The Rise of the Urban Entrepreneur

A focus on satisfying ethnic needs does not necessarily limit the growth and potential of minority businesses. Instead, a focused strategy can provide a competitive advantage over large established manufacturing-company players like Procter & Gamble, Safeway, and Levi Strauss, and a base from which to expand into other market segments. Inner-city-based firms can sell not only in their own communities but to similar communities nationally and even internationally, creating the opportunity for large multiunit companies. The rapid progress of Americas' Food Basket, a Cuban-owned supermarket based in Boston's inner city, suggests the potential for growth in retailing concepts that cater to local ethnic demand. In just its second year of operation, the company is profitable on annual sales of $8 million. Americas' Food Basket has developed a product mix that satisfies local demand better than mainstream supermarkets do. And unlike nearby mom-and-pop stores, Americas' Food Basket has developed a partnership with a leading national wholesaler, which helps it make its selection, prices, and services better than those of its smaller competitors. In San Antonio, Handy Andy Supermarkets focuses on the Latino market. The company has 23 stores in Texas and projected sales of more than $400 million for 1994.

The creation of retailing concepts tailored to inner-city consumers in such areas as food, clothing, toys, books, and restaurants in turn breeds opportunities to manufacture products for that market. For example, specialized supermarkets boost the demand for established ethnic-food producers and distributors like Goya Foods, a supplier of Latino foods, with annual sales greater than $450 million. Inner-city companies can also specialize as distributors for products targeted at inner-city consumers or provide professional services such as advertising and market research to outside companies seeking to serve inner-city markets.

An even more exciting opportunity presents itself when we realize that the needs and tastes of inner-city buyers represent trends that often cross ethnic and socioeconomic strata. For example, products, such as Parks Sausage, originally tailored to the tastes of African American consumers have entered the mainstream.

To capitalize on that large market opportunity, the new breed of inner-city businesses cannot be small high-cost companies. They must quickly build themselves into efficient, high-quality businesses that use the latest in technology, marketing, and professional management techniques.

Integration with regional clusters. A third potential competitive advantage of the inner city is a company's ability to leverage access to nearby regional business clusters. Boston's inner city, for example, is next-door to clusters of world-class financial-services and health-care providers. While inner-city companies are currently isolated from the regional economy, those unique regional clusters represent promising opportunities for economic growth. They create opportunities for new or growing companies to provide services and production inputs as well as the opportunity to sell downstream products and services. Proximity to Detroit's large cluster of automotive companies, for example, enabled $103-million Mexican Industries, a 1,000-person inner-city manufacturer of armrests, headrests, and air bags, to become a respected supplier by forging close relationships to General Motors, Ford, and Chrysler.

The inner city's proximity to regional clusters also offers employment opportunities to appropriately trained residents. Those jobs are usually far more practical and accessible than jobs in distant suburbs. With training and other work-force development programs tailored to cluster needs, both the regional firms and the inner city benefit.

Human resources. The fourth potential competitive advantage of the inner city lies in its human resources. Inner-city workers are often more motivated and loyal in businesses that suffer high turnover. For instance, a bakery in the heart of Boston's inner city supplies decorated cakes to supermarkets. It attracts and retains residents from the area at $7 to $8 an hour (plus contributions to pensions and health insurance), and its labor pool is one factor that has allowed the company to thrive. Those entry-level, hourly jobs represent a starting point in building a sustainable inner-city economy.

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