Ethnic grocers challenged by chain stores - American Independent Business Alliance AMIBA

Friday, Sept. 2, 2005

Diversity is their specialty
Ethnic grocery stores struggle to compete with supermarket chains

by Jamie Rosen
Special to The Gazette

After a customer requested pork sausage cooked without plastic wrap, Kim-Ha Ly, owner of An Binh Oriental Grocery and Deli in Wheaton, began supplying the store with pork sausage cooked in banana leaves.

Ly, like other small ethnic grocers in Maryland, is facing increasing competition from supermarket chains, so she tries to distinguish her store by providing better customer service: spending time with her customers and doing her best to stock the products they request.

Mainstream grocers, such as Giant Food LLC of Landover, are offering more international items in response to consumer demand and to try to offer one-stop shopping to a growing base of customers who buy East and South Asian, Hispanic, African, Caribbean, Middle Eastern and other foods and products

Ethnic supermarkets that have moved into suburban Maryland in recent years have thus fueled the competition by carrying foods from a variety of nations.

The market for international foods is growing substantially. U.S. retail sales of Hispanic foods reached $4.4 billion in 2004, a 55.5 percent rise from 1999, according to Packaged Facts, the publishing division of New York market research company MarketResearch.com. Revenue from Asian foods hit $3.3 billion last year, a 27 percent increase from 2000.

The Hispanic and Asian markets are projected to top $7 billion and $4 billion, respectively, by 2009. Packaged Facts does not break down the data for individual states.

Part of that increase stems from the nation’s growing ethnic population, analysts said. In Maryland, for example, minorities increased 12 percent between 2000 and 2004 to 2.3 million, according to the U.S. Census Bureau. They accounted for 41.3 percent of the state’s population last year, up from 38.7 percent in 2000.

Prince George’s and Montgomery counties were responsible for 41 percent of Maryland’s increase in minority population since 2000. Both counties have minority populations greater than the statewide average, at 83 percent for Prince George’s and 45 percent for Montgomery.

Many more minorities are starting their own businesses, including grocery stores. The number of companies owned by minorities in Maryland rose 38 percent to about 115,000 between 1997 and 2002, according to the Census Bureau.

That was much faster than the 11 percent jump for all businesses. Sales at minority businesses in the state increased 26 percent to $14.6 billion during that time.

Another factor is the demand to try more exotic dishes from traditional meat-and-potatoes shoppers, said Jeffrey W. Metzger, publisher of Food World, a Columbia, Md., trade publication.

‘‘It’s a growing area not only because of the growing population diversity in Montgomery County, but because I think even American shoppers, U.S. shoppers, are experimenting also with more international cuisine,” Metzger said.

Smaller grocers struggle against larger chains

Han Ah Reum Asian Mart, a 17-store chain headquartered in Maspeth, N.Y., is one of the success stories in the ethnic grocery industry. Since opening its first Asian market in New York in 1982, the company has spread into Maryland, Virginia, New Jersey, Pennsylvania and even Georgia, with the opening of its latest store last fall. The Wheaton and Baltimore Han Ah Reum stores opened in 2001, and there is a distribution warehouse in Laurel.

Another successful chain, Rhee Bros. of Columbia, which was founded in 1976 in Silver Spring, has grown to not just operate stores but to have a booming wholesale distribution business with more than 10,000 products shipped to some 1,500 stores worldwide. Rhee stores include those in Silver Spring, Rockville and Ellicott City under the Lotte brand.

The spread of such ethnic chains hits local grocery stores such as An Binh in Wheaton.

‘‘I struggle to survive,” Ly said. ‘‘From the time of the Korean supermarket [Han Ah Reum], it has been harder.”

When Ly’s cousin opened An Binh, then called My A, in 1983, his business prospered because no other grocery stores sold Vietnamese rice and fish sauce or other Asian products, Ly said. But now, these items are common in both supermarkets and independent grocery stores.

Ly’s cousin sold her the store in 2002 when competition was difficult, she said, adding that several other Asian stores closed around that time.

Competition has also increased for Hispanic markets, said Maria Saavedra, who owns La Salvadoreñita on Georgia Avenue in Montgomery County with her husband. When the store opened in 1995, most of the products were exclusive to Latino stores, Saavedra said.

‘‘[Now] you can find everything everywhere,” she said. ‘‘Even Giant has everything.”

Giant and Safeway have been involved in the import industry for decades. But representatives of both chains said their stores recently expanded their international lines.

‘‘About a year and a half ago, we expanded our international foods department to include more products which encompass kosher products, Hispanic products and Asian products,” said Barry F. Scher, a Giant spokesman. ‘‘All of our new stores and stores that undergo major remodeling will feature more international foods.”

Still, grocers such as Giant and Safeway, a Pleasanton, Calif., grocer that has more than 75 stores in Maryland, have limited floor space and focus on the basic, popular items. Specialty markets will continue to carry a greater variety of ethnic products, officials from those stores said.

‘‘I think we are providing some level of competition, but at the end of the day, they’re going to continue to survive largely because they’re able to do what we can’t, which is to provide those very unique items that in our marketplace only a small percentage of our customers would buy,” said Craig Muckle, a spokesman for the Eastern Division of Safeway.

Finding ways to stand apart

To distinguish her store from some of the larger Asian markets, Ly offers international calling cards, Vietnamese newspapers, embroidered Vietnamese handbags, tablecloths and sheets, bowls, plates, blankets, teas and Vietnamese foods.

She also converted one side of the store into a restaurant. ‘‘I think [with] just groceries, we cannot survive,” Ly said.

Saavedra said her primarily Latino clientele probably prefers her small grocery for its Hispanic culture and convenience.

‘‘Sometimes they like to speak with the same language, or maybe they don’t like to go to the big lines in those big markets,” she said. ‘‘Some of them don’t speak English. Maybe it’s in their way.”

Le Nguyen, a deaf resident of Takoma Park, said she sometimes goes to An Binh for the personal contact. She has conversations with Ly in which Ly writes to her and she talks back.

‘‘They are very friendly,” she said. ‘‘I feel lonely, so I go to [a Vietnamese church] and come here.”

Ly said her attitude and availability help her retain faithful customers. ‘‘If they don’t know about a product, I can spend time to talk to my customer,” she said. ‘‘Many customers call and say, ‘I’m cooking, can you help me?’”

Bestway Supermarket D.C. was founded in 1979 as a grocery store in Washington, D.C., that catered mostly to Hispanics. It has since branched out to numerous stores, including ones in Hyattsville and Silver Spring, and products from a wide variety of ethnic backgrounds.

‘‘People from all backgrounds shop here,” said Hyun Cho, manager of the roughly 8,000-square-foot Best World Market that recently opened in Hyattsville in Prince George’s County. Best World is affiliated with Bestway. ‘‘Sales have been going well.”

Frederick has also welcomed a few ethnic grocers in recent years. Those include Tropical Supermarket, which formed earlier this year by an Urbana couple, Fatime Traore and Sekou Yoda. The market focuses on foods from Africa, South America and the Caribbean.

Some customers say they find the prices, as well as the variety, better at ethnic grocers than at mainstream chains.

‘‘When I look for Oriental food I come [to An Binh],” said Trang Kao, a Silver Spring resident who is Vietnamese. ‘‘Giant, they carry, but not a variety, and usually the price is higher.”

But Kap Park, president of the Korean-American Grocers & Licensed Beverage Association of Maryland, said price can be a disadvantage when it comes to competition between smaller and larger ethnic grocery stores.

‘‘If your size is small, hardly no supplier gives you a fair price that you can compete with a big store,” Park said. ‘‘Also, financially it is hard because most stores [don’t] have the kind of financial background a big store does. It’s hard to get the money from a financial institute such as a bank or loan company. In order to keep your customers, you’ve got to keep up with your competition [by updating technology].”

For many ethnic grocery stores in Maryland, redevelopment is driving up rents. Many public entities offer development and training programs, as well as small loans, to businesses that need help adapting.

While it may be increasingly difficult for small ethnic grocery stores to make ends meet, analysts remain optimistic.

‘‘I think it’s much more challenging for the so-called independent to survive and prosper today,” Metzger said. ‘‘[But] with knowledge of their customer, service and differentiation from a larger chain, the small retailer can still make it.”

Saavedra said that despite the competition, she and her husband have earned enough to send their two children through college.

‘‘We’re a small business, we’re just trying,” Saavedra said. ‘‘We survive, all of us.”

Fair Use Notice
This site occasionally reprints copyrighted material, the use of which has not always been specifically authorized by the copyright owner. We make such material available in our efforts to advance understanding of issues and to highlight the accomplishments of our affiliates. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is available without profit. For more information go to: www.law.cornell.edu/uscode/17/107.shtml If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner.