Commentary

Hispanic Grocery Stores: The Quest for Innovation, Financial Sustainability

The Hispanic grocery retail sector has also taken center stage in the frenzy of merger and acquisition activity over the past year. Consumer demographics and the broader acceptance of ethnic merchandise have clearly fueled part of this activity but as growth occurs so do the operational and merchandising challenges most grocers face. Let’s look at five key issues that cross-cultural grocers will need to address to remain competitive in the age of the omnichannel shopper.

1. Diving into Shopper Marketing & Purchasing Data: From the onset, successful Latino grocers differentiated themselves by offering their niche shopper base a differentiated shopping environment and highly personalized services. As data driven-technologies evolved and the 2008 economic downturn changed the U.S. retail channel landscape, a void emerged where domestic-born Hispanic Millennials and, to a lesser extent, Hispanic Generation Z consumers now shop these stores in smaller numbers compared to older Latino shoppers. The disconnect is in part explained by the continued growth of national mass merchandisers, dollar stores and the surge of hard discounters, who provide options for younger Latino shoppers. Another reason to consider is that Hispanic grocers have not fully embraced shopper marketing as a data-driven science catalyst capable of yielding enormous benefits.

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2. Reinventing & Leveraging the Store Perimeter: The store perimeter has traditionally been the performing star of Hispanic grocery stores. Produce, meat, seafood, dairy, prepared foods and tortillerias have always been key contributors to the individual store’s P&L. As Latino shopper demography evolves, it’s essential for grocers to reinvent these strategic store areas adapting to these realities. The typical Hispanic grocery store has a distinct advantage vs. other grocers by having perimeter areas that convert to springboards promoting customized product offerings in the context of cross-cultural merchandising.

3. Prioritizing Center Store Merchandising: A key task of store management is optimizing center store merchandising. Many Hispanic retailers follow the practice of placing four or more brands of a given food category in the same shelf area. While the practice offers buying options, it hinders the retailer’s ability to price promote and benchmark margins effectively. Most grocers can benefit from merchandising directives integrating perhaps three brands and a private label choice and still be profitable.

4. The Call to Simplify Supply Chains (Layers): The increase of operational expenses is visible throughout the retail industry. A key driver of increased overhead comes from distribution processes. To equalize operational efficiencies with customer effectiveness, there has never been a better time to support IT teams to become the backbone of planning and forecasting replenishment operations based on data analysis.

5. A healthier tomorrow: An important shopper segment for Hispanic grocery chains is the Latino Baby Boomer group. This is the shopper cell that fueled the growth and expansion of practically all ethnic grocery store chains since their advent some 30 years ago and whom they remain loyal to this day. As a business opportunity, health-oriented merchandise and shopper programs will likely become highly important sales areas within the store. Just wait and see how these store sections expand dramatically over the next five years.

Disclaimer: The opinions and positions presented in this article are only the author’s and do not necessarily represent the views and opinions of the Vilore Foods Company.

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