Even from the street, changes are evident at the flagship store of Curacao in the heavily Hispanic neighborhood of Pico-Union in Los Angeles.
Gone are the massive Aztec statues, replaced by black marble siding. Gone is the store’s Spanish tagline, “A Little of Your Country.” Even the store’s name has changed, from “La Curacao” to just “Curacao.”
Ron Azarkman, chief executive at the retail chain, said his store has to adapt or die. Curacao’s core customers were Hispanic immigrants, but they have matured and now their U.S.-born children are the main buyers of the electronics, furniture, toys and appliances that Curacao sells. And the chain has to compete for their business.
“The major reason we did the rebranding and repositioning of our company was the second generation,” Azarkman said. “Our customers have changed their retail habits. A lot of that comes from the shift to the second and third generations.”
Inside the flagship store at Olympic Boulevard and Union Avenue just west of downtown, hip-hop has replaced the in-store mariachi music of yesteryear. The signs are still bilingual, but English is now in the first position in boldface type. Traditionally, Curacao kept its prices at or below what other nearby retailers charged. Azarkman said now the store also checks on what e-commerce sites are charging so it can compete with them as well.
Historically, the store has advertised only on Spanish-language TV and radio. Now, some of its ad budget will shift online and eventually to English-language TV.
The reason is grounded in demographics. A Pew Hispanic Center study in 2009 found that 38 percent of Hispanic immigrants could speak English well, but that number jumped to 92 percent for the second generation. According to the Census Bureau, 77 percent of American Latinos could speak at least conversational English in 2010, up from 40 percent in 1990.
Credit issue
Curacao, named after a tropical Caribbean island, has a history of targeting the needs of the Hispanic consumer. Azarkman, who was born in Iran and emigrated from Israel to Los Angeles in 1980, opened Curacao the following year. From the beginning, the store set itself apart from the competition by having an in-house credit department that offered layaway plans for recently arrived immigrants.
Most of its customers had no credit history or bank accounts, but the store found ways to extend credit based on their work history. For many Hispanics, a major purchase at Curacao was their entrance into the U.S. financial system. Since its founding, the chain has processed more than 2 million credit applications. The credit program remains an important feature. However, it’s not clear that will remain very important for future customers.
Carlos Santiago, president of Hispanic marketing consultancy Santiago Solutions Group in Burbank, said second-generation Hispanics have credit cards and no longer need the special credit services at Curacao.
“This is a challenge for their business model because it was built on offering first credit to that young, foreign-born Latino family,” Santiago said. “So really they have two challenges: holding on to that core base of older Latinos while expanding to attract the bilingual and bicultural segment.”
Curacao still plans to offer credit, but as part of the revamp it has adopted more conventional methods. Previously, the problem was customers with a lack of credit history; for the second generation, it’s a matter of correctly analyzing current debt obligations to decide if they are creditworthy, Azarkman said.
For many Curacao customers, the credit issue still looms large. Luis Martinez, 31, recently purchased a TV at Curacao. He made the trip from his home in East Los Angeles because of the store’s credit offer.
“It’s much easier to get credit here than at Wal-Mart,” Martinez said.
Santiago noted that while Curacao moves from the Hispanic niche into the mainstream, big-box retailers such as Best Buy and Wal-Mart are moving into the Hispanic market. Bilingual signs and sales personnel in some of those stores appeal to Curacao’s customers.
However, Santiago believes that Curacao’s knowledge of how to sell to Hispanics on an individual basis still gives it an advantage in the marketplace.
“Taking the time to explain to everyone in that family from the children to the grandmother how to use the product, to know which products to bundle, to simplify and make the buying process safe – that kind of special attention is very hard to find any other place,” he said. “Curacao still has a major lead but the competitors are closing in, especially Wal-Mart, Best Buy and Costco.”
Expansion in recession
Curacao changed its logo, name, décor and signage at all stores during the last week of July. The chain has 2,300 employees at 10 stores, nine in Southern California and one in Phoenix. Each store has about 100,000 square feet of retail space, compared with a typical Best Buy’s 45,000 and an average Wal-Mart store’s 106,000.
Azarkman said the stores’ sales declined with the recession and have yet to recover. He would not disclose revenue or same-store sales. The company’s business plan assumes the recession will continue for the foreseeable future.
While Azarkman doesn’t expect the economy will help his cause, he believes the company makeover will eventually increase revenue.
“Of course, we expect better business in the future,” he said. “If we look at results for the first week, the change was positive but that doesn’t mean a lot. It will take two to three years to reposition the company in the consumer’s mind.”
Curacao plans to open a store in Tucson, Ariz., before the end of the year and it is looking at several more locations to open stores in 2013.
Azarkman said the expansion is part of an overall strategy to evolve with the Hispanic market, which is still growing even as it acculturates to the U.S. lifestyle.
“We all know companies have to refresh themselves in order to survive,” he said. “Maybe this was a good time to refresh, but our purpose wasn’t to increase sales during a recession. We are in this for the long term.”
