EAST LOS ANGELES -- Piled high in the produce bins of this Tianguis supermarket, there are so many varieties of chili peppers -- Arbol, Nuevo, Pasilla, Mexico, California, Amarillo and two dozen more -- that it is hard for anyone not intimately familiar with Hispanic food to know which is hot, which is sweet, which is spicy and which is mild.

That is exactly the point.

The eight-store Tianguis chain is at the forefront of a trend now at work in the retail food industry called "microsegmentation." Put simply, the store is narrowly focusing on serving the huge, dense Hispanic population in Southern California by taking the small specialty ethnic store concept and expanding it. Most Tianguis stores are more than 65,000 square feet, the size of an average supermarket.

Owned by the 200-store mainstream Vons Companies Inc. supermarket chain here in Southern California, Tianguis has been an unqualified success, according to industry observers who have beaten a path to check out this experiment.

More than 35,000 people -- 90 percent Hispanic -- visit each store weekly. The first Tianguis stores opened in Los Angeles in 1987, taking in $23 million in revenue spread over four stores. Projected sales for 1990 are $140 million.

"We think this is an idea whose time has come," said Chris Linskey, vice president and general manager of Tianguis, which is the Aztec word for "the marketplace."

The stores try hard to mimic that marketplace mood. There are tortillerias, where fresh tortillas in corn and flour are made; wider aisles to accommodate large Hispanic families who like to shop together; and even mariachi bands and pinatas.

On one afternoon recently, the store was full of people shopping and socializing. While the crowd was mostly Hispanic, there was a sprinkling of Anglo customers looking for items not typically found in their own neighborhood stores.

Those goods are here in great number. Along with the chilies, Tianguis stocks a huge variety of Hispanic items, such as tomatillos and many kinds of chorizo sausage, salsa and Mexican cheeses. The store butchers its own meats, catering to the special cuts required in Mexican cooking.

Tianguis stores boast a larger fresh produce section than most supermarkets, and they have few frozen food selections, because many of their customers prefer to make their own dinner rather than zap it in a microwave.

Tianguis gets much of its produce locally, and other products are imported from Mexico and Guatemala.

Because there are many different Hispanic subgroups -- including those from Mexico, Central America, South America and Cuba -- that shop at Tianguis, store managers rely on customer suggestions for products and monitor buying patterns.

And they advertise heavily in the Spanish-language media. "They have done a great marketing and sales job," said Steven Soto, president of the 13-year-old Mexican-American Grocers Association.

"And its success proves that this kind of concept is here to stay," he said.

Retail experts agree.

"Almost every area of the United States has a strong ethnic group of some kind, and if stores are smart, they can be well-positioned to serve a real need demanded by these exploding populations of ethnic groups," said Tim Hammonds, senior vice president of the Washington-based Food Marketing Institute.

"What is occurring is a reflection of what is happening in the population," he said.

New technology helps. "This is a new wave of a very interesting experiment that is now possible because retailers can really identify customers with great specificity," said Jackie Bivins, marketing manager for Coopers & Lybrand's retail consulting group in New York.

"As systems improve to determine better who is buying what, supermarkets will be able to deliver exactly what a consumer wants."

Tianguis will be ready. Another new store will open in the San Fernando Valley later this year, and the company is now examining new census data to choose new locations. Tianguis targets areas that have a 65 percent Hispanic concentration in a three-mile trade area.

While the company has considered opening stores in Hispanic areas outside California, Linskey believes that there is plenty of business in Southern California. "Los Angeles alone can accommodate a lot more stores," he said. "We have not even served who is here adequately."

When the chain does expand, store officials are not worried that Tianguis stores, which are sometimes located near regular Vons units, take away business from them.

"We do really well and they do really well, since we are marketing to a different kind of customer than they do," said Linskey. "They have choice meats, lots of frozen and packaged and convenience goods ... while ours are more value-oriented." Linskey thinks the Tianguis chain has more likely hurt business at the many owner-operated ethnic grocery stores.

Retailers in other areas with large Hispanic populations, such as Houston and Miami, have also experimented with stores. One chain in New Jersey recently opened an Asian supermarket to cater to that growing population there.

In the Washington area, the success of these stores is not lost on food retailers. All the major supermarket chains, such as Giant Food Inc., Safeway Stores Inc. and Shopper's Food Warehouse, use their inventory systems to determine what products consumers are buying and all carefully scan product requests from customers.

Giant's experience so far is a good example. In Takoma Park, the chain has more Hispanic-related items because of concentrations of that ethnic group there. In Northern Virginia, Giant stores carry more Asian goods, responding to large Vietnamese and Thai populations.

Giant even stocks special items for various religious groups. With a large group of Seventh Day Adventists also in Takoma Park, the store there carries a large line of vegetarian foods. In Rockville, stores stock more kosher goods because of the heavy Jewish population in that area.

The notion of a narrowly focused ethnic supermarket will likely not come to Washington, though, because there are not deep enough concentrations of such groups.

"I don't think you have a large enough ethnic group in one place to support one store totally devoted to an ethnic group, but we try to make all our stores respond to them," said Al Mindel, director of grocery sale and merchandising at Giant. "It's just good business."