Can Grocery Retailers Successfully Target the Asian American Market? 09/15/04
By Thomas Tseng
For retailers and marketers, targeting Asian American consumers has always represented a certain conundrum. Although Asian Americans -- a diverse segment comprised of Chinese, Koreans, and Asian Indians and other distinct nationalities and languages -- are comparatively only one-third the population of the U.S. Hispanic market, yet they exhibit over one-half the purchasing power of Hispanics.
Asian Americans rank higher than, and in some cases exceed, that of the general market in such key attributes as education attainment, per capita household income, homeownership, net worth, and professional occupation. In other words, if not for the complication of linguistic diversity, Asian Americans might just be the dream consumer demographic.
Yet retailers continue to be reticent in approaching this consumer. Stymied by a lack of cultural understanding, retail marketers continue to find efforts in capturing this consumer elusive.
Adding to these shortcomings is the fact that U.S. Asian communities have successfully developed their own viable food distribution channels and supermarket chains across the country -- catering to the specific needs, tastes, and palate of Asian consumers. One can witness this phenomenon in Asian ethnic enclaves across the country -- whether you're visiting NY's vibrant Chinese community in Flushing, SF's animated Filipino neighborhood of Daly City, or Orange County's Vietnamese hub in Little Saigon.
In fact, the defining features of these neighborhoods are more often than not food-driven activity: restaurants or grocery stores are ubiquitous and serve as anchor points in definably Asian communities. They draw equally from nearby immigrant denizens as well as patrons from afar. Important lessons are to be drawn by examining these bustling centers of food activity, particularly at the grocery stores.
Without a doubt, 99 Ranch is the most prominent star of all Asian food retailers. Founded by Taiwanese entrepreneur Roger Chen in 1984, 99 Ranch is now the largest Asian supermarket chain in the country, with nearly 30 west coast stores alone, as well as branches in Atlanta and Phoenix. For those not in the know, 99 Ranch is considered the mother of all Asian grocery stores. Think of the largest Kroger supermarket you know, but quadruple the size and selection of the seafood and butcher sections. Picture endless rows of fish tanks, shellfish, and gourmet seafood esoterica like geoduck.
99 Ranch locations usually anchor a large shopping strip, which include a number of complementary restaurants and retail businesses. They are a powerful magnet for Asian shoppers, drawing from beyond the immediate confines of their market trade area and are a conspicuous, distinguishing landmark for Asian American suburbia, particularly Chinese Americans.
It is well known among ethnic marketing circles that when Charles Schwab decided to target the U.S. Chinese market several years back, they simply opened up retail branches within the same strip wherever there was a 99 Ranch market. Furthermore, they staffed their branches with Chinese speaking financial consultants, displayed Chinese signage, and generally tailored their approach to be culturally appealing and friendly.
Moderator's Comment: How can mainstream supermarket operators successfully cater to the Asian American population? What inspiration should be drawn from
expert specialty retailers?
Retailers seeking to pursue Asian American consumers can learn from these approaches used by 99 Ranch and Charles Schwab. In fact, many of these principles
are to be found in the Coca-Cola Retailing Research Council report "Grow With America." But it's also important not to overlook another fundamental fact about the Asian
American consumer: the vast majority of Asian Americans do not necessarily live in high ethnic enclaves and don't have easy access to a 99-Ranch-like store. They reside in mixed
suburban areas and only occasionally visit ethnic stores to do their grocery shopping. Hence, a considerably large proportion of food shopping by Asian Americans occurs, grudgingly,
in the same grocery shopping channels as the general market.
As a result, there are ample opportunities for retailers to shape their approach for this consumer without going up against a giant like 99 Ranch, who knows
their customer like no other. Since it's simply not realistic for the majority of Asian grocery shoppers to regularly visit, say, a Chinatown, truly opportunistic grocery retailers
can deliver a flavor of Chinatown to Asian American consumers instead. At least in the realm of food, a small taste of home for Asian consumers can translate into potentially
huge gains. -
Thomas Tseng - Moderator
Comments
Two words come to mind when I think of Asian needs - freshness & premium quality. Mainstream grocers who have reason to believe there is an Asian audience in their trading area should be offering an array of fresh fruits, vegetables and seafoods typically found in Asian cuisines. What the retailer will find is that, with a little sampling and educating, their non-Asian consumers will quickly be buying up the same products. As Americans, we have an insatiable need for variety - but minimize the risk in fulfilling that need.
Marilyn Raymond, Director, NewProductWorks
The question is, how can mainstream supermarkets approach Asian consumers? There's no easy answer, considering that retailers are still unsure how to approach the Hispanic market after all these years. As I understand it, the Asian market is even more diverse. Can you satisfy the needs of Vietnamese, Indian and Chinese shoppers with a single section? What are the steps that retailers must take to serve Asian consumers? I think mainstream supermarkets have to take a long hard look at their customer base. I've seen this evolution at Stop & Shop where stores in Indian neighborhoods are really trying to set up specialty departments. If you have a significant Asian customer base, retailers need to work closely with specialty wholesalers and get someone in-house who understands what this segment of consumers wants. Failing that, you can always put in a bid to buy 99 Ranch. That would be a good buy.
Len Lewis, President, Lewis Communications, Inc. - Braintrust Panelist
Lack of cultural understanding is the biggest hurdle. Just when we think we are making progress with the Hispanic market, now it gets even harder with the Asian market. I am aware of a few Asian owned chains, mostly in Canada, that do quite well. They have the Asian market covered very well and are trying to figure out the Anglo market. They are hiring more Anglos to manage and work in their stores to help with making Anglo customers feel more comfortable, plus provide the products Anglos want. So in Canada, Asians are reaching out to the mainstream rather than the other way around. In the USA, Asian stores don't reach out to the Anglo communities like they do in Canada. It may be stereotyping but, in my opinion, education and incomes seem to be higher among Asians. Spending is a different story because savings rates among Asians is typically higher. In some Asian cultures, having debt is disgraceful. I think it's going to be a long time before the mainstream grocers figure out the Asian market. Typically, we Americans are slow to change and accept new cultures. Look at all the people who come here broke and a few years later have achieved the "American dream." Just how many of us could walk into China, broke, and then achieve the same level of success?
David Livingston, Principal, DJL Research - Braintrust Panelist
As with Hispanics and Mediterranean shoppers, having store
level staff with the same background and, importantly, an
understanding of the consumer base's ways of life, if you
will, is vital. But, before this, the size of the target base and their
willingness to shop supermarkets (vs. ethnic neighborhood
stores) needs to be understood. And therein lies the issue many
retailers overlook. Needless to say, it is a different approach than the normal
supermarket practices and support to its shopper base. A
wholesaler / supplier and a special section in the supermarket,
in most cases, isn't the first step to capitalizing on the
target group!
Stephan G. Kouzomis, Faculty and Staff Member, University of Louisville's College of Business
The most obvious thing to me is to hire people of the appropriate ethnic background to run specific ethnic programs. Obviously, there are legal issues you have to be careful of, but it stands to reason that if you're going to target specific ethnic groups, a first step is to recruit from chains that cater just to those groups, and hire directors with the appropriate cultural background and understanding.
Al McClain, CEO, Founder, RetailWire - Braintrust Panelist
Typically, Asian Americans shop at an ethnic "mom and pop" store once a month and more frequently at the local supermarket. However, if they live in a neighborhood with an ethnic mom and pop store, they will top off items from the store almost once a week. The important thing to note is that an ethnic store will carry not just groceries but also ethnic movies, music, magazines, calling cards and a large assortment of ethnic items other than groceries. Supermarkets need to understand their consumers locally, identify the largest ethnic group for each store/store cluster and include a 'specialty ethnic' section to cater to its consumers needs.
Prateek Sinha, Consultant - Retail and Distribution, Infosys Technologies Ltd.
First, I'd like to echo Len's comment above: There is no single Asian ethnic market. Asians are at least as diverse, culturally speaking, as Hispanics. Any go-to-market strategy that lumps either group together is destined to be sub-optimal. Vietnamese and Indian dietary habits are at least as different as white bread American habits are from Mexican. Second, we should recognize that while Asian Americans may on average have more disposable income than some other demographic groups, they are not likely to spend the entire surplus on groceries. On the other hand, individuals raised in cultures that place greater emphasis on consumption of fresh seafood or certain produce may be likely to pay a modest premium to obtain those items. Finally, we should applaud 99-Ranch for doing exactly the right things to compete successfully with huge supermarket chains and mass merchandisers. It emphasizes fresh foods (the so-called "perimeter" departments) and carries ethnic brands that are not subject to much price competition at the local Wal-Mart. This is an object lesson for every supermarket operator: Choose an identity and execute relentlessly against that positioning. Go where Wal-Mart cannot go.
James Tenser, Principal, VSN Strategies - Braintrust Panelist
Marilyn makes an important point. If, as Thomas Tseng points out, the vast majority of Asian Americans don't necessarily live in high ethnic enclaves, they are not likely to spend a sufficiently significant amount on specialised products in a mainstream supermarket. Therefore, to make any new product lines profitable, the supermarket needs to introduce them to non Asian Americans as well and ensure that they are attractive to a wide enough audience to justify stocking them. This really shouldn't be too difficult and can actually generate quite a lot of excitement. Then, once the supermarket starts building its reputation for having interesting products supported by entertaining and educational promotions, many customers might increase their spend, loyalty and shopping trips across the board. This strikes me as an opportunity that can be used as a launch pad for lots of ideas and activities.
Bernice Hurst, Managing Director, Fine Food Network - Braintrust Panelist
When Von's Tiangus stores opened in LA, I know Anglo shoppers who went out of their way to shop their because they thought the produce was fresher and variety greater. Reasoning to them was that an ethnic customer would expect nothing but the freshest, so this was how they could ensure they were getting the best. I also agree with Al -- the best way to understand other ethnic markets is to hire those with a passion for the products sold, and from the target ethnic group.
Jerry Gelsomino, Principal, FutureBest - Braintrust Panelist
A brief comeback to Jerry's comment - wouldn't shopping and eating be wonderful experiences if all retailers were able to find and hire staff who were passionate about what they sold?
Bernice Hurst, Managing Director, Fine Food Network - Braintrust Panelist
The Asian community is price sensitive largely due to the fact that their currency is weaker than the Dollar. As a result, many Asians find it difficult to come to terms with Dollar spending. Apart from this, Asians are also pretty conservative in spending and try to avoid credit purchases wherever possible. Thus, shopping by Asians is driven by value shopping - getting the best quality at the cheapest price. Best quality also implies high incidence of ownership of technology products.
It should also be borne that Chinese, Korean and Thai cooking use a lot of sauce, while Indian cooking use a lot of spices. Thus, there is a difference in the cooking style and, hence, the ingredients. However, the basic elements remain the same. It would make sense for grocery chains to set up Ethnic aisles carrying stuff like rice, shredded coconut, coconut milk, sauces, peas, beans etc. Even though Asians go to an ethnic store once a month for their conventional grocery, they usually pick fresh produce, poultry and dairy products from a grocery store. And, of course, most Indians don't eat red meat.
Santhosh Jayakumar, Category Leader - Retail Health & Wellness, Wipro Technologies
The silliest thing about this, of course, is that Asian Americans have been eating, shopping and living here in significant numbers since about the 1840s, especially on the West Coast, just as Hispanics, Mexican ethnics in particular, have been here for 300 years. We do seem a bit slow to learn things, don't we? For a good sense of some of the things we might do better here, take a nice slow working vacation to Hawaii and the Philippines. It amazes me that some retailer doesn't just go and hire some people from there, give them entrepreneurial control and reward them excessively to come here and build the business.
'RetailSeer'
Santhoshjk: I liked your thought about the low spending levels of the typical Asian-American consumer tying back to the exchange rate between their domestic currency and the USD. It's an interesting thought. But then the high incidence of tech-product ownership and an affinity for quality within say, the Indian-American community, suggest otherwise. Also, it seems like prestige is another key driver within this market sub-segment. Does anyone have any data on this? Also, how does flavour impact premium CPG (consumer packaged goods) sales within this sub-market?
'Attitude_Talks'
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