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 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 entreprenurs 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. They now account for nearly 10% of the American population. And at some magic moment in the next century, they and their off-spring -- together with America's black population -- will constitute an absolute majority of American consumers.
These new demographic trends represent just the latest chapter in what sociologist Nathan Galzer call 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. 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.
The New America arrived in the Los Angeles suburb of El Monte in the late 1960s. 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. D., 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. Working with wholesalers in Minneapolis, Adam Roth took pains to import the foodstuffs traditional to eastern European cuisine. If harvests were lean, Roth would extend credit to the immigrants as best as he could. He even taught himself Ukranian -- and in the process, taught his son a valuable lesson about markets and marketing.
Mark Roth sees in today's Mexican immigrant a grocery customer every bit as ideal as the Ukranians of the '30s. They represent a growing market, both in terms of numbers and affluence -- Los Angeles Hispanics today constitute a consumer market roughtly 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. Because Hispanics spend relatively more of their free time with their extended families,Roth focused on families. On the first weekend after taking over the stores, he brought in the star ofa popular TV show, 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 sales had doubled.
It is not surprising that such fiestas are now regularly featured at Roth's market. Even on weekdays, the Mars has more of the feel of a Mexican town square than the sterile American supermarket. Product selection, too, is geared toward Hispanics, who now account for nearly three of every four customers. In the vegetable section are cactus leaves, hot chilies, and other Mexican ingredients. The meat department has long since stopped pushing high-priced meats in favor of the chuck steak and neck bones used in many Mexican dishes. But perhaps Roth's most clever and important move was to install a tortilleria -- a baker for making tortillas -- just inside the main entrance to the store.
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. 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 sale items.
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 as the average American adult. They are also more likely to hold positions as managers, executive, 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. But many of 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. Today they constitute a prosperous consumer market, with 41% owning their own houses. 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 percent of his practice was white. A decade later, at least 70 percent 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. Once one of the strongest VW operations, the San Francisco operation had dropped near the bottom on the list of the country's 900 dealerships. For this Jewish dentist from Cleveland to build a booming trade selling German cars to the Chinese 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 and mailing fliers into middle-class Asian neighborhoods. Taking his cue from his salesman father, who had encouraged him as a youth to sell everything from shoe polish to toilet deodorizers door-to-door, Greenspan sent his salesmen out to visit shops and hangouts frequented by the Asian bourgeois.
Bringing Asian customers into the showroom, however, was the easy part. Persuading them to buy was where the real challenge began. 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 aridiculous 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, and buying decisions are 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. And to help things along, "I introduce the father to my father, and there's an immediate bond there," Greenspan explains.
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.
It's true what they say: if you pitch your company openly to minority consumers, some of your traditional customers may go somewhere else. 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. Her idea was to position it as a "natural Ben-Gay," and the logical market, she figured, was New York City-area health-food stores. But for two years Muscle Medic languished on the shelves, in need of the kind of promotion and advertising Nickolaus could not afford.
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.
Gambling on a $200,000 advertising 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.
"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 Nicholaus'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 places like Guatemala, Panama, and Costa Rica. More encouraging still were the calls that began to come in from large Anglo-owned stores, whose managers had seen the ads and heard of the customer response. "I never expected it, but our success with the Latins in Miami opened everything up for us," say Nickolaus, who now reports sales of $400,000. "It was the Latins who led us to the Anglo market."
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, of Ukranians and Mexicans and Cantonese 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.
Joel Kotkin covers the Pacific Rim and new business trends for Inc. magazine from which this is adapted.