Although they make up just 1.5 percent of the population, South Asian Americans are unique in their purchasing power.
While some of its members arrive as university students or service workers, others enter the workforce in high-income fields such as information technology and medicine. They have founded billion dollar companies and own the majority of the country’s hotels. Many are visible symbols of the American dream, including CEOs like Microsoft’s Satya Nadella or Google’s Sundar Pichai. The average American Indian household earns more than double the US average, $150,000 a year compared to about $70,000. They pay five to six percent of all income taxes, according to a recent report.
In cities and suburbs where South Asian immigrants have flocked for business—Houston and Chicago, for example, have long attracted medical professionals—South Asian entrepreneurs have long served them with grocery stores, clothing stores and restaurants that offer food from home, imported clothing, and a place to gather and find community.
But with the growing spending power of the diaspora comes new competition for what Birju Shahclinical assistant professor of marketing at Kellogg, calls “the Indian share of the wallet.”
“You’re going to see more Indian products sold in American stores because of the wealth of Indians and their desire for consumerism,” observes Shah, citing Whole Foods, Nordstrom and Macy’s as examples of traditional retailers catering to South Asian tastes. .
This competition means that traditional South Asian retailers, such as national grocery chain Patel Brothers, will have to adapt to reach, retain and delight their customers.
Shah identifies three trends that will define the future of South Asian retail.
The development of retail hubs
Despite the diversity and class differences of South Asia’s diaspora, its retail giants serve as common spaces for customers.
“Even though, behaviorally, we haven’t completely left the caste system behind, everyone goes to the Patel Brothers,” says Shah. “From the richest to the poorest Indians, they will go to Patel Brothers to buy products.”
Not coincidentally, large grocery stores have been located near houses of worship so that people can group their regular trips to each. These places of worship—churches, temples, or mosques—play a similar democratizing role for South Asians in the U.S. Moreover, when Indians and other South Asians gather for worship and social intercourse, they also exchange valuable information—what might be called “compromise flow.” or “edge” in another context.
“You hear everything there in the temple,” says Shah. “You hear all about where they get the best puris, where they get their best clothes, where they get religious objects or beads.”
Instead of trying to reach out to non-Indians, big Indian retailers like Patel Brothers are focusing on having a bigger footprint and offering more to their core customers by creating retail hubs. For example, major Indian real estate groups have bought malls in areas with high South Asian densities, turning those locations into destinations with other culturally relevant offerings, such as Indian fast food chains, travel services, clothing stores, and medical offices. “These are similar in spirit to Eataly,” says Shah.
With such a strong understanding of their core customers, these retailers will continue to be able to monitor the ground to gather valuable insights. The opening of a particular temple may indicate an influx of people from a particular area, for example, so a local grocer will count on those customers when stocking the shelves.
“One year it’s North India, another year it’s West India, another year it’s South India,” says Shah. “For retailers, this means that the mix of products and packaged goods changes over time.”
Marketing that goes beyond the transactional
While doubling down on serving existing customers through retail hubs could be a winning strategy, Shah believes retailers should also think more creatively about marketing.
Previously, he said, many retailers, including Patel Brothers, traded in a very transactional way: the new Diwali fashions are in, this season’s mango crop has arrived. But Shah fears that won’t cut it in the future.
“We are in a new phase of loyalty now for Indian consumers, so it is necessary to differentiate a deep consumer context,” says Shah. “If a new grocery store comes out and it’s the same quality, everyone will shop there even if the prices are the same.”
Shah predicts that individual retailers will begin to bundle and cross-sell a more holistic concierge-driven experience to targeted communities. This will allow them to personalize products, services and insights to these specific consumer segments to foster a more personal, holistic connection with a retailer’s brand.
“Not only do you get your groceries here, but you’ll get your medical and travel concierge here, you’ll also get your specific financial credit card that’s also linked to your family in India, allowing for convenient ways to send money back,” he says.
He also predicts that retailers will have to find creative ways to target specific subgroups within the diverse South Asian diaspora. Currently, retailers like Patel Brothers have failed to offer online shopping. But Shah suspects that will eventually change, albeit “in an Indian way”. This could mean partnering with an Indian Uber driver who can pick out the right groceries and deliver them, or deliver ready-to-eat foods or meal kits that could be specialized by region.
“Or a personal shopper who shares your background or religion will target you for your personal shopping experience,” he says. “Similar to Dabbawala systemit will be arranged so that there is a person from a particular region of India who does this.”
Development of new consumers
Shah also points to broader economic and genetic trends that are likely to change both retailers and the products on their shelves.
For example, India’s projected economic growth may be a headwind for South Asian retailers in the U.S. As more Indian consumers have their own spending power, Indian companies that currently export food, textiles and other products to the U.S. may to prefer to serve their domestic market. That could force US-based retailers to turn to China or Mexico for substitutes, meaning customers could notice that the products they’re familiar with aren’t the same as they used to be.
“As sales and consumption in India increases, it can be difficult to sustain,” says Shah.
Even the products and services developed by members of the diaspora are likely to change over time.
While the first waves of South Asians who immigrated to the U.S. often used food and other cultural markers to connect and create community—a mom might make samosas and bring them to her temple to share—subsequent generations born in America is interested in selling these cultural gems for their community and beyond.
“A lot of first-generation entrepreneurs just want to serve something they’re used to cooking at home to all their friends, and they want to give it to their temple community,” says Shah. “The second generation thinks 100 percent in brands.”
Shah also sees it third generation of South Asian Americans doing business differently than their parents. While previous generations kept family businesses close, younger Indians are more open to conducting business with partners beyond the diaspora. Some are selling their family firms to private equity groups, while others are simply making deals outside their kinship group or caste.
“There is a behavioral change in business,” he says. “As more South Asian entrepreneurs expand, their products will be more widely available, there will be more brand options, price levels and niche products in categories like probiotics, organic foods,” says Shah. “This will require stronger marketing and branding efforts.”
Chai Baby, for example, sells $6 bottles of tea. The drink itself is not much different from other spiced milk teas that Shah drank regularly at home, except for its branding as a handcrafted local product, which is intended to give it crossover appeal to non-Indians.
“We all drink chai tea, right?” he says. “It’s the same thing that everyone else is selling, but the brand mentality is kind of huge for its marketability.”
With India’s explosive economic growth—and the growth of its affluent diaspora—can South Asian retailers and entrepreneurs become national players?
“There are many opportunities for individuals to follow this trend. And there’s no sign of it slowing down anytime soon.”
