How a Growing South Asian Diaspora Is Changing Retail

Although they make up just 1.5 percent of the population, South Asian Americans are unique in their buying power.

While some of its members arrive as university students or service workers, others enter the workforce in high-income fields like information technology and medicine. They have founded billion-dollar companies and own the majority of the nation’s hotels. Many are visible symbols of the American dream, including CEOs such as Satya Nadella of Microsoft or Google’s Sundar Pichai. The average Indian American household earns more than twice as much as the U.S. average, $150,000 annually compared with around $70,000. They pay five to six percent of all income taxes, according to a recent report.

In cities and suburbs where South Asian migrants have congregated for professional reasons—Houston and Chicago, for example, have long attracted medical professionals—South Asian entrepreneurs have long served them with grocery stores, clothing shops, and restaurants offering foods from home, imported clothes, and a place to gather and find community.

But with the diaspora’s increasing spending power comes new competition for what Birju Shah, a clinical assistant professor of marketing at Kellogg, calls “the Indian share of wallet.”

“You’re going to see more Indian products sold in American stores because of the wealth of Indians and their desire for consumerism,” Shah observes, citing Whole Foods, Nordstrom, and Macy’s as examples of mainstream retailers who are catering to South Asian tastes.

This competition means traditional South Asian retailers, such as the 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 growth of retail hubs

Despite the South Asian diaspora’s diversity and class differences, its retail giants serve as common spaces for customers.

“Even if, behaviorally, we still haven’t entirely left the caste system behind, everyone goes to Patel Brothers,” Shah says. “From the richest to the poorest Indians, they’re going to go to Patel Brothers to buy produce.”

Not coincidentally, the large groceries have located themselves near houses of worship, so people can bundle 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. After all, when Indians and other South Asians gather for worship and socializing, they also exchange valuable information—what might be called “deal flow” or “edge” in another context.

“You hear everything there at the temple,” says Shah. “You hear everything about where they’re getting the best puri from, where they’re getting their best clothes from, where they’re getting religious objects or beads.”

Rather than attempting to reach non-Indians, major Indian retailers like Patel Brothers are focused on having a bigger footprint, and offering more to their core customers, by building retail hubs. For instance, large Indian real-estate groups have purchased strip malls in areas with a high density of South Asians, turning these sites into destinations with other culturally relevant offerings including Indian fast-food chains, travel services, clothing stores, and medical offices. “These are similar in spirit to Eataly,” Shah says.

With such a strong understanding of their core customers, these retailers will continue to be able to keep an ear to the ground to gather valuable information. The opening of a certain temple might suggest an influx of people from a particular region, for instance, so a local grocer will account for those customers when stocking the shelves.

“One year it’s Northern Indian, another year it’s Western Indian, another year it’s Southern Indian,” Shah says. “For retailers, that means the mix of produce and packaged goods changes accordingly over time.”

Marketing that goes beyond the transactional

While doubling down on serving existing customers via retail hubs could be a winning strategy, Shah believes retailers will also need to think more creatively about marketing.

Previously, he said, many retailers, including Patel Brothers, marketed in a very transactional fashion: new Diwali fashions are in, this season’s mango crop has arrived. But Shah fears this won’t cut it going forward.

“We are in a new phase of loyalty now for Indian consumers, so an in-depth consumer context is necessary to differentiate,” says Shah. “If a new grocery store launches, and it has the same quality, everyone’s going to shop there even if the prices are the same.”

Shah predicts that individual retailers will start bundling and cross-selling a more holistic, concierge-driven experience to targeted communities. This will allow them to personalize products, services, and knowledge to these specific consumer segments to foster a more personal, holistic connection to a retailer’s brand.

“Not only do you get your groceries here, but you’re also going to get your medical and travel concierge here, you’re also going to get your specific financial credit card that also ties to your family in India by allowing convenient ways to send money back,” he says.

He also predicts that retailers will need to find creative ways to target specific subgroups within the diverse South Asian diaspora. Right now, retailers like Patel Brothers have been unsuccessful in offering online shopping. But Shah suspects this will eventually change, albeit “configured in an Indian way.” This could mean partnering with an Indian Uber driver who can pick out the right groceries and deliver them, or delivering prepared foods or meal kits that could be specialized by region.

“Or a personal shopper who shares your background or religion is going to be targeting you for your personal shopping experience,” he says. “Similar to the Dabbawala system, it’s going to be configured so that there’s a person from a particular region of India that’s doing this.”

New consumer growth

Shah also points to broader economic and generational trends that are likely to change both retailers and the products on their shelves.

For instance, India’s projected economic growth might be one headwind for South Asian retailers in the U.S. As more Indian consumers have their own spending power, Indian firms that currently export foods, textiles, and other products to the U.S. may prefer to serve their domestic market. This may force U.S.-based retailers to turn to China or Mexico for substitutes, meaning customers could notice that their familiar products aren’t the same as they used to be.

“As the sales and consumption in India rises, it may be hard to maintain,” says Shah.

Even 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. have often used food and other cultural markers to bond and build community—a mom might make samosas and bring them to her temple to share—subsequent American-born generations are interested in marketing those cultural touchstones to their community and beyond.

“Many entrepreneurs in the first generation just want to serve something that they’re used to cooking at home to all their friends and they want to give it to their temple community,” Shah says. “The second generation is 100 percent thinking in brands.”

Shah also sees the third generation of South Asian Americans doing business differently than their parents did. While earlier generations kept family businesses closely held, younger Indians are more open to conducting business with partners beyond the diasporic community. Some are selling their family firms to private-equity groups, while others are simply doing deals outside of their kin group or caste.

“There’s a behavioral shift going on with businesses,” he says. “As more South Asian entrepreneurs expand, their products will be more widely available, there will be more brand selection, price tiers, and specialized products in categories like probiotic, organic foods,” Shah says. “This will require more-robust marketing and branding efforts.”

Chai Baby, for example, sells $6 bottles of tea. The drink itself is not much different from other spiced milky teas that Shah would drink regularly at home, except for its branding as an artisanal local product, which is intended to give it crossover appeal to non-Indians.

“We all have chai tea, right?” he says. “It’s the same thing that everyone else sells, 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’s a lot of opportunity for individuals to follow this trend. And there’s no indication that it will slow down anytime soon.”