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As the US becomes even more ethnically diverse, especially with booming population segments such as the Hispanic demographic, retailers are learning that success lies in effectively merchandising to ethnic tastes. While ethnic merchandising commonly is implemented at a market- or store-specific level, larger-scale programs are increasingly gaining popularity, such as Hispanic-targeted apparel lines Lucy Pereda at Sears, Daisy Fuentes at Kohl's and Thalia at Kmart. Realizing the importance of family as a value among Hispanic-Americans also plays a part in how products are merchandised. As retailers become more adept to analyzing a store's customer profile, targeted multicultural merchandising can effectively grow sales, if executed with the right products and in the right amount. Becoming closely attuned to the ethnic customers' brand preferences and cultural values helps retailers earn shopper loyalty and boost revenue.
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Multicultural merchandising is the key
What it means to be an American cannot be described without taking into account the diverse ethnic backgrounds of those who have made this country their home, both in recent years and during the immigration wave of the 1900s. As the United States becomes even more ethnically diverse, especially with booming population segments such as the Hispanic demographic, retailers are learning that success lies in effectively merchandising to ethnic tastes.
Growth of the Hispanic population in particular has challenged retailers to rethink how they market to this large group, which in itself is also diverse based on country of origin. Nearly 14% of Americans are Hispanic, a ratio that is expected to near 16% in four years. Other large ethnic groups include African-Americans, at 12.8%, and Asians, at 4.1%.
While ethnic merchandising commonly is implemented at a market- or store-specific level, larger-scale programs are increasingly gaining popularity, such as Hispanic-targeted apparel lines Lucy Pereda at Sears, Daisy Fuentes at Kohl's and Thalia at Kmart.
When it comes to food, one of the biggest categories in which multicultural merchandising pays off, retailers have learned that a customer's heritage holds significant sway. Despite the appeal of "American" mainstream foods such as steak and potatoes, many shoppers still prefer the dishes of their home country.
"Customers enjoy the items they grew up with and look for those specific brands as well, and we want to do what we can to get those selections on our shelves in the communities where there is a demand," said Karen Burke, a spokeswoman for Wal-Mart Stores.
Burke said Wal-Mart tailors its food assortment to suit the different tastes of its customers as part of its "store of the community" strategy. Among its targeted food offerings by store or market are selections in Hispanic, German, Indian, Asian and kosher foods, along with specific Hispanic food tastes broken down even further by country of origin. Authentic Hispanic food brands such as Maseca flour, Jumex, Valle and Kerns fruit nectars, Las Costena and Goya food brands, Dgari and Con gelatin, Herdez salsas and Juanita's menudo, are carried at many stores where there is sufficient customer demand.
"Wal-Mart is always working to align its assortment with the needs of each store's unique community. Our associates are dedicated to listening to our customers, and that customer demand in each specific community is the determining factor on what products we carry in our stores. That said, you will see different selections offered in different stores based on what the customers in that community are requesting," Burke added.
Food and drug retailer Albertson's also has learned that ethnic merchandising to specific store-level demographics works best. Offering a handful of high-demand ethnic food items across all stores severely limits store loyalty and revenue potential, according to Jake Fontenot, director of ethnic, specialty, natural and organic merchandising at Albertson's.
"This had always been the safe approach taken by most food retailers, but our ethnic marketing team found in surveys with consumers in various neighborhoods throughout the country that this traditional way of doing business falls short of what the customer really wants. In recent years, particularly since 2001, we have been retailing the ethnic merchandising in selected stores, ranging from an upgraded mix in some neighborhoods to a focused concentration of specific ethnic approaches in areas with a sharply defined demographic population," Fontenot said.
Stores in largely Hispanic neighborhoods in Chicago, Dallas, Philadelphia, Boston, San Diego and greater Los Angeles, for example, now carry a greater selection of Latino foods and allot more space to produce, meat, fish, dry groceries, and health-and-beauty products preferred by the Hispanic customers in these stores. To strengthen its customer outreach, Albertson's also strives to have Spanish-speaking staff in these stores.
"The multicultural programs at Albertson's are not limited to Hispanic or kosher offerings. They include several varieties of Asian-oriented formats, and in Chicago we even have a Polish-focused supermarket," he added.
Meeting the kosher dietary needs of Jewish shoppers is another area of opportunity in multicultural merchandising. Retailers have gone to great lengths to serve this group's specific food needs, such as Albertson's execution of 25 kosher "destination" stores in places such as San Francisco, Boston, Chicago and South Florida. At these locations, kosher butchers, delis, bakeries, food and beverages are featured. Oftentimes these stores have a rabbi on hand to counsel customers on kosher dietary laws, Fontenot said.
Wal-Mart also provides expanded kosher foods in stores with a large Jewish population base. At one supercenter in Monticello, N.Y., Wal-Mart brings in up to 20,000 additional kosher food offerings each summer to accommodate Jewish summer camps in the area.
"We provide kosher products all yearround, but during this high-demand period, for the summer camps we bring in these additional offerings," Burke said. "We also train our associates in the Jewish culture."
Family Dollar, which targets Hispanic and African-American shoppers in some markets with expanded food and health and beauty products, continues to fine-tune such efforts. Kiley Rawlins, divisional VP, said the company is pleased with such efforts to date.
"We've learned a lot," Rawlins said. "We have tried to adapt our assortment primarily in food and health and beauty aids. Our goal is to provide value and convenience to our customer, so we have explored different assortments in those key categories."
Rawlins said one of the biggest challenges at first was understanding the different taste preferences within ethnic groups, such as variations among Central American, Puerto Rican and Cuban Hispanics. A combination of sophisticated demographic data and feedback from management at the store level helps determine which products to stock.
Realizing the importance of family as a value among Hispanic-Americans also plays a part in how products are merchandised. For example, Rawlins said the need to cater to Hispanic shoppers with large families may translate into having a deeper selection of value toys of $1 to $3 and making sure stores can be easily navigated with kids in tow.
In product categories outside of food and drug, success in ethnic merchandising at times is more difficult to execute. Despite a growing array of Latin-inspired apparel brands, companies such as J.C. Penney have noted mixed results with such efforts. A test brand targeting Hispanic women this past summer was discontinued, while J.C. Penney's Havanero brand catering to fashion-forward Hispanic men continues, but just in select stores.
"What we're finding is that it's better to address our apparel offerings through customers' lifestyles rather than using a specific demographic, age or ethnicity," said Daphne Avila, a J.C. Penney spokeswoman.
One area in which J.C. Penney reports success with ethnic merchandising, however, relates to an expanded assortment of fancy dresses, boys' suits and gold jewelry related to quinceaneras, or celebrations of a Latina girl's 15th birthday.
"In some of our Hispanic-designated stores, we try to become a destination for families planning a quinceanera," Avila said. "It shows we're much more in tune with the culture and customs."
Home product tastes may also vary depending on cultural background. A Home Depot store in Brooklyn, N.Y., for example, offers a large selection of kosher kitchen designs with round-top doors to cater to its predominantly Orthodox Jewish population customer base. Ethnic merchandising strategies in entertainment products are more obvious, such as offering Spanish-language music, video, book and magazine titles in stores with a heavy Hispanic customer base, especially among less acculturated Hispanics.
As retailers become more adept at analyzing a store's customer profile, targeted multicultural merchandising can effectively grow sales, if executed with the right products and in the right amount. Becoming closely attuned to the ethnic customer's brand preferences and cultural values helps retailers earn shopper loyalty and boost revenue.
Copyright Lebhar-Friedman, Inc. Mar 2006