A new wave of immigration is changing the complexion of the American consumer market, turning 'minority' markets into 'majority' ones
NINETEEN YEARS AGO, MARK ROTH left his job as manager of the food division of a chain of discount stores to take over a dying food market in a working-class section of Los Angeles. Within a week, he had doubled sales at the store, which now serves as the base for a specialty-food business with customers throughout the Southwest.
In 1981, orthodontist Ron Greenspan assumed ownership of a lackluster Volkswagen dealership on San Francisco's "auto row." With a radical change in marketing strategies, he transformed it into the second largest dealership in America.
Harriet Nickolaus, a mother of three from Greenwich, Conn., had virtually no marketing experience when she started peddling her homemade Muscle Medic ointment. Yet with a healthy advertising budget and a change in market focus, she increased her sales last year tenfold and opened up important new export markets.
These three entrepreneurs have two things in common. They are all white, native-born Americans of European descent. And they all have positioned their businesses to ride a wave of recent immigration that is radically changing the complexion of the American consumer marketplace.
Forget seniors. Forget yuppies. Forget female professionals. For sheer numbers and purchasing power, it is immigrants, most of them now from Asia and Latin America, who represent the fastest-growing domestic markets. While Asians and Hispanics were only a few drops in the national melting pot just 20 years ago, they now account for nearly 10% of the American population. And at some magic moment in the next century, they and their offspring -- together with America's black population -- will constitute an absolute majority of American consumers (see charts).
You don't need a futurist's crystal ball to catch a glimpse of the New America. In New York City, Hispanics are about to become the largest minority group, surpassing blacks, while in cities such as Miami, San Antonio, and El Paso, they already constitute an absolute majority of the population. San Francisco's Asians, about 15% of the population in 1970, already outnumber the local Anglo population by some estimates. And Los Angeles, once jokingly dubbed "the largest city in Iowa" because of its ethnic homogeneity, now boasts a hodgepodge of ethnic and racial minorities who together easily outnumber its residents of European descent.
These new demographic trends represent just the latest chapter in what sociologist Nathan Glazer calls the "permanently unfinished story" of America, a nation that continues to take in more immigrants each year than all the rest of the countries of the world combined. Immigration has always been the source of the remarkable self-renewing power of the American economy -- the source of new people, new ideas, new products, and new markets. Similarly, it has always been a source of social unrest and political discord. For U.S. business, that presents both challenge and opportunity.
The challenge is to resist the temptation to write off each wave of new consumers as a fringe or niche market, insignificant and impecunious. Such nativist insularity is nothing new -- the economic history of the nineteenth century is littered with now-defunct businesses that clung bitterly to their familiar customs and customers rather than adapt to the waves of Italians, Germans, and Russians who swelled the populations of the great cities of the East and Midwest. Today the Sunbelt cities of the South and West are favored ports of entry for the American dream. And it is no coincidence that these are the cities enjoying the highest rates of growth and newfound wealth.
To those who embrace the New America comes a rare business opportunity -- the opportunity to sell into rapidly growing, untapped markets largely free from competition. Although a handful of companies such as Anheuser-Busch, Coca-Cola, Kraft, and Campbell Soup have made special efforts to sell to the New America, big business still largely ignores it. By and large, these are still local and regional markets, and as Mark Roth, Ron Greenspan, and Harriet Nickolaus all happily discovered, they are markets just craving to be served.
"It's a whole new ball game out there," states Ed Escobedo, a Los Angeles consultant who advises businesses on marketing to Hispanics. "People have to start realizing that these new immigrants have a lot of buying power. Instead of thinking of them as undocumented aliens, maybe it's time to start thinking of them as undocumented consumers."
The New America arrived in the Los Angeles suburb of El Monte in the late 1960s. Like many communities in the San Gabriel Valley east of downtown, El Monte was changing rapidly from a predominantly white community to one that was predominantly Hispanic. To the owner of the local Mars Market, it was a transformation he wanted no part of.
"The guy simply wanted no Mexican trade," recalls Mark Roth, who purchased the failing business in 1969 for $72,000. "He didn't carry the products they wanted or the cuts of meat they could afford. He just wanted to cater to the so-called elite of El Monte. And he was starving to death."
But where the old owner saw a mere rabble, Mark Roth spotted opportunity. Back in his native Belfield, N. Dak., Roth had watched his father build the family grocery store by catering to the community of Ukranian refugees who had settled there in the early 1920s following the Russian Revolution. The majority population in Belfield -- German, Dutch, and Scandinavian in origin -- generally looked down on the Ukranians and kept them at a distance. The South Side Mercantile Co. was one of the few places where the immigrants were not only welcome, but courted.
Working with wholesalers in Minneapolis, Adam Roth took pains to import the foodstuffs traditional to eastern European cuisine. And when products like kielbasa, the Polish-style sausage, were unavailable, he made them himself. If harvests were lean, Roth would extend credit to the immigrants as best he could. He even taught himself Ukranian -- and in the process, taught his son a valuable lesson about markets and marketing.
"My father always said that the new arrival was the best customer," the son remembers. "They are settling down, so they need pots and pans and staples. And they are people on the way up. The Ukranians dominate the whole area back there now."
Mark Roth sees in today's Mexican immigrants grocery customers every bit as ideal as the Ukranians of the '20s. They represent a growing market, both in terms of numbers and affluence -- Los Angeles Hispanics today constitute a consumer market roughly the size of metropolitan St. Louis. And they spend more on food than Anglos -- $20 more per week than other shoppers, according to a recent supermarket study.
To appeal to this market, Roth started by hiring local Spanish-speaking employees, both as a way to facilitate communication with non-English-speaking customers and to tie the market to the community. Today, about two-thirds of the employees at Mars Market are Spanish speaking. And the community ties are more than simply commercial: a former box boy once counted relations to 52 different families in the area.
The focus on family has been the key to Roth's marketing efforts. Because Hispanics spend relatively more of their free time with their extended families, shopping is often a group affair, not a lonesome chore. From the start Roth hoped to turn that cultural reality to his advantage. On the first weekend after taking over the stores, he brought in Ray Walston, star of the popular TV show "My Favorite Martian," as a celebrity draw. A Mexican mariachi band provided music, and there were balloons and prizes for the kids. Some of the Anglo customers were bemused, others offended. But when the week was over, Mars Market's sales had doubled.
It is not surprising that such fiestas are now regularly featured at Roth's store. And even on weekdays, Mars Market has more of the feel of a Mexican town square than a sterile American supermarket. Aisles are gaily decorated in bright colors, and customers mingle at the complimentary salsa and chips table. Although Roth himself never learned to speak Spanish, he is a friendly and familiar presence with employees and customers.
Product selection, too, is geared toward Hispanics, who now account for nearly three of every four customers. Next to the lettuce and onions in the vegetable section are cactus leaves, hot chilies, and other Mexican ingredients. The meat department has long since stopped pushing high-priced meats, such as porterhouse and London broil, in favor of large displays of the chuck steak and neck bones used in many traditional Mexican dishes.
But perhaps Roth's most clever and important move was to install a tortilleria -- a bakery for making tortillas -- just inside the main entrance to the store. By producing hot, fresh corn tortillas, the staple of the Mexican diet, Roth gave every Mexican family in ElMonte a reason to shop in his store. Fresh burritos, tamales, enchiladas, and other Mexican specialties soon followed, and continue to give him an edge even as the large supermarket chains have finally begun to make a push for the Los Angeles Hispanic market.
Although most of the techniques for marketing to Hispanics are fairly obvious, Roth has found that nuances can also be important. Early on, for instance, Roth thought it would be a great idea to print up posters and fliers for the stores in Spanish for his growing clientele of non-English-speaking customers. But to his surprise, this offended not only his Anglo clients, but also many Mexican-Americans who had already been in the United States for a generation and resented being lumped in with the recent arrivals. His solution: print fliers in English, but use large pictures to illustrate the items on sale.
"When we started all this, people asked us, 'Why are you catering to those wetbacks?" Roth explains, "The payoff is that we have built credibility with these people over all these years. They may not speak the language, but they sure learn fast how to use the currency."
Mark Roth's success in El Monte reflects the more traditional side of marketing to ethnics -- selling specialized food and everyday low-cost staples to first- and second-generation Americans right in their neighborhoods. But today's immigrants are not all huddled masses yearning for entry to the middle class. Many of them are already there.
Asian-Americans are perhaps the most populous such group. They are two or three times as likely to hold a college degree at the average American adult. They are also more likely to hold positions as managers, executives, or professionals. And among the Japanese, Chinese, and Filipinos, average family income already exceeds that of whites.
San Francisco has long been the capital of Asian America. During the past 15 years, Asians have more than replaced the whites who fled the city for surrounding suburbs. But the San Francisco Chinese are no longer the poor immigrant FOBs ("fresh off the boat") of the popular imagination, washing dishes in a small Chinese restaurant or stitching garments in a stuffy sweatshop, living in crowded flats on the quaint but squalid streets of Chinatown. Today they constitute a prosperous consumer market, with 41% owning their own houses. When the Brahmins of the city's Nob Hill complain about the Chinese these days, it has nothing to do with poverty, crime, or prostitution. The fear is that the Chinese are "taking over too much" of the city's property and businesses.
For Volkswagen dealer Ron Greenspan, word of this newfound affluence came straight from the horse's mouth, you might say. Greenspan, you see, was an orthodontist who opened a small practice in a comfortable San Francisco neighborhood in 1969. Back then, 70% of his practice was white. A decade later, at least 70% was Asian, mostly Chinese. "I learned fast that these folks had money when they began paying with cash," recalls Greenspan.
Straightening teeth, however, was never Greenspan's great love -- cars were. And in 1981, he bought one of San Francisco's two VW dealerships for $250,000. At the time, this was a business going nowhere. The flocks of youthful, white San Franciscans who had bought up "Bugs" by the boatload now were opting for more expensive German imports or cheaper cars from Japan. Once one of the strongest VW operations, the San Francisco outlet had dropped near the bottom of the list of the country's 900 dealerships.
It was natural that Greenspan would find former patients among his new customers. What was not so predictable is that this Jewish dentist from Cleveland could build a booming trade selling German cars to the Chinese. That required a good deal of ingenuity.
Greenspan started out by placing ads in such outlets as the Asian Yellow Pages, a popular Chinese-language advertising medium. He mailed fliers into middle-class Asian neighborhoods such as the Richmond section of San Francisco, and the nearby suburb of Daly City, with its large concentration of Filipinos. Taking his cue from his salesman father, Nat, who had encouraged him as a youth to sell everything from shoe polish to toilet deodorizers door-to-door, Greenspan sent his salesmen out into the streets of the city to visit shops and hangouts frequented by the Asian bourgeoisie.
Bringing Asian customers into the showroom, however, was the easy part. Persuading them to buy was where the real challenge began. And it was here that his experience in the dentist's office began to pay off.
"The problem is that a lot of people don't really see Asians as people," Greenspan explains. "There's a great mystique about the Asian, and how hard he is to sell. Salespeople tend to be intimidated by them."
Most intimidating was the Chinese penchant for tough bargaining over price. To the Chinese, this is simply a normal part of the business culture. But to someone more accustomed to American business -- even a car salesman -- the exchange can seem downright cutthroat.
"When the guy comes in here and makes a ridiculous offer on a car, you don't get mad," Greenspan instructed his salesmen. "You come back with something equally ridiculous and have a good laugh. Then start your real negotiation."
Another facet of Greenspan's "Asian Sensitivity Training" focused on dealings with the family. The Chinese prefer shopping in large family groups, with buying decisions usually made by the family elders. Greenspan explained to his salesmen that while the car might be for a teenage schoolgirl or a middle-aged engineer, the successful sales pitch may have to be directed to the grandfather or elderly uncle. To help things along, 75-year-old Nat Greenspan is often on hand to make the generational connection.
"I introduce the father to my father, and there's an immediate bond there," Greenspan explains.
You may think all this is fairly subtle stuff, but Greenspan's Chinese customers apparently appreciate the considerations. Largely as a result of sales to Asian-Americans, Greenspan has now boosted car sales from only 20 a month to more than 100. In 1984 and 1985, Ron Greenspan's dealership ranked second in the nation in terms of VW sales. And in 1986, it was sixth.
Three thousand miles away in Miami, Toyota dealer Richard Goldberg has had a similar success. These days, much of Miami's white business establishment has turned its back on the city's new Hispanic majority -- a popular bumper sticker of the early 1980s asked bitterly, "Will the last American to leave the city please lower the flag?" But Goldberg didn't buy the conventional Anglo version of what makes for a good American, or a good customer. Growing up in Newark, N.J., Goldberg counted blacks, Italians, and Jews among his friends. So why, he asked himself, couldn't his customers be Cuban or Colombian or Salvadoran?
Goldberg, in fact, was so convinced of the future of Miami's Cuban market that he upped and moved his dealership from the city's north side, with its concentration of black and Jewish populations, into a heavily Hispanic neighborhood just east of Little Havana. If other car dealers wanted to continue to compete for the 20% of the city that was still Anglo, so much the better, he told himself.
"We came here because it was a growing area, not because it was Hispanic," Goldberg explains matter-of-factly. "We wanted to go where there would be the most people with the bucks to buy Toyotas."
In the five years since the move, Goldberg has used most of the familiar techniques for marketing to minority consumers. Nearly 90% of Expressway Toyota's 150 employees, including much of his top sales staff, are Hispanic, and the predominant language on the showroom floor is Spanish. And on weekends, he has used every family draw he could think of -- Latin singers, clowns, acrobats, even an elephant.
But perhaps the most important changes were in Goldberg himself. When he made the move, he looked on Hispanics as business prospects. Today, he thinks of himself and his business as part of the Hispanic community. Over the past few years, Expressway Toyota has poured thousands of dollars into Latin community events, including beauty pageants and the annual Calle Ocho festival in Little Havana. Goldberg also sponsors youth baseball and soccer teams. And if, as the French philosopher once said, you are what you eat -- well, you might as well call him Ricardo Goldberg.
"Give me a Cuban holiday and we'll sponsor it," jokes Goldberg between gulps of sopon, a spicy Cuban fish soup. "I really like this culture. And I think they can tell that."
In the last analysis, that may be what marketing to minorities is really about. Be it the Mexicans of El Monte or the Chinese of San Francisco or the Cubans of Little Havana, what "minority" consumers respond to most eagerly is a level of respect that, too often, is missing in their transactions with mainstream businesses. Targeted advertising, bilingual salespeople, and special events all help to break down barriers. But their long-term value is to confirm for minorities that they are genuinely welcome and valued not just as consumers, but as people -- and as Americans.
"If the Hispanic respects you and you respect him, I think he's a better customer than the Angle," says Goldberg, whose business from repeat customers is now twice what it was in North Miami. "With the Anglo, you're always bargaining. They are interested in only one thing -- the price. They'll go across the state to save 50 bucks. But with Hispanics, if you earn credibility, that's it. Sure, we sell the car as cheap as anyone. But what makes it work is that we've created the image that if you're Hispanic, you buy your Toyotas here."
Today, Goldberg lays claim to more than half of Toyota's Hispanic market in Miami -- not bad for a city where Hispanics are an undisputed majority. As a result, sales have climbed 400% in six years, to $75 million last year. Once only 350th in sales among the 1,100 Toyota dealers nation-wide, Expressway Toyota so far this year is ranked number 22.
It's true what they say: if you pitch your company openly to minority consumers, some of your traditional Anglo customers may go somewhere else. The vaccine for bigotry hasn't yet been discovered. But it is also true that minority marketing can have just the opposite effect, providing an effective and inexpensive access to a wider, mainstream marketplace.
That's the way it has worked out for Harriet Nickolaus. A dance teacher from Greenwich, Conn., Nickolaus backed into business after concocting a homemade muscle pain-relieving lotion for her choreographer husband. Later, several friends tried and liked her mixture of water, herbs, and spices, and it was only then that she began to think of selling it to the public.
Her idea was to position it as a "natural Ben-Gay," and the logical market, she figured, was New York City health-food stores. But for two years Muscle Medic languished on the shelves, in need of the kind of promotion Nickolaus could not afford. In 1985, sales barely reached $48,000.
Then, on the strength of the response she'd received from a few Haitian friends, she placed Muscle Medic in some local bodegas, small markets that cater to Hispanics. In contrast to the health-food stores, the bodegas seemed able to move the product among Hispanics. When she learned that Hispanics have traditionally been enthusiastic customers for a variety of home remedies, she decided to abandon the health-food stores and New York and to move to Miami.
"I realized that Miami was a large Latin market with a lot of local media," she explained over drinks at The Alexander Hotel in Miami Beach. "It was a market we could really reach." Gambling with a $200,000 advertishing budget, she invested most of it in Spanish-language television, appearing herself before the camera to explain her product. Her ads were every bit as homemade as her product -- she had taught herself just enough Spanish to make the spots. But however awkward her presentation, Hispanic viewers seemed to respond favorably to an Anglo woman attempting to sell to them cara a cara.
"When I got on and said in Spanish, 'You have nothing to lose but the pain,' it really caught on," said Nickolaus. "I use a very personal approach, like Frank Perdue and his chickens. I go on and say that I made this for them. They seemed to appreciate that an Anglo woman would do that -- and say so in Spanish."
Sophisticated marketeers might sneer at Nickolaus's analysis, but not at the growth in her sales figures. By the summer of 1986, she was selling more product in a month than she had sold in a year through New York City health-food stores. At the same time, visitors from Latin America -- who number in the millions each year -- started picking up the product, and orders soon began arriving from such places as Guatemala, Panama, and Costa Rica.
The response from the Hispanic market was encouraging. But more encouraging still were the calls that began to come in from the large Anglo-owned stores, whose managers had seen the ads and heard of the customer response. Today Nickolaus counts among her customers 150 Anglo stores, including Eckerd Drug Stores, a major chain in the Southeast, which now carries Muscle Medic at all of its Florida stores, even those located outside Hispanic neighborhoods.
"I never expected it, but our success with the Latins in Miami opened everything up for us," says Nickolaus, who now reports sales of $400,000. "It was the Latins who led us to the Anglo market."
Is this simply a fluke, an isolated case of good luck? Not to hear if from the business owners themselves.
Take the case of grocer Mark Roth in El Monte, where our story began. Although Roth's Mars Market continues to be profitable, he finds these days that he is facing increasing competition from large supermarket chains that have begun to employ some of the same strategies he has long used to attract Hispanic shoppers. At certain key locations, these chains are now stocking large quantities of Mexican-style meats and produce. Some have stepped up the hiring of Spanish-speaking employees. A few have even installed their own tortillerias.
In the long run, Roth figures he cannot prevail against the giants in an industry that measures profit margins in tenths of a percent. So he has found a way to turn the trend to his advantage. Instead of remaining a competitior to the chains, Roth has decided to become their supplier.
It all started several years ago, when Roth, celebrating the opening of his new tortilleria, asked one of his employees to make a little salsa to go with the corn chips. The response of the customers was so enthusiastic that he started packaging some for his Mexican-food deli counter. Later, he happened to bring some of the salsa to a meeting of area independent grocers. The grocers ate it all -- and left him with orders for their stores.
Soon the workers in the backroom of Mars Market were churning out not only the original hot sauce, but other Mexican specialties such as guacamole and green chile sauce. Some of it he sold under his own El Burrito brand name, the rest he provided on a custom-label basis. Now, with sales last year close to $1 million and doubling annually, Roth is already making more money on his packaged foods than he is from the market. He has moved much of his production to a separate manufacturing plant several miles away. And he counts among his customers supermarkets as far away as Montreal and as close as El Monte.
All this started out of a calculated interest Roth and other grocers had in serving a growing Hispanic market. But it has now gone far beyond that. For to Roth's surprise, the largest orders for the packaged foods are not coming from stores in predominantly Hispanic sections of L.A. or San Antonio -- they're coming from Anglo merchants serving mostly upscale Anglo shoppers. Roth estimates that Anglos now account for 60% of the market for his packaged Mexican foods. Setting out to sell to Hispanics, he has found himself on the forefront of the latest American food craze.
It is, of course, a familiar story. It is the story of pizza and pita pouches, of the bagel and the croissant, of sushi and chop suey. It is a story of minorities that become majorities and majorities, minorities -- of Ukranians and Mexicans and Cantonese and Cubans who constantly define and redefine what it is to be American. E pluribus unum -- from the many, one -- is how it reads on the seal of the United States. For 200 years it has been the motto of American democracy. Now, it is a political creed that translates nicely into a marketing strategy for American business.