Accelerating Sales Growth in Multicultural America

BY TERRY SOTO

The multicultural consumer market represents 40 percent of the U.S. population and number 125 million people. Growth continues at a quick pace due to births and immigration.

To put this in real-time terms, between 2017 and 2022, the multicultural population is growing by 2.7 million people per year, 221,000 people per month, 7,300 people every day, and 300 people every hour and it is projected to become the majority population by 2044.

But, in California 2044 is already here. The multicultural population is larger than the top five states in the country and 21 of the 25 most populated counties are already majority multicultural. For most business landscapes this means that 2044 is already here for 84 percent of companies’ most important markets. Making these consumers Terry Soto is a Whiteboard Sessions speaker an important part of at the 2019 CGA Strategic Conference. strategy implementation is critical to food retailers not someday, but now.

What should matter most to you is that their buying power as of 2018 was $3.8 trillion dollars – just over one-fourth of all buying power in the country. If this multicultural market were a separate country, they would have the fifth largest GDP in the world after the U.S., China, Japan and Germany and larger than Great Britain, India, France, Brazil, Italy and Canada. I cannot imagine any retailer willingly ready to leave one out of four consumer dollars on the table.

Retailers who haven’t caught on to what this growth engine represents to their businesses are being left behind and need to quickly learn about and consider the needs of multicultural consumers in their assortment, merchandising an overall customer experience or risk becoming irrelevant.

“Attracting and retaining multicultural shoppers requires culturally nuanced and authentic engagement.”

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Not only are multicultural families larger translating into larger basket rings, they are also much younger which translates into longer life expectancy than non-Hispanic white consumers. This translates into an effective buying power as consumers of about 15 years longer.

Because of their youth they are also in their prime consumption years – they are buying for themselves, for their children, for their parents and for other members of their households.

The recently released Bureau of Labor Statistics Consumer Expenditure Survey for Q.3 2017 – Q.2 2018 indicates that Hispanics spend 8.4 percent of their total yearly expenditures on groceries compared to 7.3 percent for all consumers. This translates into an annual grocery spend of $76 Billion during this period. Not considering inflation, their effective buying power over an 15 additional years can be estimated at $1.14 trillion. This same report indicates that Hispanics, Asian Americans ($33.2 billion) and African Americans ($56.3 billion) spent a combined total of $165.6 billion of groceries during this period.

The numbers are irrefutable. So, how to get started? The answer is quite simple. Approach these consumers in the same methodical manner utilized to target any new opportunity segment. Attracting and retaining multicultural shoppers requires culturally nuanced and authentic engagement. Data and insights are essential for ensuring that assortment choices, merchandising plans and marketing resonate and connect them to their store brand of choice.

On the surface, it may seem like unfamiliar territory to think about growing sales in a market that is outside one’s comfort level but think about it – most of target consumer segments are new at some point. Look at how long the food industry has been working at getting to know Millennials and guess what? By 2020 46 percent of Millennials will be multicultural. This one fact alone should put an interesting spin on efforts to win over this segment.

Don’t hesitate because you think there’s an inherent risk in targeting an unfamiliar market or because you might get it wrong. And don’t reason that you don’t have the time or budget given your many priorities. This line of thinking is counterproductive. The first step is to adopt a future-oriented leadership mindset and ask, how much more business would my stores generate if we catered effectively to multicultural America?

A few years ago, I interviewed many future-minded supermarket presidents and CEOs and they made it clear that sales growth in their stores was directly attributed to multicultural sales.

One supermarket president said: “I think that most supermarkets don’t realize the power of these markets and they want to target the middle class. Well, we’ll take all the fall out you want because when I look at some of our stores that are up 15 – 8 percent, I think it’s strictly because of the impact that the ethnic business is having… a lot of our increases are coming from urban areas from Hispanic and Asian groups.”

As I traveled the country for four months visiting stores and meeting with everyone from CEOs to store directors, some common themes surfaced which were synthesized into six best practices for a report called “Grow with America – Best Practices in Ethnic Marketing and Merchandising.”

Much of them are common sense. But it is this commonsense approach that allows retailers to see double-digit growth in their stores. The following are excerpts of the six best practices successful retailers are applying today.

Learn about your multicultural customers so you can

1 serve them better.

Define their needs and preferences – Successful retailers proactively seek a deeper understanding of the culture of the most prevalent segments in their trade areas by:

1) Exploring the restaurants with employees who can explain the dishes, how they are prepared, when they are eaten, and the ingredients used in the preparation.

2) Looking through recipes from those countries and noting staple ingredients that surface often including condiments, herbs, produce, meats and other grocery items.

3) Visiting ethnic supermarkets and observing the shopping experience, asking questions about products and brands and preferences.

4) Observing the interaction between customers and employees in service departments and observing how categories and departments are merchandised.

5) Hiring external expertise to guide them.

Define your delivery model according to your target profile – Successful retailers always learn about the acculturation level of their target customers to help shape their implementation approach.

For example, “Newly Arrived” shoppers tend to be more traditional cooks, prefer fresh ingredients, ethnic brands, shop frequently and shop both neighborhood and chain stores. “Newly Established” shoppers will have a greater orientation to convenience, prefer fresh but may also be buying some packaged items, include national brands along with ethnic brands and will shop ethnic and chains one to two times per week. And “Firmly Established” shoppers will be much more convenience-oriented and include more packaged items from mostly national brands, but also a few ethnic brands. They will shop less often, about once per week, and will shop mostly chain stores.

2 Define your multicultural merchandising “look” and organize to execute it.

Organize to support the strategy – Successful retailers assign the multicultural implementation plan to a senior executive who can speak across operational areas at corporate and store level. This person has P&L responsibility and can make decisions. They know that while store personnel can provide critical firsthand input about these customers, they don’t have the view of the whole business and therefore will not be as effective leading the organization.

Position products strategically – Successful retailers demonstrate commitment to their multicultural base by having the right assortment and merchandising. For example, key products and brands, especially staples should be immediately visible to customers entering the store.

Define store clusters to help customize offerings – Best in class retailers customize offerings based on store groups or clusters. Clusters can be defined based on demographics including acculturation based on cluster mentioned above. In some cases, stores are clustered according to shopping behavior.

Align customer segments and category management – While successful retailers use traditional category management as a foundation, they also develop filters that help assess product turn relative to these targets. Manufacturer and broker relationships and leveraged to define category development and share data to refine assortment.

“Include a relevant assortment of fresh items, produce and meats at prices that align with buying velocity. Cooking staples should be highlighted in visible and relevant areas of the store.”

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Successful retailers don’t rely on sales data alone. They get out into the stores to talk to department managers and local vendors to gauge relative success of their multicultural assortment and new product opportunities. They track competitive assortment shifts and changes as an indicator that they’re on the right track.

Cultivate distributor relationships – Successful retailers know that ensuring a broader base of distributor relationships can assure ready access to the items and brands multicultural consumers favor. While it’s time consuming to develop and nurture new vendor relationships, they stress that changing demographics make it a requirement.

“Successful retailers make it part of the store managers’ goals to develop local relationships with diverse communities and stores are provided appropriate training, tools and funding to do so.”

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3 Tailor your offering to appeal to your target multicultural customers.

Use key assortment and merchandising triggers – Successful retailers know that developing the right assortment is an evolutionary process and that flexibility is a requirement. They are willing to try new items, evaluate their effectiveness and refine again and again. They would say that while product assortment is key, merchandising is just as important in communicating an understanding of their multicultural targets’ shopping needs.

Some triggers include a relevant assortment of fresh items, produce and meats at prices that align with buying velocity. Cooking staples should be highlighted in visible and relevant areas of the store.

Lead with key categories and brands – Successful retailers know ethnic brands typically satisfy a flavor or aroma from a customer’s home country or tradition of cuisine that may not otherwise be available to them in the U.S. so they lead with ethnic brands for staple items. They also know how to strike a balance between ethnic brands and relevant multinational brands which are household names in countries around the world.

Execute the plan holistically at store level – Successful retailers assess each department for relevance in assortment and merchandising.

1) Produce is perhaps one of the most important department to ethnic consumers – relevance, abundant displays, peak freshness and staple pricing convey value and are key success factors.

2) The meat and seafood departments which cater to multicultural consumers do significantly more business in this department. Service counters, different cuts and offal, seasonal selections, marination and seasoning options, staple pricing, and space and containers for fresh and live seafood are critical success factors.

One Vice President of Marketing put it this way: “The incremental sales we’ve gained in our meat department alone plus the total store as a result, far outweigh the profit loss of staffing a service department. We have seen an increase of 70 – 80 percent in our meat department just by opening a “carniceria” (service meat department). We get instant double digit growth when we open one.”

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3) Relevant bakery and tortilla assortments are essential in stores catering to multicultural customers. Authentic assortments of bakery products are a big draw among Hispanics and African Americans. Sweet breads and cakes do very well among Hispanics while African Americans tend to buy cakes and pies, often by the piece. Authentic assortment, freshness and pricing are key differentiators and success factors.

4) Service deli and hot foods are visited by most Hispanics and African Americans on almost every shopping trip according to best in class retailers. Hot foods are particularly popular on weekends, but the offerings must be authentic so having cooks familiar with the cuisines as well as counter personnel who can answer question in languages other than English is critical. Pricing hot foods by the pound is considered to offer the greatest value.

One store president said: “We offer fried catfish on Fridays and we can’t cook it fast enough – the wait is as long as two hours sometimes and our customers drive over 10 miles to our stores to buy it.”

4 Enhance the in-store experience and connect with the community.

Develop and implement a community relations strategy – Successful retailers develop relationships with the communities in which they operate, and they take important steps to make multicultural shoppers feel welcomed in their stores.

Use In-Language communication where and when appropriate – Some of the ways best in class retailers make their customer feel appreciated include bilingual signage, bilingual employees wearing badges indicating other languages they speak, playlist with a mix of music to please the diverse consumers, and announcements repeated in different languages. Retailers would say that while these steps show appreciation and enhance the customer experience, they also work to accelerate sales growth.

One Vice President of Human Resources said: “There are retailers out there that tell their employees, ‘Don’t speak any other language other than English.’ We don’t have that practice. We recognize that significant number of our customers are going to be more comfortable with their own language.”

Develop and implement an ethnic community relations strategy – Successful retailers make it part of the store managers’ goals to develop local relationships with diverse communities and stores are provided appropriate training, tools and funding to do so. Successful retailers also invest in educating their employees about their customers’ cultural values so they can identify and partner with community base organizations and establish relationships with multicultural community leaders and members of local churches and schools.

“Successful retailers know ethnic brands typically satisfy a flavor or aroma from a customer’s home country or tradition of cuisine that may not otherwise be available to them in the U.S.”

5 Recruit and retain a diverse staff to help you serve multicultural target customers relevantly.

Create a culture of diversity and inclusion – Best in class retailers say that a diverse staff helps them think like their multicultural customers – not just think about them. The benefits cited are numerous and include: 1) invaluable real-time customer feedback, 2) an authentic understanding of relevant product assortment and customer needs, 3) an understanding of what makes for a familiar and comfortable shopping experience, and 4) stronger credibility as a member of the community and an effective connection to the community.

Be flexible and adaptive – Successful retailers recognize that many multicultural job candidates may not have food retail backgrounds – they must be developed. They’ve adopted progressive hiring practices that consider bright people regardless of their origin, language abilities, industry experience and educational background. They invest in training, sponsor ESL classes or are lenient with schedules so employees can go to classes.

6 Develop a marketing plan that relevant value at all customer touch points

Ensure your messages and your execution are relevant – Successful retailers know it’s not enough to create a multicultural assortment and merchandising plan and hire a diverse staff. It’s also important that multicultural shoppers are aware of the “value” associated with shopping a store. They ensure their ad departments can support the stores’ and district managers’ brand’s value proposition in a way that will be compelling to multicultural shoppers’ point of view.

Create promotions that will resonate and connect – Successful retailers develop promotions that engage and connect with multicultural shoppers. They strive for promotions that play into these shoppers’ everyday lives – including daily routines, family dynamics, the types of activities in which they participate, and they insert themselves into their brands into this context.

One VP of Marketing said: “Just because African Americans speak English, it’s a mistake to believe that general market efforts engage them effectively. In fact, because African American have a rich culture and many unique traditions that are very different from those of other cultures, it’s important to consider these distinctions when targeting them through advertising.”

The multicultural population’s size and growth in the United States undoubtedly represents one of the most significant sales growth opportunities of the 21st century. So, successful retailers make multicultural marketing and merchandising part of their organization’s philosophy and they consistently reinforce and allocate the necessary resources.

This consistent commitment can position any retailer for incremental sales growth, enhanced customer experiences and heightened loyalty. Importantly, it will position any retailer to grow with America as the marketplace continues to transform. ■

Editor’s Note: Terry Soto is one of the country’s foremost experts on top-line growth in multicultural markets and has advised a myriad of Fortune 500 executives in the U.S. and Internationally on how to accelerate growth and gain competitive advantage in multicultural markets. Soto’s newest book, “The 3.5 Trillion Advantage – A Marketer’s Guide to Revenue Growth In Today’s America” shows executives in charge of topline growth how to “quick start” or “step up” success in the most economically viable consumer market of the 21st century.