In his book "Why We Buy," author Paco Underhill makes the case that retailers must offer customers an experience, rather than just a product. It's a lesson that Dearden's Home Furnishings stores have applied to the Hispanic market in Los Angeles.
The shift from middle-class Anglo buyers to immigrant Hispanics "started in the 1960s as management saw the changing demographics of the market," said Ronny Bensimon, chief operating officer at Dearden's. "They saw a need for the Hispanic population to be served."
As a result, the family chain made decisions that non-Hispanic retailers likely would shun. For example, rather than increasingly specializing in furniture or jewelry or electronics as most retailers do, Dearden's increasingly diversified, offering all manner of goods. Even the lighting in Dearden's stores became less formal and more festive because immigrant Hispanics tend to prefer it.
"It's a smart move," said Underhill, chief executive of retail consulting firm Envirosell in New York. "Merchants should recognize that you have to change as fast as your customers. In Southern California, catering to the Latino and other immigrant markets is good business."
For Dearden's, the first step in the changeover involved Spanish-language print advertising. Today, Dearden's spots are regularly broadcast on local Spanish-language TV. The company also publishes 12 circulars per year in addition to media buys in radio and direct mail.
In tandem with the advertising approach, the company changed its work force. "As new employees were hired, it became almost mandatory that they speak Spanish," Bensimon said. He estimates that only 10 or 12 of Dearden's 620 current employees can't communicate in Spanish.
As for the shopping experience, Dearden's puts nearly as much attention on credit counseling as furniture sales. Stores feature as many as 30 booths where customers arrange credit provided directly by the store.
"A lot of what we do is faith-based," Bensimon said. "We use some traditional methods on how people qualify, but mostly we talk to the customer and find out who they are. They are wonderful people and we can tell that they are good credit risks."
Because many of the customers have no credit history, a Dearden's purchase can facilitate entry into the U.S. financial system. "We have helped hundreds of thousands to establish their credit base," Bensimon said.
"Latinos often shop in larger family groups, and the act of going to the store is for family bonding and family entertainment, but also consumer education," said Underhill. "In Latino culture, when you extend credit, you extend it to the family, not the individual. It becomes a family commitment to pay it back."
The policy is clearly connecting. Customer Manuel Vargas recently returned to Dearden's to buy a sofa. A year ago he bought furniture from another store, but ended up giving it away. "I didn't like the furniture and they treated me badly, so I said to my wife, 'Let's go back to Dearden's,'" he said.
Vargas has maintained a Dearden's credit line since 1984. Because the store sells big-ticket items, he may go years between visits, but he estimates a typical purchase runs about $2,000.
Dearden's product lines have grown beyond furniture to include consumer electronics, major appliances, jewelry, and travel. It may seem an eclectic mix, but Underhill calls it "very targeted" because it derives directly from the needs of the customer. For example, Dearden's started offering credit for travel in 1994, a service not offered in the market at the time. In the words of Bensimon, "we're giving loans to people who are leaving the country."
The company also has an "export" service so customers can buy furniture in a California showroom and "ship" it to Mexico or Central America. In fact, the goods ship directly from a warehouse in the country.
"You have to recognize that the immigrant consumers have connections to the home country, and the ability to multi-task under one roof is just as much an issue for them as anyone else," Underhill said.
The database of customers' purchases, credit and export transactions gives Dearden's a focused marketing tool. The company tailors direct mail and telemarketing campaigns to customers based on previous purchases and the draw available on their Dearden's credit line.
Loyalty an Asset
The demographics that inspired Dearden's strategy 40 years ago have grown stronger with time. According to estimates by the University of Georgia's Selig Center for Economic Growth, national Hispanic purchasing power totaled $796 billion last year, with California claiming $202 billion. The figure is projected to reach $1 trillion by 2010. Moreover, Hispanics spend more of their money than the average U.S. consumer on furniture and major appliances Dearden's two major product lines.
Dearden's strategy of following local demographics has paid off in terms of growth. The company started in 1909 with a single store; by the 1960s when it developed the Hispanic focus, it had two outlets. Today it has seven stores with plans to open another in the Inland Empire by early 2007.
Mr. Bensimon manages the chain together with his mother, Raquel Bensimon, who is chief executive. The two have a small ownership, but most of the equity belongs to members of the extended Dearden family.
He describes his outlets as a type of department store, based on the variety of products. In terms of physical design, "most furniture stores are dimly lit with maybe some accent lighting. The community we serve wants more of a festive look bright lighting, with sofas next to the TVs. We mix it up," he said.
While unfamiliar with Dearden's, Underhill said many Hispanic-friendly stores "emulate the street market in terms of (product) discovery. They are providing better quality merchandise, higher security, and a more organized transaction process, but they still want to give the nostalgia and flavor of the experience."
Bensimon singles out the Hispanic market's tendency to return repeatedly for major purchases as one of Dearden's big assets. "They are a very loyal community, and if treated well become very loyal to a brand," he said. "We get calls all the time from people asking how to reach this market. I can tell you that it doesn't happen overnight. It takes time to build trust and loyalty. But once you've accomplished that, it's very rewarding."
Underhill concurred. "It's a community that gives back loyalty to those who reach out to it, much more than the typical middle class community, who shop where they are," he said. "If you target a lower-income immigrant, and you make the experience pleasant and make them feel welcome, they will come back."
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