Culture Cash : Retailing: Upscale Central stores make it easy for Latinos to exercise their spending power. Santa Ana will soon say <i> bienvenidos </i> to one.
Easy credit. Brand name merchandise. Friendly sales clerks who speak the language.
This combination is what keeps thousands of Latino customers in Southern California coming back.
Bienvenidos .
Welcome to Central, an upscale department store-style retailer where a sign in Spanish at the entrance invites customers inside. Other signs also let shoppers know they can charge their purchases--even if they don’t have an established credit history.
“We will help you to buy today at Central. And do it within your budget,” a sign reads on one side in Spanish, the other in English.
The store opened in downtown Los Angeles as a one-man electronics shop called Central Electric more than 60 years ago. It grew into a general retailer with four stores, 400 employees and a large inventory of appliances, TVs and furniture.
Its owner, West Coast Private Equity Partners, has capitalized on serving Southern California’s fast-growing Latino population.
“We speak their language,” said Raudel Munoz, a buyer who started at the company 12 years ago as a merchandise runner--helping customers load purchases in their cars.
“It’s a friendly environment, and we have good service and selection,” Munoz added. “The customer definitely trusts us.”
In the last 18 months, three stores have opened in predominantly Latino districts in Los Angeles County: Commerce, Baldwin Park and Huntington Park.
After several years of looking to expand into Orange County because of its sizable Latino community, the company plans to bring a fifth store to Santa Ana next month.
“We’ve been very successful at the downtown (Los Angeles) site and we think we can take that success to other communities,” said Hal Compton, Central president and chief executive officer. “The feeling of the company was that there was opportunity in Santa Ana,” where about two-thirds of the residents are Latino. Central already draws many customers to its downtown Los Angeles store from Santa Ana, Munoz said.
Compton said Central is scheduled to open March 12 in the former Montgomery Ward Clearance Outlet store in a 110,000-square-foot shopping center at the corner of Bristol Street and Warner Avenue. Central will occupy a one-floor, 35,000-square-foot building. The store will employ about 35 people.
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Frank Dominguez, president of the Hispanic Chamber of Commerce of Orange County, said Central is welcome.
“Obviously, they’re expanding and reaching the Hispanic market,” Dominguez said. “It’s great for the economy and the Hispanic community. I don’t see it as a threat to any other business here. I think it will provide more of a vitality to the economy.”
Scott Burnham, president of Burnham USA Equities Inc., the Newport Beach company that owns and manages the shopping center, negotiated a 10-year lease with Central valued at about $2.5 million.
Burnham said his company sought a tenant that complemented the community’s ethnic diversity. The population within a one-mile radius of the store is 61% Latino. Burnham added that other retailers nearby also target the Latino community.
Gary Cypres, the general partner of West Coast Private Equity Partners and chairman of Central, said his company’s expansion strategy is easily explained: About 24 million Latinos live in the United States today, a more than 50% increase from 1980.
“From a customer perspective, it was clear the market that Central served was growing and would continue to grow,” he said.
Maria Dubravka Pineda, president of International Marketing Media of Newport Beach, which specializes in ethnic consumer marketing, said American businesses should recognize the economic importance of the Latino community, which spends tens of billions of dollars and, if treated well, can become very loyal.
“One of the things that has been a big myth is that the Hispanic community here has no buying power. And it’s exactly the contrary,” Pineda said, adding that Latinos spend a greater percentage of their income on food, clothing and mass-consumption items than other ethnic groups. “Whatever they earn, they recycle fast back into the market.”
Ed Vasquez, communications director for the Latin Business Assn. in Los Angeles, said Latino purchasing power in the United States has doubled in the last decade to an estimated $200 billion.
When Latinos go to shop, Vasquez said, “they’re going to a place like Central that will recognize that this population is credit-worthy, that they have a specific need--and show they’re willing to bend backward to meet that need.”
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At a time when major retailers are turning toward high volume, bargain prices and self-service, Central offers lots of customer service--at the counter and after the purchase--and sells brand-name products at a good price, Compton said.
Though most store signs are in Spanish, everyone will recognize the names on the merchandise: Sony, Seiko, Singer, General Electric, Whirlpool, Pioneer and Hoover.
Shoppers can also find a selection of fragrances, sofas, stereos, sewing machines, dining and bedroom sets, mattresses, strollers, baby furniture, Nintendo games, even tires, batteries and bicycles.
“You feel like you’re walking into a department store in Mexico City,” Burnham said. “It’s a very unique tenant for the county; it’s the wave of the future.”
In the last three months, Compton said the company has begun to stock some apparel including LA Gear shoes, Dingo cowboy boots, cowboy hats, leather jackets, Wrangler jeans, and T-shirts.
In the beginning, Central did not sell sneakers and soccer balls. Paul Perelman was an electrical contractor who opened a modest shop in 1929 in downtown Los Angeles and sold small electrical appliances. When he died in 1955, his son, Dick, took over the family operation and expanded the business by selling major appliances, televisions and stereos.
Dick Perelman picked up more business by marketing to Latino customers who worked nearby in the garment industry and by letting customers buy goods on credit. By 1959, he had moved the store to a larger building at 11th and Main streets.
Business continued to grow, and Perelman built a larger store eight years ago at Broadway and Washington Boulevard, which remains the company’s flagship store and its busiest, drawing about 3,000 shoppers on a Saturday.
Three years ago, Perelman sold the store to the Los Angeles-based group of investors who plan to continue opening stores in California as well as in other western states, said Cypres, adding that Central may eventually open a store in Anaheim.
Because the company is privately held, Cypres declined to reveal annual sales figures. But Santa Ana officials said a retailer the size of Central would bring the city a minimum of $100,000 a year in sales-tax revenue, which at 1% of the store’s sales suggests $10 million in annual receipts.
Compton said the primary feature that makes buying at Central attractive is its flexible finance policy that offers first-time credit. “In the Latino community that is a big deal,” he said.
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Central has between 75,000 and 100,000 active credit accounts despite its high interest rate of 21%. “But in reality, because it’s installment credit, the interest rate paid by the customer is less,” Cypres said, adding, “Our true interest rate has been 18% recently.”
Nearly 95% of the merchandise sold at Central is bought on installment credit, he said.
Pineda said the company is at relatively little risk with its first-time credit policy.
“We have seen that (Latinos’) rate of paying on time and paying the loan is better than other” ethnic groups, Pineda said. “They’re reliable. It’s part of their culture.”
The stores, which cash paychecks for those with a credit account, also lets customers apply for a one-year, unsecured personal loan for up to $1,000, Cypres said. “It’s really an extension of our credit business.”
Central began the program during the 1992 holiday season when it made about 3,000 loans. Between mid-November and the end of December, 1993, Cypres said 8,500 loans were extended to customers. Because of favorable response, loans are being offered year-round. In January of this year, 1,000 loans were approved.
In addition, Cypres said the company has joined with Wells Fargo Bank, one of the investors in West Coast Private Equity Partners, in a program to offer home loans.
“What we’re trying to do with Wells Fargo is become a full-fledged finance company where customers can come into one place and get a loan for their particular needs,” Cypres said.
Kathleen Shilkret, spokeswoman for Wells Fargo, said the bank will design a program to offer home loans to qualified customers.
“We find that we are able to piggyback on a company that is able to serve Latino customers and that has found a way to effectively assess credit risk in ways we’re not able to do in a market we wish to be in,” Shilkret said.
To reach its Latino customers, Central spends heavily on advertising. Ads are aired on local Spanish-language radio and television stations, and a color catalogue of about 30 pages is printed in Spanish and English six times a year.
“The image we’re trying to get across is that we’re proud to be Latinos,” said Fernando Lozano, president of Lozano Communications in Los Angeles, which handles Central’s advertising.
Lozano said most retail competitors are failing to meet the needs of the Latino shopper.
“You need a cultural understanding before you can address this market,” he said. “The store that correctly addresses the Hispanic market is going to gain recognition and have people buying in their stores.
“Central is trying to do that. (They’re) on the right track. When a Hispanic feels comfortable in the store they will come back and shop again and again.”
