Denver: Retailers court Hispanic, millennial shoppers

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Denver: Retailers court Hispanic, millennial shoppers

By John Karolefski - 04/25/2018
Two major demographic shifts are happening in Colorado. One is a surging Hispanic population, and the other is the emergence of millennials, who in 2015 became the largest generational group, surpassing baby boomers, resulting in nearly 40% of residents being under the age of 18 years old.

These factors are affecting the retail marketplace throughout the state and especially in Denver, the biggest city.

“The ethnic operators, including Hispanic formats, continue to grow methodically,” Douglas Munson, principal at MTN Retail Advisors, said. “With KKR making a huge investment in the Hispanic sector, and with the purchase/merger of Mi Pueblo and Cardenas, look for a greater investment in markets like Denver.”

But that investment will be in a rapidly evolving market. Hispanic grocery stores will likely consolidate as they have in the natural food channel. One Latino grocery chain, Rancho Liborio, closed the last of its Colorado stores in May 2017. Azteca Ranch Market filed for bankruptcy and Avanza Supermarkets recently was sold.

King Soopers, a subsidiary of retail giant Kroger, is the leader in Denver’s mass market channel with a 29.1% share, per ARM Insight. Safeway trails in grocery at 10.2%. Mass retailers and clubs collectively dominate with nearly half of the mass market business. That includes Walmart at 26.8%; Target at 9%; Costco at 8.2%; and Sam’s Club at 4.7%.

Meanwhile, there isn’t a competitive situation in the drug store channel. ARM Insight reported that Walgreens controls the business with an 86% market share. Rite Aid and CVS Pharmacy are behind at 10% and 4.0% respectively.

Whether it’s the drug or grocery channel, winning retailers are adapting their product mix, promotions and services to appeal to the market demographics that are growing — a health-and-wellness focus for millennials and Latino food and beverages for Hispanic shoppers.

“Adding bilingual signage and packaging will make shopping easier for non-English speaking customers, and will increase brand loyalty,” Ken Morris, principal at Boston Retail Partners, said. “Retailers are also expanding product offerings to appeal to various ethnic interests, including specialty food items, makeup with broader skin tones, broader clothing sizes and styles, etc.”

Lari Harding, vice president of product strategy and marketing at Inmar, cautioned retailers that first-generation immigrants are particularly sensitive to the relationship between pricing and assortment. For example, such items as mangos and papayas are typically considered by U.S. retailers to be specialty items and are priced as such. Shoppers who view these as everyday items will expect to see the products in stores and priced in kind.

“This combination of assortment and pricing can be very difficult and expensive for traditional chain retailers to manage at the store level, she said. But if retailers can identify and invest in making the right SKUs affordable, then they can make real progress in appealing to immigrant populations.”

That’s what King Soopers is doing, but its playbook also includes catering to the growing number of millennials, which is the demographic group that favors online grocery shopping and delivery more than others. The Kroger subsidiary is speeding up its delivery of online-ordered groceries to a two-hour window via Instacart, a third-party service. The moved followed the entry of AmazonFresh grocery delivery service in Denver.

The grocer also is building urban stores in Denver, as more millennials prefer an urban lifestyle. King Soopers also operates in-store pharmacies in 13 Denver stores.

“Metro Denver’s retail scene appears to be struggling, but King Soopers is the grocery store to watch,” Todd Huseby, lead partner in the pharmacy sector practice for global consultancy A.T. Kearney, said.