In a nation of immigrants,
white is still the predominant color. According to the 2000 census, 75.1 percent of Americans were Caucasian. But minority consumers and their buying power should not be underestimated.
In 2002, African Americans, Latinos and Asians wielded significant discretionary income: $646 billion, $581 billion and $296 billion, respectively, according to the Selig Center for Economic Growth at the University of Georgia. And although whites continue to account for the majority of the nation's $6.3 trillion in annual consumer spending, their market share is dwindling. They represented 82 percent of the total consumer marketplace in 2002, down from 87 percent in 1990.
“We've seen tremendous growth in the demand from retailers to service those ethnic groups,” says Carol Greenberg Brooks, president of Miami-based Continental Real Estate Cos. CREC manages shopping centers throughout Florida, and particularly in Miami-Dade County, where Hispanic consumers comprise 57 percent of the population.
That applies to cities across the nation. The Brookings Institution, in a 2001 report, noted that in 2000, non-Hispanic whites accounted for just 44 percent of the population of America's 100 largest cities, down from 52 percent a decade earlier. Those cities gained 3.8 million Hispanic residents, an increase of 43 percent over 1990 levels.
“Years ago, retailers were able to achieve growth targets by tapping into markets that had demographic profiles they understood,” she continues, “and they largely ignored ethnic profiles that were outside of their traditional experience. Now, if you've got stores on every corner in a non-Hispanic market, you've got to start looking at alternatives.”
Developers looking for growth, in other words, have to consider minority markets. But it's not as simple as finding the ethnic enclaves and selecting a likely site. To attract tenants, owners have to educate retailers about the buying habits and growing economic power of those communities. They should know that Hispanics normally shop as a family, African Americans are fashion-conscious, or that Asians shop most frequently but aren't particularly brand-loyal, for example.
Ultimately, Greenberg Brooks says, the need to grow overshadows fear of the cultural unknown.
Filling in the voids
That has become true only recently. Almost 50 years after Brown v. Board of Education ended the separate-but-equal approach to education, Americans are still not treated equally in many areas of life, including retailing.
It's not necessarily redlining or discrimination. In many cases, it's simply an oversight. But it's an oversight that retailers and developers of retail real estate can ill afford. Throughout the nation, entire (and entirely profitable) enclaves of consumers with desirable demographic characteristics go underserved. That's money smart business people will not leave on the table, or allow to go to competitors.
Take a lesson from Mark Toro, president of North American Properties in Atlanta. He spotted an underserved pocket of upscale African-American consumers on Atlanta's south side. Despite the rising incomes of residents, the official demographic readings did not indicate that the neighborhood would support retail development. But Toro looked deeper (specifically at new residential construction) and found a very healthy consumer base. To capitalize on it, the company is currently readying Camp Creek Marketplace, a 1 million-square-foot power center, scheduled to open this summer. The project will be anchored by Target, Marshall's, Lowe's, Staples and BJ's Wholesale Club, and it is the first major retail center in the area.
“These consumers were driving 15 miles one way to go to Target or Marshall's or Barnes & Noble. The high-income African-American shopper was not provided access to the same shopping provided in other Atlanta communities,” Toro says. Once retailers put on their color blinders and recognized the high income and good housing stock in the neighborhood, they signed up in droves. Camp Creek Marketplace's tenancy reflects African-Americans' appreciation for brand names at value prices, he explains.
“It's not a white thing or a black thing,” says Toro. “It's a green thing.” And it's a good thing for his tenants, he says: “None of these retailers have any significant sister-store impact or transfer of sales.”
Even ethnic neighborhoods that lack the qualities of Camp Creek's environs are worth a second look for retailers. “The fact is that while a lot of these communities are characterized as being low-income, that's compensated by the density of these communities,” says Bobby Turner, managing partner of the Canyon-Johnson Urban Fund, a $300 million investment company that builds developments in urban markets, which are more typically weighted toward minorities.
Canyon-Johnson, a Beverly Hills-based partnership between money manager Canyon Capital Realty Advisors and Magic Johnson's Johnson Development Corp., has projects under way in Milwaukee, Cleveland Heights and North Philadelphia. Turner says that the population densities in these and similar inner-city neighborhoods are often three to five times that of surrounding suburban markets. “So,” he says, “the spending power of these communities greatly exceeds the broader markets.”
Pinpointing — and capitalizing on — difference
Increasingly, urban ethnic consumers want the same product choices and shopping experiences as suburbanites — plus merchandising that caters to their wants and needs. “Wal-Mart doesn't necessarily sell the same thing, and Magic Johnson doesn't show the same movie,” says Turner. And he recommends that movie theaters in African-American neighborhoods not feature violent movies and that apparel retailers not stock clothing with gang colors. In these enclaves, too, Starbucks carries sweet potato pie in lieu of scones. “It is understanding customers' desires and goals, and catering to their needs,” he says.
Ashley Stewart founder Joseph Sitt realized that earlier than most retailers. In 1991, he opened his first Ashley Stewart storefront, an apparel retailer targeting African-American women. First, Sitt tailored the apparel choices to what customers had been telling him.
“Certain bright colors look really good on African Americans, so you'll see certain tones of orange and certain tones of green looking very good with that person's skin color,” he says. The same goes for jewelry: African Americans favor gold.
Customer service and store design also reflect Sitt's research on what these shoppers want. Sitt also worked with local churches to run employment fairs, which gave him further insight into the community. Today, Ashley Stewart operates more than 300 stores, and generates approximately $300 million in sales.
Sitt founded the chain on behalf of New York-based Thor Equities, of which he is the chairman and CEO. The company also acts as developer, and Sitt applies these same principles to retail development. “It's the same way a retailer buys product for their store, a developer brings tenants to their mall,” he says.
Sitt also says a developer has to create the ambiance ethnic consumers want, and he draws a comparison between Ashley Stewart's mahogany, stone and leopard-print carpeted finishes and the larger shopping center. Thor's 1 million-square-foot Military Circle Mall, in Norfolk, Va., underwent a $36 million renovation two years ago, for instance.
Of course, even the most sensitive retailing efforts face some barriers. Among Latinos, “You do have a small group that is still largely enmeshed in their cultural ways,” says Greenberg Brooks. “Different generations are still in the same house; they're speaking Spanish predominantly.”
On the other hand, most second- and third-generation Hispanic consumers have shopping habits that are more Americanized. They are loyal to clothing brands, but also willing to travel far to try out new stores.
These shopping idiosyncrasies can be used to a developer's or retailer's advantage. Viejas Outlet Center in Alpine, Calif., 30 minutes northeast of San Diego, decided to expand its base of Hispanic shoppers through a targeted marketing campaign in border towns Mexicali and Tijuana.
Now, Hispanic shoppers, who account for 25 percent of the center's customers, up from 10 percent four years ago, travel as long as two hours to buy brand names at a discount.
The marketing effort includes Hispanic-flavored festivals, including a four-year-old annual mariachi concert that, in its first year alone, attracted more than 30,000 people. Also planned this year are two Easter eggs hunts — one specifically for Hispanic shoppers, says Lucy Garcia Roberts, principal of HMC Bilingual Advertising in Chula Vista, Calif. HMC handles the marketing for Viejas.
Ignore ethnicities at your own risk
Where ethnic marketing gets trickier is in the areas where ethnic populations are blending into the suburban masses.
“There's a critical inflection point you have to reach to make your return on investment worthwhile,” says Lois Huff, senior vice president for retail consultant Retail Forward.
On the other hand, the investment can be as simple as respecting another's language (see story on page 31). Moreover, diversity is important for many white Americans, who are attracted to different cultural experiences. The mariachi-palooza, for example, draws non-Hispanics interested in a festival with a Latin tone. Japanese supermarket Mitsuwa Marketplace, with nine 50,000-square-foot to 60,000-square foot U.S. stores, appeals to the general population as well with its special ethnic events. Recently, the L.A.-based chain flew in a chef from the Hokaido region of Japan (along with the local fish and crab for which the area is known) to prepare seafood dishes for shoppers to taste. “These days we welcome Chinese, Korean, native Americans and the general population, too,” says a Mitsuwa spokeswoman. “People are curious.”
Although America's taste in music, fashion and culture cross cultural lines more than ever, Asian, Hispanic and black communities still display distinct buying patterns. As the disposable income and buying power of these groups continues to increase, understanding how, when, where and why these blocs shop is increasingly important.
An adjustment of tenant mix — or, for the retailer, a shift of inventory or marketing strategy — according to racial and ethnic nuances can spell the difference between a thriving retail operation and one that goes ignored, by minorities and the general population as well.
SCW's Brannon Boswell and Beth Karlin contributed to this story. American Demographics' writers Rebecca Gardyn and John Fetto contributed the original text.
blacks are the most fashion-conscious group. In fact, 34% of those polled say they like to keep up with changes in trends and fashion, compared with 28% of Asians, 27% of Hispanics and 25% of whites. Blacks are the most likely to travel an hour or more to shop at their favorite store and almost twice as likely as the average consumer to go out of their way to find new stores, especially for a bargain. Nearly a third of the black respondents will travel an hour or more to shop at a factory outlet store, compared with 27% of all consumers. And once they get there, black consumers prefer conquering the sales racks alone, rather than with friends.
whites make up the majority of the shopping hordes, but they are the least likely to enjoy the process. Just 35% of white consumers say they enjoy shopping, even when they don't buy anything, compared with 47% of Asian, 43% of black and 42% of Hispanic shoppers. Almost two-thirds of white consumers say they go shopping only when they absolutely need something, vs. 57% of Asians, 54% of Hispanics and 47% of blacks. And nearly half of white consumers don't stick around to browse. Interestingly, white consumers are the most likely to say they make spur-of-the-moment purchases. Yet they are also more likely to plan far ahead to buy expensive items.
asians How do you say “Shop till you drop” in Japanese or Korean? Asians are the most frequent shoppers and the most brand-conscious. Yet they are the least brand-loyal. A quarter say they change brands often, compared with 22% of Hispanics, 20% of blacks and 17% of whites. Asians are also the most concerned about keeping up appearances. More than a quarter say they buy what they think their neighbors will approve of, compared with 12% of Hispanics and blacks and 10% of whites. Asians don't like to shop alone: 31% say they prefer shopping with their friends, compared with 25% of Hispanics and blacks, and 23% of whites.
hispanics make shopping a family affair. About one-third say they prefer shopping with their families and 30% report they like shopping with their children, compared with 29% and 26%, respectively, of the total population. A quarter say their kids have a significant impact on the brands they buy. Hispanics are almost twice as likely as white consumers to go out of their way to find new stores. They are also more likely than blacks or whites to use the Internet when planning a shopping trip. The least likely to go out of their way for a bargain, Hispanics prefer to shop at national chains over local mom-and-pop stores.
know your customer
The principal shopper in a black household is likely to be single, divorced or widowed.
| WHITE | BLACK | ASIAN | HISPANIC | |
|---|---|---|---|---|
| Married | 65% | 43% | 70% | 64% |
| Single | 15% | 32% | 19% | 21% |
| Divorced/separated | 12% | 18% | 6% | 12% |
| Widowed | 7% | 7% | 5% | 3% |
| *”Principal shopper” refers to the person responsible for making the majority of the everyday purchases (groceries and household necessities) for the family. | ||||
| Source: American Demographics, Feb. 2002 | ||||
on the cheap
Americans of all colors like a bargain, but whites are the most likely of all racial and ethnic groups to shop at discount stores. Many Asians also look for a discount, but they are the most likely to buy their clothes, housewares and cosmetics at a traditional department store.
| CLOTHING AND ACCESSORIES | WHITE | BLACK | ASIAN | HISPANIC | |
|---|---|---|---|---|---|
| Department store | 47% | 43% | 51% | 48% | |
| Discount store | 60% | 50% | 54% | 57% | |
| FOOTWEAR | |||||
| Department store | 15% | 16% | 18% | 20% | |
| Discount store | 24% | 15% | 19% | 21% | |
| HOUSEWARES AND FURNITURE | |||||
| Department store | 8% | 5% | 10% | 6% | |
| Discount store | 20% | 14% | 18% | 17% | |
| COSMETICS | |||||
| Department store | 6% | 5% | 8% | 7% | |
| Discount store | 21% | 11% | 16% | 19% | |
| Source: American Demographics, Feb. 2002 | |||||
everyday needs
Warehouse clubs, like Costco and Sam's Club, depend heavily on Asian and Hispanic consumers. The typical Asian shopper, for example, makes 14 trips a year to such stores, whereas blacks report that they shop at a warehouse club just eight times a year.
| WHITE | BLACK | ASIAN | HISPANIC | |
|---|---|---|---|---|
| Grocery stores | 72 | 70 | 65 | 67 |
| Drugstores | 15 | 17 | 16 | 15 |
| Mass merchants | 24 | 20 | 21 | 24 |
| Supercenters | 19 | 16 | 12 | 15 |
| Warehouse clubs | 10 | 8 | 14 | 12 |
| Gas/convenience stores | 14 | 19 | 6 | 11 |
| Dollar stores | 10 | 16 | 7 | 10 |
| Source: American Demographics, Feb. 2002 | ||||
charge it
More than 1 in 10 Asians (12 percent) say they have used their credit card 20 times or more in the prior month, compared with only 2 percent of blacks who say the same.
| WHITE | BLACK | ASIAN | HISPANIC | |
|---|---|---|---|---|
| 1-5 | 47% | 28% | 49% | 39% |
| 6-19 | 21% | 9% | 27% | 15% |
| 20 or more | 8% | 2% | 12% | 5% |
| *Note: Numbers do not add to 100 percen because some people had not used a credit card at all in the prior 30 days, and others did not answer the question. | ||||
| Source: American Demographics, Feb. 2002 | ||||
dressed to impress
Minority consumers are far more likely than whites to say they enjoy wearing the latest fashions.
| WHITE | BLACK | ASIAN | HISPANIC | |
|---|---|---|---|---|
| I like to dress in the latest fashions | 36% | 58% | 46% | 46% |
| I like to impress people with my lifestyle | 17% | 20% | 28% | 20% |
| I'm very likely to buy new technology products and services | 41% | 42% | 49% | 39% |
| I like to look in hardware or automotive stores | 46% | 40% | 44% | 45% |
| Source: American Demographics, Feb. 2002 | ||||