Ethnic malls are buzzing

“Customers are willing to go in and shop there even if it’s not the best price,” says David Kaplan, professor of geography at Kent State University in Ohio. “Loyalty is very important.”

Even if individual incomes are down among the minorities who make up these niche markets, their overall numbers are growing, offsetting any downturn in spending. One in 3 US residents belongs to a minority group today. The Pew Research Center predicts that number will be 1 in 2 by 2050. Hispanics, who alone account for 14 percent of the US population today, are expected to swell to 30 percent by 2050.

Minorities also wield formidable economic clout, says Jeffrey Humphreys, director of an economic and demographic forecasting group at the University of Georgia in Athens. The combined buying power of African-Americans, Asians, and native Americans was $1.5 trillion in 2008, almost 14 percent of the nation’s total buying power, according to the group.

Hispanics controlled $951 billion in buying power last year, up 349 percent from 1990. That figure for Hispanics is supposed to hit $1.4 trillion by 2013, sending manufacturers, marketers, and retailers scrambling to profit from the exploding ethnic market.

Another advantage: Immigrants tend to save more, making them better prepared to survive a recession, says Ms. Li at Arizona State. “There’s a general pattern of saving among many first-generation immigrants.... Because they tend to save more, their capacity for weathering the financial crisis may be better.”

They also tend to rely heavily on cash, one of the few protected assets in the wake of Wall Street turmoil. Since the recession began, only Asian and Indian commercial real estate projects have remained steady in his business, says Tim Cisneros, president of his own Houston commercial architecture firm, which designs restaurants, condos, and retail locations across the country. “They’re still able to work on a cash basis. They still have enough liquidity to build.”

Apart from a financially resilient customer base, ethnic malls themselves are better poised to weather a recession.

While mainstream malls are anchored by high-end department stores and ritzy restaurants – the retailers most vulnerable in a recession – ethnic malls are usually anchored by supermarkets and low-cost eateries. “Ethnic malls aren’t selling diamond necklaces, they’re selling necessities,” says Mr. Kaplan of Kent State.

What’s more, they sell services. Ethnic banks help customers with overseas accounts, money transfers, and currency exchange. Legal offices decode the bewildering process of immigration and applying for visas. Educational institutions offer language and vocational training. These services help immigrants get a foothold in their new country, but they also attract regular traffic to the mall and position it as a social support, reinforcing customers’ relationship with it.

Perhaps even more important are the sense of community and familiarity ethnic malls provide. “It provides a welcome mat for ethnic consumers,” says Legaspi. “It creates an environment where people feel welcome, a home away from home.”

Today, as battered industries and retailers begin to recover from the recession, ethnic malls are drawing attention for their resilience and growth potential.

“Ethnic malls ... are becoming increasingly important as ethnic groups suburbanize, make more money,” says Kaplan.

But the real test is whether they can segue into the mainstream market. “Will ethnic businesses be able to expand?” he asks. “Can they bust out of their protected market?”

That depends in part on whether immigrants remake American consumerism – or American consumerism remakes them.

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