PRINT THIS STORY:

CHANGE TEXT SIZE:

MARKETERS PROMOTING THE MALL AS MELTING POT

BY NANCY COHEN

The retail mix at Plaza Fiesta in Atlanta reflects its customer base.

As ingredients from around the world are added to it in ever greater proportions, the American melting pot is becoming a crucible for retailers and developers. While rapid demographic change only intensifies the challenge of serving the customer, the potential rewards are too great to ignore.

“Anyone who wants to increase market share from new customers has to make a serious effort in ethnic markets, because that’s the growing opportunity,” said Rupa Ranganathan, senior vice president and ethnic strategist at New York City’s Strategic Research Institute. “It’s so dynamic and robust in terms of purchasing power — no marketer can ignore the fact that it’s galloping.”

The demographic shifts are by now well known. America’s racial and ethnic makeup is undergoing a profound and accelerating change, spurred by immigration and birthrate trends. As recently as 1970, just one out of eight Americans was nonwhite; by 2000, that figure had risen to one out of four, according to the U.S. Census Bureau. And between now and 2010, Hispanics, blacks and Asians will account for nearly 80 percent of the country’s projected population growth. And Hispanics, the fastest-growing segment, are expected to account for 46 percent of that growth.

Less well known, perhaps, are the concomitant socioeconomic trends. Total household income in the minority market more than doubled between 1989 and 1999, from $550 billion to $1.2 trillion, and is projected to surge to $2.27 trillion by 2009. By then, that market will control about one-quarter of the nation’s income and spending power — about $225 billion in income and $120 billion in total retail sales, according to a study by ICSC/Clarion Partners.

The impact of America’s increasing multiculturalism (a catchall term for a multiracial, multiethnic, multinational and multilingual population) has so far been felt more in some areas than in others. Most of the shifts are occurring in California, Florida, Illinois, New Jersey, New York and Texas. But fundamental change will sweep the rest of the country in less than a generation, as the children of today’s immigrants enter the mainstream and settle across the United States, a fact that most retail chains and shopping center developers have yet to fully grapple with, experts say.

“The phenomenon is brand new for shopping centers,” said Cesar Melgoza, president of Geoscape International, a Miami marketing firm that specializes in multicultural issues. The industry as a whole needs to anticipate and adjust to demographic change, he says. “It’s not a matter of political correctness. It’s a matter of green.”

The rainbow connection
Green, yellow, brown or white — knowing the customer is the fundamental task of any business. But understanding the multicultural market may be a special challenge for an industry that has historically catered to what has long been considered the majority shopper category — white women between 25 and 50 years old — and has been slow to integrate its own ranks.

“You need diversity inside the company and to work with people on the outside of the company who can provide input,” said Debra Peek-Haynes, president of Quorum Commercial, a Dallas brokerage, and founder of QC International, a network of minority brokers. “Be open to education; talk to professionals like myself who understand it from both sides; reach out to community groups.”

Had Abercrombie & Fitch done that, or if it had had more Asian Americans on staff, it would surely have scuttled plans to release a line of T-shirts decorated with caricatures of Chinese laundrymen and rickshaw carriers. The New Albany, Ohio-based apparel chain drew protests and international condemnation when it launched the items last year.

It’s not only the signage and ads that are bilingual at San Antonio’s Rivercenter Mall.

Retailers that have successfully reached ethnic markets generally reflect their customer base. At Kmart, for example, Hispanics, blacks and Asians account for 36 percent of shoppers, and minorities make up nearly one-third of the work force. (Even so, the Troy, Mich.-based discounter began providing diversity training to all senior-level managers and salaried associates only last year.)

Some companies have gone a lot further still to ensure that their staffing reflects their customer base. The team behind Fallas Paredes, a 60-store discount apparel chain targeting Hispanic families, is “conservatively 80 percent of Hispanic origin,” said Michael Fallas, president of National Stores, Gardena, Calif., the chain’s parent. That heritage is reflected in the music employees choose to play in the stores, as well as in an innate understanding of the merchandise and pricing the market demands, Fallas said. “Our employees are our customers, and we make decisions by committee. All day long I’m running around showing items to people in the warehouse or the secretaries and asking them, ‘How much?’”

Individual shopping centers that have focused on multicultural marketing, usually located in established multiethnic communities or international tourism destinations, tend to have employees that look like the people they serve.

“When you live in a market like Miami, which has been so diverse since the 1950s, it’s natural,” said Julie Goldman, SCMD, general manager of Taubman Centers’ open-air The Falls. “All our retailers have bilingual employees. That’s the labor force here, which makes it easy, and most of my staff is Hispanic. We represent the community, so we’re sensitive to having the shopping center being appealing and welcoming to everyone.”

On the corporate level, the challenge of keeping tabs on the nuances of a splintered customer base with not only ethnic, cultural and language distinctions, but regional, socioeconomic and age-related ones as well, is one reason General Growth Properties brought its consumer research in-house last year.

“We can’t just make decisions based on what we personally think is right,” said Wally Brewster, CMD, senior vice president of corporate marketing and communications. “I’m a middle-aged white man, and something that is offensive to me looks different through a teen-ager’s eyes. The research helps educate us internally and makes it easier to understand what choices to make.”

Researching consumers has become a priority for General Growth, Brewster says. “Once, we thought doing a study every three years was fine. But now change is happening so fast we need ongoing research to understand the dynamics.”

On a smaller scale than General Growth’s, less formal and decidedly more personal research can help a company make inroads to unfamiliar markets, too.

“To keep my finger on the pulse, I’d go to churches every week, to discos, to movies,” said Joe Sitt, founder of the Ashley Stewart chain, which targets black women with better-quality plus-size apparel. “I took my wife to every Hispanic or African-American social event I could. I’d study people to see what they’re wearing, listen to what they’re talking about, find out their needs and desires.” Sitt has sold most of his retail interests, but he continues to apply those insights as chairman and CEO of Thor Equities, a New York City-based developer of urban retail, residential and commercial projects (see story).

Matching the mix to the market
A better understanding of the customer informs merchandising decisions first and foremost, says Susan Dennis, Kmart’s senior media relations specialist.

“We try to determine the core customer in each market by many factors,” she said, “including ethnicity, climate — is it a college town, a resort area? It’s not minority versus majority, but what brand preferences or types of products are needed in a local market.”

Kmart then adjusts the selection accordingly, including cookware, pantry items, apparel sizes and colors, hair care and beauty products. The chain is also developing new lines for targeted markets, such as the clothing and accessories promoted by Mexican pop star Thalia, which appeared at selected Kmart stores this summer.

The equivalent mechanism that many shopping centers use to match goods to a multicultural shopper is the specialty leasing program. Incubating businesses owned by ethnic entrepreneurs has been critical to the success of Florin Mall, says general manager John Hanron. The 95-store mall is located in Sacramento, Calif., which Time magazine recently cited as America’s most diverse big city. Tenants at the Cordano Co. property mirror that diversity.

“This mall looks like the United Nations,” Hanron told the Sacramento Bee. Its merchants hail from all corners of the globe, from Afghanistan to Africa, Romania to Vietnam, Pakistan to Fiji. A number of them purvey goods from around the world, including sarongs, Oriental rugs and African carvings, and 41 percent are independent retailers.

“Many of our retailers have started out on carts and progressed to in-line stores,” Hanron told SCT. “The malls with 80 percent national tenants don’t have much room for local diversity.”

That may be intentional. “Having the local and regional flavor is what makes you unique, but you can’t go too far to the extreme,” Brewster said. “Very few people don’t want the same product lines available to everyone else in the United States The Asian and Hispanic teen wants the same stores Anglo teens do.”

Broad appeal, narrow focus
Of course, in a pluralistic society the reverse also is true: Nonethnic shoppers seek out unusual goods and specialty foods with an international flavor too. “In fashion, you see ethnic trends, but everybody’s wearing them,” said the Falls’ Goldman.

That doesn’t mean that a marketer or merchandiser can take a one-size-fits-all approach, however. “The most common mistake is to think, ‘We’re serving Hispanics by doing what we’re doing’ — the assumption that they’re getting them by reaching the general population,” said Melgoza. “Marketing ‘in-culture’ is necessary if you want to optimize your reach.”

Goldman agrees. “Many of our customers are comfortable in English and Spanish, but if you want to make an emotional connection, you speak to them in Spanish, a recognition of their heritage.”

Consequently, the Falls’ banners say “welcome” in many languages, customer service staff and collateral materials are bilingual, and radio ads are produced in English and Spanish versions. The ads are “transcreated,” not translated, Goldman says. “There can be amazing faux pas with literal translation.”

Bilingual advertising and print materials featuring bright colors and Latin-looking models are essential for San Antonio’s Rivercenter Mall, says Mark Bachus, assistant general manager of the L&B Realty property. Not only is the residential population 50 percent Hispanic, but 12 percent don’t speak English. What’s more, visitors from Mexico contribute a full 34 percent of Rivercenter’s annual sales.

The Latin flavor extends to Rivercenter’s special events, including celebrations of fiesta, Cinco de Mayo and Holy Week, and a holiday program with a mariachi theme. The events appeal to all shoppers, Bachus says. “There’s not many lines drawn. People embrace both cultures here.”

Not every community has been so accepting of a multicultural mix, however. Although Anaheim, Calif., is about 50 percent Hispanic, local officials waged a two-year campaign to prevent a branch of Gigante, a leading Mexican supermarket chain, from opening in Anaheim Plaza, a power center anchored by CompUSA, Mervyn’s and Wal-Mart.

“We had a hell of a battle, with the city saying it would change the nature of the shopping center,” said Tom Schriber, president of Donahue Schriber, Costa Mesa, Calif., which manages the property. “We argued that our shopping experience is for the masses.” With average prices 15 percent lower than at traditional supermarkets, Gigante appeals to a broad customer base, its executives say.

In explaining her opposition, the head of the Anaheim Redevelopment Agency may inadvertently have advanced Gigante’s cause. Her October 2001 letter to Donahue Schriber, in which she wrote, “the product selection catered primarily to the Hispanic market and … store signage and music were predominately in Spanish,” triggered an uproar. Ultimately, the City Council reversed the Planning Commission’s decision to deny Gigante a liquor license, and the store opened in Anaheim Plaza in May.

One challenge of multicultural marketing is to avoid alienating one consumer segment while reaching out to another. Another is the multiplicity of efforts that may be required. Within the last year, for example, Kmart began printing its circulars in Spanish as well as English and launched a series of advertising supplements designed as entertainment/lifestyle publications: La Vida for Spanish speakers, Urban Direct for black and urban consumers and Tea Leaf, which is published in Mandarin, Korean and Vietnamese and is distributed in California.

The store signage and merchandise appeal primarily to Hispanics, complained an Anaheim official. Exactly, responded the landlord.

“You have to be sensitive not to isolate a group in your advertising,” Schriber advised. “Even though Anaheim’s heavily Hispanic, at Anaheim Plaza we make sure we have Chanukah decorations as well as a Christmas tree.”

Subtle cultural distinctions can also be land mines, he said. “You just have to be careful. There are lots of things to consider in terms of design for Asians, like colors, window placement — which way they face — the numbers in the address. No bad omens.”

Cultural nuances are many and varied, agreed Ranganathan, but not impenetrable. “No one can know everything about every culture,” she said. “Orange may be bad in one, good in another. So do your focus groups, test and retest, interact with the community, observe major holidays or send greetings in the neighborhood newspaper. These are all signals that you respect another culture that can go a long way to sealing the relationship.”

Location, location
Another component of inclusiveness is so obvious that it is frequently overlooked: site selection. Ethnic neighborhoods and the inner city have long been disregarded by retailers and developers who fail to understand the opportunity there, says Peek-Haynes.

“The urban market is a new frontier, and so many neighborhoods are underserved,” she said. “Many retailers and developers don’t understand where they’re missing out.” They often underestimate spending potential in neighborhoods where savings may not be deposited in banks, she says, but these areas are home to “whole groups of people who are forced to drive an hour to shop.”

Thor Equities’ Sitt agrees. “The market has grown by leaps and bounds but is seriously underserved,” he said. “Mostly, you just have to open a store in these Hispanic or African-American markets. It’s even better if you tweak the merchandise to cater to the customer, but they’ve been so ignored for so long, there’s a huge demand. Billions go unspent. Just bring your wares.”

Simply having a positive presence in a given market can go a long way toward building loyalty, says Schriber, whose portfolio includes 65 neighborhood and power centers. “The opportunity is to go into neighborhoods, buy underloved properties, remerchandise, make them cleaner, more user-friendly,” he said. “Every person, no matter what ethnicity, appreciates people coming into the community, investing in it, making it better. They’ll stay with you for that.”

Succeeding in urban and ethnic markets should be no challenge to those who have succeeded elsewhere, suggests Peek-Haynes. “You need to apply the same standards as in suburban stores,” she said. “Some retailers on the edges of underserved markets, not in them, often have not improved the store or kept it up, or have poor parking access or customer service. People get fed up.”

Into the breach
In some cases where pockets of consumers have been overlooked, nontraditional developers are filling the void. They are often giving new life to old strip centers or vacant big boxes in the process. For example, the Black State Employees Association of Texas, seeking to better serve the black middle-class neighborhood of Oak Cliff, Texas, purchased and razed a defunct mall. In its place the association built the $6 million West Cliff Shopping Plaza, which opened last year. It includes an Albertsons, a Blockbuster Video, a Subway, a HipHop Clothing store, a beauty supply shop and a café specializing in Southern cooking, among other tenants.

Similarly taking matters into their own hands, immigrant entrepreneurs are developing ethnically focused shopping centers with such names as Asian Square, Global Mall, Mandarin Plaza and Plaza Puebla. They typically cater to immigrants and first-generation Americans with specialty food stores and minority-owned independent shops. No longer confined to the inner city, like the Chinatowns and Little Italys of the past, these ethnic business enclaves are spreading into the suburban fringes of such major cities as Atlanta, Boston, Houston, New Orleans and Seattle, and also popping up in smaller cities from Oakland, Calif., to Orlando, Fla.

Mainstream retailers and developers may never be able to win those customers from the entrepreneurs who share their backgrounds and who intuit their needs without doing exhaustive research. But they can coexist, says Brewster.

“We can never do the same job as a Koreatown that focuses on the first generation in the U.S.,” he said. “They understand the dynamics better than we ever could. Be we do need to understand the second and third generations that want to be more mainstream, that look at national trends.”

Doing so, and marketing to multicultural groups with sensitivity and authenticity, requires a corporate commitment, says Ranganathan. “It goes well beyond language translation and using diverse models. It takes investment in total infrastructure. Customer service, kinds of stores and psychological aspects — the décor, the colors, the music — should all be responsive to diverse tastes. But there’s no prescription. It’s a creative process. Good ethnic marketing is plain good marketing.”

© 2010 ICSC. All rights reserved. | Terms and Conditions | Privacy Policy | Contact ICSC | ICSC Home |