A Lucrative Demographic

Although the U.S. Asian population is small — representing only 5.4 percent of the total population, according to “The Shopping Experience of Asian Americans,” an August 2014 report from global market research firm Mintel — it is growing more quickly than the black and white populations. Moreover, Asian Americans’ buying power is increasing three times the rate of total U.S. buyer power and is expected to reach almost $1 trillion in 2018.

Vanna Tran, manager of multicultural growth and strategy for New York-based Nielsen, notes that 75 percent of Asian Americans are immigrants. But Asian Americans’ household size grew 61 percent between 2000 and 2013, while their household income rose 97 percent.

“Household growth is being driven by the younger median age of Asian Americans, who now are embarking on prime years of working and earning, expanding with marriage and family,” she says.

Retailers that want to target store brand product development and marketing to this important demographic need to understand the influences and motivators behind Asian Americans’ purchase decisions.

Connected to home

Even with the recent surge in household size, much of the growth in the U.S. Asian population is still coming from new immigration, a reality that is important for marketers to understand, suggests Edward Chang, president of the Los Angeles-based Asian American Advertising Federation and vice president/group director of A Partnership, New York. (The Asian American Advertising Federation helps marketers connect to the Asian American market.)

“It means they will have a different set of experiences and attitudes versus other consumer groups, and consideration must be given to the influences of the formative home country experiences,” he says, “whether it may be with brands and products, shopping habits, cultural norms, language drivers, etc. The opportunity for retailers is [determined by] the degree to which they can cater to these norms and differences.”

Although Asian Americans represent multiple countries of origin, they do share some common values and experiences, Tran notes.

“Today’s Asian Americans are trendsetters and tastemakers across a broad range of categories, from food and beverage to beauty products,” she says. “Cultural traditions and social aspirations drive Asian American shopping behaviors and are also resonating with many mainstream consumers, which increases return on investments and magnifies the business case for reaching this consumer base.”

As an example of an Asian-inspired trend, Tran points to the current popularity of sriracha sauce with mainstream American shoppers.

Chang notes that, in general, Asian American shoppers are looking for a balance when it comes to quality and value.

“They want and demand high quality and are willing to pay more to get it,” he explains. “But with an ingrained saver mentality, it drives them to seek value.”

When it comes to favored channels, Asian Americans frequent the grocery channel most often, Tran says, but also are attracted to mass merchandisers, club stores and drugstores.

“With a strong emphasis on family, Asian Americans of all ethnicities shape their purchasing decisions to reflect their larger-than-average household size and multigenerational composition,” she adds. “Balancing priorities of family care for both elders and children means they are looking for efficiency and convenience, with a focus on freshness and healthy options like organic food.”

Retailers that want to attract Asian Americans to store brand products also need to understand that attitudes and behaviors within this demographic differ according to country of origin. And not all Asian Americans are affluent.

“Country of origin definitely impacts shopping behavior because as immigrants, Asian Americans bring brand and taste preferences from their homeland,” Tran states.

Three out of four Asian Americans are immigrants, and they and their children tend to have dual identities, she adds. Although they generally speak English, they have a preference for in-language media.

“They connect a part of their identity to their inherited culture and values,” Tran explains. “About 62 percent of all Asian Americans most often describe themselves by including their country of origin.”

But despite the differences within the demographic, Chang points to universality in the group’s willingness to spend on products boasting both quality and value.

“Baby products come to mind, as Asians are willing to pay for best quality no matter where they fall on the income spectrum,” he says. “How much they can pay, of course, is relative.”

Chang believes retailers cannot and should not cater to all of the subgroups making up the Asian American demographic. Instead, they should identify and work to understand the demographics within their trading areas, then fine-tune their offerings and marketing to those Asian American shoppers most likely to frequent their stores.

Swayable to store brands

Although Asian Americans are generally considered to be brand-loyal, more than a third of them consider themselves to be “swayable shopaholics,” Tran says, meaning they are willing to switch if the product/brand proposition wins them over. Value-minded store brands that emphasize quality on both the product and packaging sides have the most chance of attracting the attention of Asian American consumers.

“There is a perception that Asians will not buy store brands because they believe store brands are generic,” Chang says. “If your store brand packaging looks like the branded product next to it, I believe it will be viewed as a cheap knockoff, and it goes against the grain [for them] to buy it.”

But retailers that do a good job here actually could have another advantage — as recent immigrants to the United States, many Asian Americans might not even recognize such offerings as store brands.

“They may not have the base of experience with particular brands we believe are rooted,” Chang explains. “Or they are discovering a need for certain products that they did not need in their home country, so your private label brand may be just as recognized and accepted as a ‘big brand.’”

On the store brand marketing front, retailers should also recognize that more than three-quarters of Asian Americans say they like to shop around before making a purchase, Tran says. The goal, of course, is high quality at a value, but they also are willing to pay a premium for quality.

“With this in mind, retailers wanting to target store brand offerings to Asian Americans should explore deal offerings alongside product attributes,” she says.

In-language communications and culturally relevant media count, too, in store brand-related marketing efforts. Although Asian Americans are thought of as technology-savvy and digitally connected, they are heavy users of traditional media such as print, television and radio.

“For retailers, it’s not only about connecting the dots between today’s digital reality, but also understanding the cultural nuances of the Asian American consumer and the role technology plays,” she explains. “Technology can provide both a bridge across cultural and national borders and a platform on which to explore, share and celebrate Asian American identity while sustaining their native culture.”

Finally, traditional retailers need to invest in this demographic — on the store brand side and beyond — before it’s too late, Chang suggests. He’s seeing the emergence of more competition from “big box” Asian grocers offering convenient locations, a large selection and a comfortable shopping experience.

“As the Asian markets expand their offering, Asian consumers will frequent these businesses only more,” he says.