Entrepreneurship in Ethnic Supermarket Industry -Brief Description

Question: Discuss about the Entrepreneurship in Ethnic Supermarket Industry. Answer: Introduction: The ethnic supermarket industry is a niche within the retail industry. This industry is fuelled by the fact that a large population across the world are changing their geographies but still wish to stay connected to their regions, culture and heritage. The easiest way to do so is through food. Ethnic supermarkets have boomed across the world where there are large migrant populations especially in countries such as the USA, UK and Western European nations. The absence of big players in this industry has been touted as one of the best sectors for start-ups. This industry is projected to be valued at $35.8 billion in 2018. Challenges in this industry are similar to the ones in other retail sectors- employee retention, customer loyalty and theft. However, entrepreneurial activity is high and can be successful as most entrepreneurs in different countries have faced fewer barriers as compared to other industries. The possibility of succeeding in a retail venture as niche as this is relatively high but there are many crucial factors such as location, inventory management, human resources, access to investments etc. which will determine the success. A brief description of the Ethnic Supermarket Industry The Ethnic Supermarket Industry is a niche industry but has proven to be one of the most profitable industries for entrepreneurs. This industry comprises of companies that sell products mainly in food and beverages ranging from groceries, fresh fruits and vegetables, canned products to gourmet foods largely for consumption at home. These companies operate from a specific areas and locations which suit the demographic theyre catering to. As the world becomes more and more cosmopolitan with people from different cultures and countries moving and mixing in other parts of the world other than their native countries or regions, ethnic supermarket industry will continue to grow ("Ethnic Supermarkets - In Photos: 11 Hottest Industries For Start-Ups", 2016). As migrating consumers will always seek out foods from their culture, this industry will continue to exist and grow. In the United States, the key demand driver for ethnic products is the increasing Hispanic and Asian populations. These products of these two regions cover 98.3% of the industry sales. There has been over 40% growth in the population of these communities resulting in the ethic retail industry to grow at a rate of 2.5% annually. In 2011 the profit margins were reported at 2.8% while in 2015, this industry was worth over $32.0 billion only in the United States (First Research, 2015). As ethnic consumers worldwide get higher wages and travel more frequently, their interests in different ethnic speciality products is expected to increase significantly (Duff Phelps, 2016). The projections for 2018 show that the industry will be worth $35.8 billion representing a growth rate of 3.7%. Coverage of significant issues facing entrepreneurs in the Ethnic Retail and Supermarket Sector Entrepreneurs in this industry are not immune to challenges which the retail sector faces worldwide. Start-up businesses have had to deal with the global recession. When the consumer behaviour and buying power changed in 2008 due to the recession, there was a significant impact on the ethnic retail business leading to a fall in the earnings and profits by 2.8% and 1.2% respectively (IBIS World, 2015). Amongst other challenges that entrepreneurs face in this industry the most prominent are the following: Theft- As would be the case with any retail organisation and operation; small ethnic retailers have to deal with customers and workforce stealing their stocks (Ray, 2015). Typically retailers have always considered a buffer amount to deal with lost inventory. According to the National Retail Federation, in 2012, over 95% of the retail organisations participating in a survey mentioned that their operations were affected by organised thefts from warehouses, transport vehicles, stores and virtual shopping gateways (IBIS World, 2015). This would hold true for entrepreneurs in the ethnic supermarket industry as well. Customer Loyalty- Ethnic supermarket industry, being a niche market, still has competition (Ray, 2015). As an entrepreneur, one must be aware of building customer loyalty. Pricing, service and inventory is crucial to continue to attract customers (Krafft Mantrala, 2010). Customers always look for convenience and lower prices. For example, if a competitor allows online purchasing and ordering the customer loyalty might get substantially shifted. Therefore as an entrepreneur in this industry, it is important to keep up with the latest trends in terms of technology, pricing and service at the foremost (Khojasteh Raja, 2016). Employee Retention- With new businesses being established, it is a challenge to find an experienced workforce to support the organisation. Much like the entrepreneur, the workforce comprises of inexperienced people who are looking to gain fresh experience. This leads to a higher turnover of employees and indirectly affects the customer also. In retail, especially, human resource attrition has been a major cause of concern (Krafft Mantrala, 2010). The ethnic supermarket industry is not immune to this challenge either. With limited avenues to explore within this segment of the retail industry, employees often gain specialised experience in this industry before joining a different segment of retail to capitalise further on their speciality. The National Retail Federation mentioned that even in a recession hit job market, the turnover percentage for large retailers was between 70 -80% (IBIS World, 2015). Therefore for start up businesses the number would also be significantly high. Acco rding to a leading daily in the United States, it is important to retain employees and this can be done by providing the workforce with adequate skill development and remuneration (Ray, 2015). Entrepreneurial activity in the Ethnic Supermarket Industry The retail business in general sees a lot of entrepreneurial activity across all industry segments. With no big players in the ethnic supermarket segment, the scope for entrepreneurship is vast. Entrepreneurs typically arise from immigrant communities in the specific countries (Khojasteh Raja, 2016). Asians and Hispanic supermarkets in the USA, European or American retail stores in South East Asia as well as South Asian supermarkets in the UK are examples of ethnic supermarkets in different regions of the world which have large migrant communities. Some of the start-up businesses have demonstrated break through performances as they have built business strategies around two facets- nonlocal and non-ethnic, though this is largely dependent of human and financial resources of the organisation. There are two ways in which businesses in this segment have proved to be successful. First, they start out in local areas and gradually venture out to global markets which take time and patience. Otherwise, businesses right from the beginning aim to serve national or global ethnic markets (Plunkett, 2010). With recent advancements in technology, entrepreneurs can break into diverse geographies into co-ethnic markets without necessarily breaking out into non-local markets. Taking the example of the South Asian community in the UK, who have traditionally established businesses in the retail and restaurant sectors. Asian retail organisations account for 75% of all independently owned retail outlets in the UK (Basu, 2010). The main reasons for this concentration are as follows. Firstly, ethnic food and beverage retail and restaurants is the most alluring business option for immigrant populations. Since food is one of the basic commodities that connect immigrants to their home country, the market is already well established for a break in. This consumer segment would be exclusive and would appeal to the intended consumers easily as the products would be the same as the ones consumed in the consumers home countries. Secondly, a lot of South Asians in the UK came there with prior experience in retail and distribution as they moved from Africa where they established ethnic retail businesses (Basu, 2010). Thus setting up a similar business in the UK was simpler and more logical for the community. Thirdly, ethnic retail offered far lower entry barriers for immigrant entrepreneurs as compared to any other industry. Ultimately, since entrepreneurs have the tendency to launch businesses that are inspired from their previous work experiences and since many South Asian immigrants had previously worked for co-ethnic employers, entrepreneurship in ethnic supermarket industry was relatively easier for most aspiring entrepreneurs. A small but noteworthy number of South Asian retailers have been featuring in the annual Rich Lists published by daily newspapers (Basu, 2010). This establishes the importance of the above mentioned factors in the entrepreneurship activities in the ethnic supermarket industry in the UK. This would transcend across geographies as well. Factors influencing the probability of success of new ventures The factors which influence the probability of success of a new venture in the ethnic supermarket industry are similar to any to other segment of the retail industry. Any start-up venture in this segment should take into account the following factors to ensure success. Location plays a crucial in determining the success of the venture. Entrepreneurs should identify the right locations to ensure maximum traffic count. An ethnic supermarket should ideally be next to a non-competitive ethnic retail store so that there is a steady flow of potential customers in the area bringing in walk-in crowds and immediate returns. Inventory and merchandising is equally important and key for success of retail entrepreneurship especially in this segment as most goods are sourced from other regions of the world. Hence, keeping track of stocks and keeping up with trends in the home country should be done meticulously to ensure that all clients of the store are able to find what they are looking for easily (Heard Woolf, 2003). Human resource management is essential to sustain the business. Start-up organisations will rely on a younger and inexperienced workforce but the employees should be chosen in a manner so that they accentuate the business further (Smith, 2005). Employees should be eager to learn about the business and its operations. Without a tuned-in workforce, the organisation will not be able to achieve its business goals satisfactorily. Customer service is the ultimate key to success (Smith, 2005). People coming into an ethnic supermarket either come with a sense of nostalgia or with an eye for discovering new products. Customer service should be designed and carried out in a way to enhance to their experience. Each customer should be treated equally and with fervour so that it lures them back to the establishment. Business planning and marketing on a large scale may not be the most crucial factor when it comes to ethnic supermarkets as they usually cater to smaller segments of society but it is nevertheless important. Business planning and marketing should be done keeping in mind the organisational vision as well as the long and short term goals. Access to investments is important for any retail start-up. With ethnic supermarkets, the management should understand the requirements of potential investors and model their business approach accordingly so that they can create an integrated outlook which appeals to investors across different geographies and segments ("Critical success factors - 8 key elements for a successful venture - www.entrepreneurstoolkit.org", 2016). If the organisation is able to establish a stronghold on the elements mentioned above, the probability of success of the venture will improve. Recommendations While starting a business in the ethnic supermarket industry, entrepreneurs should take the following recommendations, as has been described in the above sections of the report, into consideration. The location of the business is of primary importance as it defines the clientele that the business will be interacting with and catering to. Keeping up with the trends of the native geography will give the ethnic supermarket a competitive advantage. The advantage of bringing new trends to a different geography will bode well with clients who look for newer ways to connect with their native countries. Customer service is important in any business, especially in retail. In ethnic supermarkets, many customers might not be aware of the products as they might not be of the particular migrant community, so helpful and attentive staff will definitely create a positive impact on the customers psyche. Business vision should be defined during the conception of the business model. As an entrepreneur, one must have clarity on whether he or she is going expand the business locally or across different geographies. With the absence of big players in the ethnic supermarket sector, the possibility to create a more global footprint is easier given the increasing mobility of people across the world. Conclusion The ethnic supermarket industry may not be as competitive and rigorous as regular retail but it comes with its own set of challenges and opportunities. Entry for entrepreneurship is easy but to sustain a business in this industry will take dedicated effort and remaining up-to-date with the latest trends and technologies as well as maintaining other salient features of a dynamic business operation. The success rate is high but the operations of the individual businesses tend to be limited to certain geographies. A more global approach will definitely add value to the business and improve the possibility of succeeding to a much greater level. References Basu, A. (2010). From 'Break Out' to 'Breakthrough': Successful Market Strategies of Immigrant Entrepreneurs in the UK.International Journal Of Entrepreneurship, 59-81. Critical success factors - 8 key elements for a successful venture - www.entrepreneurstoolkit.org. (2016).Entrepreneurstoolkit.org. 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