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Know Your Multicultural Shopper: Once Treated As A Separate Niche, Ethnic Marketing Is Now Part Of A Successful Retailer's Most Basic But Ever-Changing Strategy. Those That Ignore The Shifting Makeup Of The Ethnic Marketplace Do So At Their Own Peril.(Cover Story)
By Vanessa L. Facenda
April 1, 2004
The U.S. has long been a melting pot of different languages, customs and cultures. But the flavors that go into that pot are continually shifting. This is prompting large retailers to not only identify and serve the needs of ethnic clientele, but to establish multicultural marketing as a core business strategy that can keep pace with constant population changes.
In New York City alone, for example, The Daily News recently reported that the growth rate of the city's Puerto Rican population has been surpassed by that of Dominican immigrants. The number of Mexicans in New York City has grown by more than 700%, while Cuban growth has declined.
In California today, Hispanics, along with Asians and African-Americans/Blacks, now constitute half the population of the state, representing the country's largest ethnic market. This combined group is equal in size to the baby boomer population--a demographic group that receives enormous amounts of attention today.
These populations also continue growing across the U.S. In the top 50 markets, they are the fastest growing segments. Combined, these groups comprise nearly one-third of the U.S. population. By 2040, the groups are projected to represent half of the American marketplace.
Betsy Helgager, president/ceo of BLH Consulting, an Atlanta-based firm which specializes in the African-American and Hispanic markets, says that in order to properly address ongoing population changes, retailers need to hire marketers who understand that the "minorities" of today will be the "majorities" of tomorrow. "There's no question that the customers who shop in their stores are extremely diverse in cultural makeup. Therefore, retailers need to look at attracting customers to their stores like any marketers do because the retail outlet is the brand."
According to The Selig Center for Economic Growth, Hispanics, Asian-Americans and African-Americans had an aggregate purchasing power of $1.5 trillion in 2002--exceeding GDP of countries like France, the United Kingdom and South Korea.
This could signify enormous growth for retailers that compete effectively for these consumers. Those who ignore the shifting composition of the marketplace--or make only superficial efforts--do so at their own peril.
Still, even for those who recognize the importance of targeting Hispanic, Asian-American and African-American consumers, the gap between what is being done and what opportunities remain is enormous.
For retailers to succeed with multiculturalism as an ever-changing core business strategy, they need to believe in it. If the top executive at a company does not believe that multiculturalism is key to his/her chain's growth, say industry experts, little gets done. Or, efforts end up fragmented and inefficient.
"I remember a large retail corporation whose marketing department prioritized Hispanics, but no other department did," notes Erika Prosper, director, account strategy, at San Antonio-based Garcia 360, a communications company specializing in the Hispanic/Latino market. "They spent hundreds of thousands of dollars creating events and advertising for the Latino community, only to find that the corporate media, merchandising and partnership departments had done nothing to prepare for this direction because they were never told by the ceo that this was important enough for them to alter their course. In the end, they lost a lot of money."
KNOW YOUR CUSTOMERS
The first step to implementing multiculturalism as a core business strategy is to know who is shopping in the stores.
Whether retailers are addressing the needs of Hispanic, Asian-American or African-American consumers, the end game is the same--profitability. This means the most basic marketing principles apply: know your customer and, more importantly, know your customer's mindset.
There is much diversity of want and need within these demographic groups. Therefore, relying on a single type such as "Hispanic" or "Asian," is not fully effective. Retailers that want to succeed need to know exactly who their customer is--Cuban, Mexican, Central American, Chinese, Vietnamese, Korean--and where they fit on the socio-economic scale within their respective group.
The Hispanic population itself is a melange of African, American, White, Asian and indigenous races and hails from a host of countries--Central America, South America, the Dominican Republic--as well as Puerto Rico, Cuba and Mexico. While these groups speak a common language, cultures and inherent values vary tremendously.
"If creating a marketing campaign in South Florida, don't feature an actor or actress of Mexican descent in the advertisement," says Alejandra Cadiz-Gomez, who heads the Hispanic arm at BLH Consulting. "If you can't be specific, then it's better to go general." South Florida, has a strong base of Cuban consumers.
Within the Asian population, the U.S. government statistics identify the term 'Asian-American' as including people from more than 15 ethnic groups and origins. However, Saul Gitlin, evp, strategic marketing, new business at New York-based Kang & Lee Advertising, says the bulk of U.S. Asian residents come from six groups. "Nearly 89% of all Asian-Americans are accounted for by six groups--Chinese, Filipino, Asian-Indian, Vietnamese, Korean and Japanese." The dominant portions of these segments are highly concentrated in tight communities throughout a handful of major metropolitan areas in California, New York, Hawaii, Washington state, Texas, Illinois and Georgia.
According to the 2000 census, Asians are now also the fastest growing racial group in the U.S. and command the highest median household income of any group in the U.S. at $55,521. Their annual purchasing power was $344 billion in 2003.
Still, there are huge differences from one Asian or Hispanic group to the next when it comes to geographic location, national origin, length of residency in the U.S., education level and English-speaking ability, as well as age and gender. Retailers that understand their consumers' level of acculturation will be able to target specific demographic groups more effectively. The incidence of foreign-born citizens gives a good indication of acculturation levels, but it is not the sole determinant. An immigrant's age when he or she arrives in the U.S. is a key factor.
For example, a recent immigrant from Chile who teaches at a university leads a different lifestyle than a recent immigrant from Mexico who came to the U.S. looking for field or construction work. They may have some similarities, but they will live in different neighborhoods and likely shop in different stores.
CHOOSING A TONGUE
Language is a crucial issue for retailers. They must determine when to market in English and when to market "in-language." The answer depends on the community and the target audience. Retailers looking to win over multicultural customers would do well to know who their customers are and what their characteristics are--and market and merchandise accordingly.
One issue retailers targeting specific ethnic groups must determine is whether to advertise in English, a native language or a combination. According to Florida-based Market Segment Research, about one-third of all Hispanics in the U.S. speak only Spanish, while about 1% speak only English. The rest are bilingual to varying degrees.
Gitlin points out that even with Asians who are highly acculturated and bilingual, one-third most often watch television and surf the Web in their native language. This makes in-language broadcast and electronic media the best way to reach a significant segment of this population.
Understanding the language and culture creates loyal customers--consumers value companies that serve them. And it is important to remember to adapt and not simply to translate marketing campaigns into Spanish, Chinese or Korean or another tongue.
ACNielsen's recent LA Hispanic Homescan Panel shows that Hispanics who prefer to conduct business in English only spend more in supermarkets than those who prefer to do business in Spanish. Conversely, as they become more acculturated, Hispanics shop less frequently in convenience stores and local bodegas.
But multicultural strategies are not only about acculturation, they are about lifestyle. Those immigrants who have more money and education live differently from those who do not have these resources. "Acculturation tricks many marketers into thinking that if you target by 'time in the U.S.' you will appeal to the right consumers. Not so," says Prosper. "The buying habits of a wealthier immigrant are the same as those of a professional fourth generation Hispanic, for example. They both have the education and salaries to buy pricier goods."
The lifestyle factor is also critical when targeting African-Americans. Like Hispanics, African-Americans tend to have larger families. However, African-American families often have female heads of households and fewer than 50% are married, says Helgager.
While Hispanics tend to shop with their families, Helgager notes that with African-Americans, friends often shop together as a social outing. Shopping is also considered a social escape.
Yet for both Hispanic and African-American consumers, grassroots marketing and word-of-mouth recommendations are taken very seriously. Grassroots campaigns often prove more effective with these consumer groups than advertising campaigns, says Cadiz-Gomez.
Given the growing importance of Hispanics, African-Americans and Asian-Americans, a significant number of marketers have been investing heavily in improving their efforts to reach them--in both products and promoting their brands. Retail efforts, however, are mixed.
While some retailers have made ethnic marketing a core business strategy and are experiencing success, some have greatly improved their efforts from even over just a couple of years ago. Others appear to still be testing the waters.
Ranch 99 in California, for one, is very popular among Asian consumers because it is a one-stop-shop for Asian cuisine, offering everything from Asian foods and rice cookers to mainstream consumer-packaged goods.
With stores ranging from the Mexican border to the Oregon border and as far east as Texas, California-headquartered 99 cents Only Stores has a diverse consumer base. The chain is concentrating on adding more Hispanic products to its merchandise mix and has added a new buyer to focus on Asian products. Martha Lopez, senior buyer, says that the chain advertises in a number of newspapers aimed at the Hispanic community. "We are also advertising on Spanish and Asian radio stations."
Wal-Mart has been pioneering multicultural strategies under its store-of-the-community approach. The retailer thinks nationally and acts locally, so it is uniquely positioned to understand its customers' needs on a store-by-store basis. Therefore, Wal-Mart can adjust a wide variety of multicultural touch points to deliver the best and most relevant shopping experience for its consumers through its selection of merchandise (including brand preference), size/allocation of merchandise, as well as multilingual packaging, signage and employees.
While Wal-Mart is building new stores to suit relevant communities, Sears is changing stores in communities it is already in to better meet consumers' needs.
Sears realized the demographics of its customers has changed rapidly over the last 15 years. It has an aggressive multicultural management approach that is the centerpiece of the organization. The philosophy touches everything from human resources and finance to merchandise and promotion.
Kmart, which operates many urban stores, has even gone so far as to launch Thalia, a Hispanic-directed clothing line, as well as an apparel assortment aimed at African-Americans. The retailer also focuses on multiple ethnic groups in other categories.
Several national drug store chains have also increased their multicultural efforts. Rite Aid is featuring bilingual shelf talkers in its stores. Walgreens asserts in its 2003 annual report that it "customizes merchandise by recognizing who is walking through our doors and looking beyond traditional ethnic labels."
Walgreens maintains it knows if its customers are Mexican, Puerto Rican, Cuban or South American. Consequently, its product mix has been tailored to suit distinct neighborhoods. This includes everything from "pinto beans and pinatas in Corpus Christi, to sushi and soy products in San Francisco, as well as the newest African-American cosmetic lines in urban Detroit and Chicago," notes the annual report. Walgreens also prints directions on prescription drugs in 10 languages in addition to English, with more languages to come.
In home improvement, Lowe's and Home Depot feature bilingual signs in stores located in Hispanic communities. Home Depot organizes local events that target the Hispanic community. The home improvement chain is also launching a Web site in Spanish.
With African-Americans, there is no language barrier, so retailers do not have to worry about bilingual signage or employees. But many are often hesitant to plunge into uncharted waters with customer-centric initiatives. "Retailers have to not be afraid to open stores in black communities where there aren't too many other [major] retailers," says Helgager. "But it's important for families to not have to pack kids into the car and drive across town to go shopping. Opening stores in our communities makes us feel wanted and breeds loyalty." She adds that Home Depot was one of the first retailers to open a store in a predominantly Black, affluent area of Atlanta. Other retailers like Staples soon followed suit.
Helgager also notes that retailers like Target and Gap were among the first to feature multicultural actors in their advertisements. This also made consumers feel welcome, she explains.
THE MAJOR MINORITY
While focusing on African-Americans and Asians is essential, it is the Hispanic market that many retailers see as the biggest key to growth as the Hispanic population grows and incomes rise.
Hispanics, or Latinos, as some prefer to be called, are the largest minority group. Estimated at 42.5 million, this group represents 14% of the U.S. population. The Hispanic population is projected to reach approximately 52 million by 2010, according to the U.S. Census Bureau. According to Public Relations Quarterly, the U.S. will be the second largest Spanish-speaking country by 2010.
Nearly half (about 15 million) of the Hispanic population is foreign born. For retailers, this is significant because it means that many carry a pre-disposition toward brands that are popular in their home countries.
The Census Bureau also reported that in 2002, 26.5% of family households in which a Hispanic person was the householder consisted of five or more people. For retailers, the equation is simple--the larger the family, the more they need to buy. In all probability, they shop more frequently. Industry experts suggest that since Hispanics tend to make shopping a family outing, it is a good idea to have a merchandising mix that appeals to all generations.
Although Hispanic workers earn less than non-Hispanics (26.3% of Hispanics versus 53.8% of non-Hispanic whites earned $35,000 or more in 2002), the annual median household income for Hispanics in the U.S. has surpassed $40,000. And the disposable income of Hispanic consumers has risen 29% since 200l. Thus, Hispanics can afford a variety of price points.
For retailers to succeed in targeting Hispanic consumers, they need to know who their audience is. If a person has recently immigrated to the U.S., there will be an overwhelming propensity to embrace the native language, culture and cuisine--these habits are hard to change. And again, depending on their socioeconomic level, there are variances. The higher a shopper's economic status, the more bilingual he or she is. Additionally, depending on the age of the individual when they came to the U.S., their language skills will differ.
"The older you are when you emigrate to a new country, the more difficult it is to learn a new language," says Cadiz-Gomez. "For those Hispanic consumers over the age of 35, it would behoove retailers to target them in Spanish. Yet when marketing to Hispanic teens, it is better to do so in English. And often with Hispanic immigrants, the mothers at home don't speak English, so the children are the translators. It's important to know your audience."
However, when advertising to Hispanics, do not forget that they like the same merchandise that everyone likes. But they may be predisposed to think of some of it as more important to their lives. Garcia 360's Prosper advises not to 'hide' a children's section if you have one in your store. "Target moved its children's apparel section to the front of its stores that were located in high Hispanic-density areas because they know that children are a big priority to Latino parents. Target did not buy different merchandise, it just re-prioritized it in certain stores to match the priority their Latino consumers placed on that merchandise."
Prosper also suggested retailers think about re-prioritizing certain items in Hispanic-heavy populations such as personal cleansing products like shampoos, conditioners, hair coloring, soaps and beauty products.
While it is important for retailers to reach out to multicultural consumers, industry experts advise against segregating ethnic efforts from the general merchandise efforts. You never want fragmentation of a brand.
"If a Latino sees marketing in English and Spanish and they do not have brand consistency, the retailer and supplier end up looking suspicious, or you can mistakenly have your Latino customers confused about what exactly you are trying to sell," stresses Prosper. "Never segregate [ethnic] efforts, just make them a part of what you are doing overall."
Making an Impact on Multicultural Consumers
Developing a multicultural core business strategy is a long-term proposition. But multicultural marketing experts agree that there are a number of initiatives that retailers can implement in appropriate areas that are not too costly and have an immediate impact:
* Display a welcome sign in the community-dominant language to show these consumers they are wanted.
* Install multilingual signage.
* Hire at least one associate who fluently speaks the dominant language of that community store. (Spanish, Chinese, Filipino or Vietnamese, depending on the community)
* Buy in-language radio spots when advertising sales events.
More advanced multicultural marketing efforts include:
* More multilingual in-store communications with items like shelf talkers.
* Offering multilingual credit card applications.
* Improving ethnic offerings--specific food mixes, certain types of produce, meats and seafood. Product and selection are key.
* Taking an active approach to the community--events centered around Cinco de Mayo in Hispanic communities, Asian Lunar New Year in Chinese, Vietnamese and Korean communities.
* In-language television ads and circulars.
"When focusing on reaching multicultural consumers, it's about looking at everything you do for your customers from products to services," says Saul Gitlin, evp strategic marketing, new business at Kang & Lee Advertising. "If retailers address the needs of consumers in specific regional areas, they will gain customers."