El Colmadito Internet Market Segment Paper

By: Eduardo R. Zayas-Quiñones

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Abstract: This paper discusses services provided, target market segmentation and penetration into Hispanic households by "El Colmadito Internet" and provides a quantitative assessment and perceptual map of its market potential.

Company Name and General Overview: "El Colmadito Internet" which translates to "The Little Grocery Store on the Internet" is an independent broker, Internet based marketing and online sales business catering to the needs of working Hispanic women for purchase of a wide range of non-perishable Goya, La Cena Fine Foods, Iberia and several Hispanic foods not available at most groceries stores.

Geographic Location and Operations:
The company is home based in Elkridge, Maryland with corporate headquarters located at 9137 Washington Blvd, Elkridge Maryland.

Overall business administration, Web page development, upgrades and required product prices or purchasing updates are performed at the Elkridge, Maryland location. From there, changes in Web content are performed through Netfirms.com, a commercial Internet Web Hosting company for a fee of approximately ninety dollars ($90.00) per year.

Website promotion is performed via Scrubtheweb.com, a service dedicated to analysis of Web page content, optimization and suggested of key words, and promoting of the company's domain name and associated Web Page on hundreds of search engines on the Internet like Google and Yahoo using "search robot technology". There is no cost associated with the service - their money is made through advertisement on their Web page.

Payment for purchases via credit card is performed through ClickBank.com, an Internet based intermediary who takes care of electronic credit card transactions at a fee of one dollar ($1.00) per order plus seven percent (7%) of each sale.
Tracking and shipment of orders is also performed from the Elkrigde location. Orders entered are received here as emails from Clickbank with all the appropriate order and shipment information in it.
Products are stored at a nearby storage facility at a cost of three hundred dollars ($300.00) per year.


Company Objectives:
The company's objective is to meet the needs of Hispanic women employed in Managerial / Professional and Technical Sales and Administration occupations throughout the United States by providing them access to non perishable food products online which are normally found in small sections on large grocery stores, some which require "out or the way" trips to specialty food stores and even some which can only be purchased through families and mailed from their countries of origin all in one convenient location and at a very competitive price. The products can be shipped through a wide variety of customer options ranging from regular third class parcel through guaranteed next-day delivery via UPS.

The company wishes to represent and promote a "community store" look and feel in its bilingual (English and Spanish) Web page, providing nutrition information and an opportunity for customers to share some of their favorite recipes and comments.

Company Resources:
Company assets and resources consist of one self-employed owner, his laptop, a high-speed Internet connection and five thousand dollars worth of products in stock.

Mission Statement:

Company's basic values and philosophy - "Colmadito Internet" is dedicated to the marketing, sales and speedy delivery of high quality non-perishable groceries to Hispanic women via the Internet.

Corporate vision - The company vision is to provide Hispanic women access to a larger variety of favorite brand name products and delivering these quickly.


Needs Assessment:
According to the U.S. Department of Commerce Bureau of the Census, the Hispanic population in America is on a steep rise. It is estimated that the population of Hispanics will reach 63 million in 2030 and 88 million by 2050.

A number of 7.4 million Hispanic families live in 6 million Hispanic households, and on 47% of these according to year 2000 estimates there is one computer. The great majority of women in these homes continue to fulfill the traditional tasks of grocery shopping and cooking meals for the family. Fifty seven percent (57%) of women are part of our country's workforce - that's an estimated 9.8 million Hispanic women, mostly in the ages of 18 to 64. The majority of these women outnumber men in Managerial and Professional Specialty (16% Hispanic Women vs. 11% Hispanic Men) and Technical, Sales, and Administrative Support (39% Hispanic Women vs. 15% Hispanic Men) jobs. This translates to approximately 5.4 million Hispanic women working in jobs that provide familiarity in some fashion with computers and the Internet. The majority of Hispanic women in the workforce earn annual incomes of $30,000.00 or less. According to a report published by Vertis Corporation examining holiday shopping trends found that the greatest increase in Internet utilization for online shopping took place in households of annual income of $30,000.00 or less with over 63 percent of these doing more Internet shopping.
The majority of Hispanic foods are still hard to find. Small selections of these can be found in some major grocery stores while many condiments and foods require shopping at hard to find specialty stores and at a very high cost. Time is a rare commodity for these members of the workforce and professionals as well. Being able to order these products used in preparation of meals for their families while saving time and money would appeal to many of them.

Most Hispanic households will purchase their non-perishable foods wherever these are available. In some cases it may take that extra long drive out of the way a few times a month to get whatever is needed at a very high cost. In many other cases, Hispanics rely on their families who live abroad to purchase and mail these goods. I have witnessed this in many military communities overseas where the commissaries stocked Goya and other brand name products but where never able to fully satisfy the customer needs. Here, as I have observed Hispanics still get what they need through their families via mail no matter at what cost.

Overview of competitors: The first segment evaluated was Internet based competition. After numerous searches on the internet looking for food retailers that catered to the Hispanic population only one worthwhile competitor was identified, www.mexgrocer.com . This individual company's web page provides an extensive selection of canned goods, sauces, olives and capers, condiments and spices, candy, and toys but only in types and brand names, which are specific to consumption by Mexicans.

Another consideration in competition is why would an individual not purchase from a food manufacturer or distributor. After evaluating the presence of Goya Products, a leading manufacturer of Hispanic non-perishable foods for the business on the Internet, it became clear that the company's only portal to cyberspace, www.goya.com only provides information about the company, names of approximately 9 distributors over the United States, Spain, Dominican Republic and Puerto Rico, press releases and recipes. Further analysis of availability or accessibility of Goya product distributors in the US and abroad showed that none of these have an Internet presence. La Cena Fine Foods, another major Hispanic non-perishable Hispanic food manufacturer had no Internet presence at all.

As a result of this analysis, I conclude that the only competition would be provided by a dwindling number of small specialty retailers who are being driven out of business by major grocery stores and therefore present little risk to El Colmadito's ability to penetrate the Hispanic household market. Very few major grocery stores in turn carry a good or wide selection of Hispanic products. Even where Goya has introduced a dedicated product shelf concept and succeeded in achieving larger sales than it's competitors, the fact still remains that even if Goya was to place all available products in one single isle it would still not be able to provide all of the popular foods, and condiments desired by Hispanics - Goya makes only some of them. In addition, a lot of the can goods they package are already available at stores under other brand names. Some of these are chick peas, pinto beans, black beans, red beans, rice, spices and sauces. Where Goya has been able to capitalize at these stores is the fact that the majority of these canned goods happen to be displayed with Goya's label next to very few hard to get ones like "Sazon" condiment, "Annato" seed and deserts like guava paste or food coloring products. Because the major grocery store would normally cater to customers within a small geographic area they would not be able to provide the needed and desired products in sufficient variety at a profit. Therefore, major grocery stores also present little risk for El Colmadito.

Market Penetration:
According to a report recently published by Insight Research Corporation in it's website www.insight-corp.com, Hispanics and Asians in America are more likely to be online than Caucasians and African-Americans. Statistics provided recently for year 2000 by the Census bureau have caught corporate America off guard. The reality of our country's demographic make up is that Hispanics have surpassed the African-American population as the largest minority group in America. This does not include the population of Puerto Rico which consists of an additional 3.8 million Hispanics and who display an equal fast growing pace in Internet presence and utilization.

According to an article published by May Wong in the Associated Press several computer vendors and Internet Service Providers (ISPs) have rallied to meet the increasing demands of Hispanic customers. Gateway drew 20,000 customers to a small store in Stockton, CA by inviting boxing champion Oscar de la Hoya.

The "Digital World and the U.S. Hispanic II" study conducted by Cheskin Research states that the rate of growth of Hispanic household computer penetration over the last two years is 80 percent. This is a substantial increase over the last few years and rates higher than even the over all market which was only 21 percent. The report goes on to tell us that that Hispanics still find that shopping is a main reason for using the Internet and 60% use the Internet for reasons other than email. The big challenge here is how to reach the potential customer. This must be a very diversified approach requiring a lot of legwork.


Here are some ideas:

A good way to reach many Hispanics in high-density areas is through the radio particularly in stations that broadcast Hispanic music and sport events. Advertising a web page over radio particularly one with a catchy name will yield good results.

Hispanics, according to Cheskin Research favor Yahoo as their top ISP. Popup adds on Yahoo should provide a substantial return on investment dollar with 68% of Hispanics preference.

Population of Yahoo, Google and other search engines with links to my Web page will also yield good results.

Finally, spam mail using subjects in Spanish would help get attention.


Psychographic Profile of the Consumer Population:
According to a report published by Cheskin in September 1998, these are key psychographic characteristics of the Hispanic population.

a. Cultural Values. Hispanics enjoy spending time with their families and loved ones. The introduction of the computer and it's ability to help them organize is perceived as a way to help them spend time with their families.

b. Social Necessity. Hispanics feel that an individual must learn how to use computers in order to get ahead in society and at work.

c. Social Connectivity. Hispanics feel that introduction of computers into their homes helps them stay busier communicating with others on the Internet and even with families in their countries of origin.

Frequency and Sales Estimate:
According to The Wall Street Journal, Tuesday July 9, 2002 ed., "Hispanic Food Firm Goya Scores With All-in-One-Aisle Approach", there are two very important purchasing characteristics of Latinos.

First, Hispanics are very loyal to their food brands. Goya, and the other brands offered in the Web site are and have been the most popular brands in the Hispanic food market for many years.

Second, Hispanics unlike other ethnic groups shop on the average four times per month. From this figure, I estimate receiving orders from each customer at a rate of at least twice per month.

I believe the company can reach more, but if it was only able to reach a conservative 1% percent of the 48% of Hispanic households who have computers, roughly 28,200 homes as the target customer at an average purchase of fifty dollars ($50.00) per month the volume and profit could be substantial.

The numbers therefore indicate 28,200 x $50 = $1,410,000 a month in sales. This of course does not take into account the cost of replenishing stock, my time, gas and oil shipping the orders, packaging and a small fee to Clickbank for processing the electronic transaction but at least in principle, it sounds like as could work as a small home based e-Commerce business.

Market Segment: Based on the above demographics, I conclude that my target segment is 5.4 million Hispanic women who live in 48% of Hispanic households.

Perceptual Map:


References:

Kotler, Phillip. Marketing Management Millennium Edition (10th ed.). Boston, MA: Pearson Custom Publishing, 2002

U.S. Department of Commerce Bureau of the Census,
http://www.census.gov/pubinfo/www/hotlinks.html

The Wall Street Journal Online, Tuesday July 9, 2002 ed.,
www.wsj.com

The Digital World of the U.S. Hispanic, January 2001, Cheskin Research,
www.cheskin.com

US Hispanic Use of Telecom Services 2002-2007, Insight Research Corporation,
www.insight-corp.com/ushispanic.html

Hispanics Increase Their Purchases of Computers: Why Now?, Cheskin Research Corporation,
www.cheskin.com

In saturated market, PC makers begin to woo Hispanics, May Wong, Associated Press, June 2001 North County Times

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