity," she concluded.

Indeed, mass merchandisers are the thorns in the sides of many ethnic HBC departments in supermarkets. Not only can stores like Wal-Mart and Kmart slash prices, but they can also stock a wider variety and devote more off-shelf promotions to the category, said retailers.

"It is very difficult to compete because mass merchandisers can devote so much more space. We're working with a limited amount of space in our stores, especially with HBC products," said Roger Burks, senior vice president at The Mad Butcher, a nine-store retailer based in Pine Bluff, Ark. To combat this, "you have to carry the best sellers, utilize your space," he said. "We just cannot have any slow movers in there. We must carry the fast turners only."

"It's difficult because of the price difference. They're price-sensitive items," said Reg Terry, GM/HBC manager for Fairplay Foods, a nine-store independent in Chicago.

Other retailers told SN they did not feel they were in competition against mass merchandisers.

"I'm a supermarket and I won't make my living selling ethnic HBC," said Mason of Community Foods. "I make my living selling canned goods, meat. As far as me competing against mass merchandisers in that category, I'm competitive, but I'm not competing against them. Other supermarkets have tried using successful mass merchandising strategies in their own ethnic HBC departments.

"Wal-Mart is very innovative with the concept of cross-merchandising ethnic HBC across the board. It works well. Consider it," said Eugene Taylor, vice president of marketing and sales at Paul's Sundries, an ethnic HBC wholesaler in Chatsworth, Calif.

He said his company is cross-merchandising the ethnic HBC products it distributes to supermarkets with the general set of HBC products wherever it can.

"That may not be innovative, but in our sense, you don't see enough of it. We have seen an increase in sales from that," Taylor added.

Paul's has also tried "to make use out of what available space is there for us," Taylor said.

Paul's has condensed many of its ethnic HBC sets and added promotional windows with extra shelving, at the Vons stores it works with throughout California. Taylor said this is one way his company works around the lack of endcaps and tower space for ethnic HBC promotions. Officials at Vons declined comment on their ethnic sets.

"And bonus items are important to us because we all know that consumers want an extra bonus value," he added.

Gardner of Soft Sheen said she feels food retailers have a tremendous one-stop-shopping advantage that is still not being taken full advantage of. She said if food stores can get the right mix of ethnic HBC for their stores demographics, they can prevent consumers from heading to a drug store or mass merchandiser.

And, said Stanton of St. Joseph's, supermarkets can charge slightly higher prices than mass merchandisers because people will be willing to pay more for the added convenience food stores provide.

Waddell of Harris Beauty School said food retailers should stock ethnic HBC when their demographics warrant, "because that's lost sales their missing out on. Everybody wants one-stop shopping."

Stanton suggested that perhaps ethnic HBC sales and profitability may not be the issue at stake. Looking at the larger picture of consumer comfort with the store environment may be more important, he said.

"It might mean you have to put some things on the shelf that won't have the really high turns. They are there to tell the customers, 'We have products for Hispanics, blacks, Asians. You can't have tons of those but you can have some," Stanton explained.

If targeting a niche market or two is so easy, then why haven't food retailers capitalized on the trend?

"People are mesmerized by size. They say, 'Oh my God, there's 25,000 white Americans in my market. There's only 2,000 Asian Americans. Why would I target the 2,000 Asians when I can target the 25,000 white Americans," said Stanton. "But the answer is simple.

"You can go after the 2,000 and the 25,000. You don't give up one for the other," he added.

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