Shelving Diversity
Journal of Property Management
By Emma Johnson
Many great American cities are known for their ethnic shopping districts. San Francisco would be nothing without Chinatown. Chicago's Greektown has been home to some of the city's favorite restaurants for decades. What would a trip to New York be without a stop in Little Italy? Even Houston's Little Saigon has an identity of its own with city-issued street signs in Vietnamese.
Ethnic neighborhoods have been home to corresponding ethnic retail since the dawn of capitalism. In almost every case, the neighborhoods blossomed organically as immigrants populated a city's given quarter, and their unique restaurants and shops attracted city residents and tourists alike. But as the United States' population becomes more ethnically diverse-and its buying power shifts among ethnic consumers-the ethnic shopping experience is changing throughout the country. Ethnic shopping centers are more the result of careful planning and market research than the result of organic growth in a given part of town. They're also geared toward consumers who have been in the country for generations, rather than recent immigrants.
As a result, developers and real estate managers must pay careful attention to their communities' changing demographics and their properties' evolving tenant and consumer bases, said Valeria Piaggio, vice president and consumer strategist of Latino topics for the Minneapolis-based market research firm Iconoculture. Doing so will keep their businesses relevant and growing, she said.
"Minority consumers are driving change," she said. "Property managers should try to keep pace with the new face of America. They can't afford to ignore this shift. For many businesses, [multicultural consumers] represent opportunity for growth."
CORRELATING NUMBERS
Currently, 35 million Latinos live in the United States. The Latino population is growing six times faster than the non-Latino population, according to U.S. Census figures. While one in every eight U.S. residents is Latino today, it is estimated those figures could be one in five by 2035, one in four by 2055 and one in three by 2100.
"In general you have to focus on where growth is coming from," Piaggio said. "If you look at the growth of the Latino population alone, there is huge growth coming from both immigration and U.S. births that needs to be acknowledged, not to mention the buying power."
Latinos spent $686 billion in 2004, according to a recent report from the University of Georgia. Between 1990 and 2009, the nation's Latino buying power will have grown by 8.2 percent annually-double the buying power for non-Latinos.
The number of Asian Americans is also growing, although their representation among other ethnic groups will stay at about 10 percent over the next 50 years, according to Census estimates.
This group, however, spends about 10 percent more per capita than the rest of the country's population. By 2010, all ethnic minorities combined in the United States will have $1.7 trillion in buying power, Piaggio said. These groups' growing populations and increased buying power make them attractive targets to shopping center investors.
In the past three to four years, several Asian-themed shopping centers have opened along the East and West coasts. In other parts of the country, Forest City Enterprises' Hispanic Retail Group is investing about $12 million to overhaul Southgate Mall on the Arizona-Mexico border to attract Hispanic shoppers. The new $6 million Lamar Crossing shopping center in Memphis, Tenn., caters to the African American community with retailers targeting that demographic.
Retailers, especially, have been paying attention to the changing demographics, and some have already established positive relationships with ethnic consumers. JCPenney, Target, Wal- Mart and Home Depot have long been favorites with Hispanics. Two years ago JCPenney reported its stores targeting Hispanic shoppers by way of merchandise, Spanish-language in-store collateral and advertising, and bilingual sales associates had revenue triple that of other locations.
"From a consumer point of view [these retailers] resonate with them," Piaggio said. "They are looking at all aspects of their business to adapt to a new consumer. They are creating a more personalized shopping experience."
BULLSEYE
Industry experts said tapping into these markets does not mean trying to replicate a street scene in Beijing or devoting a food court to taco stands. Instead, real estate owners and managers need to complete careful market research to capture their target audience's shopping habits and needs.
Piaggio said companies should conduct population surveys and consider what competing centers in nearby areas have to offer. Southwest Plaza-a Littleton, Colo., shopping center primarily attracting Hispanic and Asian American shoppers-regularly polls its retailers and customer service employees on their observations of customer behavior, and it conducts annual surveys about the center's specific demographics. To better target ethnic shoppers on a general level, Piaggio said shopping centers should make their properties destinations that appeal to Hispanic and Asian American family values. Elements might include playgrounds, places of worship, kid-friendly stores and restaurants that regularly hold specials like children's meals and childfriendly menus.
"Convey the idea of family and community," Piaggio said. "Think of the center as a community gathering." Southwest Plaza strives to be a family gathering place for its customers. Years ago management noticed Latino and Asian American families were visiting the shopping center to spend time together. Now, the shopping center hosts Friday family nights and offers children's entertainment.
The center's management also hires bilingual employees for customer service, custodial, engineering and security positions. It also pays close attention to the national brands resonating with its target audience.
"It just makes good business sense to meet the needs of the people who are using your center," said Susan Sgrignoli, CPM and senior general manager of Southwest Plaza. "As customers spend their precious money here, we work to support and value them."
Equally important to understanding numbers-driven research, is understanding cultural differences between recent immigrant consumers and the later generations that are largely assimilated into American culture. Newer immigrants, for example, tend to be driven by nostalgia.
"They want to recreate the experience they had back home," Piaggio said. "They want the feeling they had, and the real-life things and purchases they made. They want to maintain the cultural lifestyle."
The shopping patterns of second generation U.S. residents and following generations, however, tend to be more mainstream, including their tastes in fashion, wireless products, cars and music. "Latino consumers are not looking for the same thing at every store," she said. "When they're looking for an American retail format, they're looking for a cool American experience. If they're seeking a small Latino experience, they're looking for familiarity and to recreate that cultural experience."
MIXED COMPANY
To draw in the right consumers, managers have to draw in and maintain an appropriate tenant mix-one with solid national retailers as well as locally owned and operated retailers that cannot be found elsewhere.
Southwest Plaza management makes extra efforts to nurture its independent retail tenants. It employs a team to help incubate start-ups and offers new business owners access to a visual merchandiser, a marketing team and someone to help connect the tenant to contractors and other critical professionals. It also offers shorter-term leases to small businesses in kiosks and carts in the middle of the shopping center as a nimble way to test new concepts and grow businesses.
"It always adds differentiation to lease to local operators-it adds that flavor and special interest," Sgrignoli of Southwest Plaza said.
Oak Ridge Plaza, an 80,000-squarefoot center in a historically Latino section of Orlando, Fla., also strives for a healthy tenant mix and tweaks its approach to jive with the local, longestablished market.
Mez Birdie, CPM and NAI Realvest director of retail services, oversees the center. Before turning to national chains to lease space, he seeks out local and regional tenants via the city's Hispanic Chamber of Commerce and advertising in the weekly Spanish version of the Orlando Sentinel newspaper.
Birdie said while the center works to accommodate these exclusive small businesses by doing things like allowing the center's hours of operation to follow the Latin American custom of staying open later than traditional shopping centers, the small business owners learn to adapt to U.S. business practices.
"While they have their own habits of doing business," Birdie said, "the successful ethnic community adapts to the American way. Otherwise the competition will drive customers away."
Piaggio said although concessions might have to be made to help these ethnic business owners succeed, the extra effort might be well worth a manager's time and money. For example, she said the Hispanic entrepreneur tends to be connected to his community, and has a knack for identifying unmet retail or service needs and filling that gap.
Piaggio said the nation's changing demographics mean real estate managers need to be paying attention to their markets, too. She said proactively changing gears to accommodate these shifting trends not only makes business sense, but will eventually be necessary for survival.
"This is just the beginning," Piaggio said. "We are going to see these trends growing with time. It's smart if business owners and managers are aware of these trends. They shouldn't just be reactive, but they should be prepared to face this business reality."
© Institute of Property Management/Emma Johnson