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Meet the Walmart of ethnic grocers

With a vibrant shopping environment and authentic Korean food, H-Mart has set its sights on becoming the Asian superstore of North America

H-mart inside-Oct13

It’s Saturday afternoon and K-pop blares from the speakers. A group of teens enjoys a seafood pancake while a couple explore the high-tech rice cookers on display. Among the hustle and bustle of mini shop-in-shops, a delectable smell of Korean barbecue wafts through the air, eliciting a throng of eager taste testers.

The whole affair feels like an outdoor Korean market. But we’re actually in a supermarket: H-Mart, in suburban Richmond Hill, Ont. And it’s exactly this type of excitement and one-stop shopping that U.S.-based H-Mart hopes to provide its Canadian shoppers.

READ: Meet the godfather of ethnic grocery in Canada

Indeed, some have called H-Mart the ethnic consumers’ answer to Walmart.

Walking through the doors of the 37,000-square-foot H-Mart in Richmond Hill, customers aren’t greeted with fresh produce à la typical Canadian supermarkets. Instead, they’re presented with a few choices: head to the Eastern medicine counter, visit the three food eateries or check out the housewares, part of H-Mart’s Home and Home business.

Reaching the produce section requires a trek to the store’s other end, a journey that takes customers through the centre aisle of frozen open case and upright freezers, the cosmetics shop, a Korean water-filtration system counter, a rice aisle and other grocery-goods sections.

The store layout is reminiscent of what Korean hypermarket chains E-mart and Lotte Mart do back home: combine several mini shop-in-shops under one roof.

H-Mart, or Hanahreum Group (a Korean phrase meaning “arm full of groceries”), headquartered in Lyndhurst, N.J., is well established in the U.S. It has 45 outlets and had an estimated US$1.1 billion in sales in 2012, according to global retail research firm RetailNet Group.

H-Mart wants to replicate that success north of the border and become a “global brand,” says Jongha Chun, H-Mart’s assistant marketing manager for Eastern Canada.

H-Mart is off to a good start in Canada but has faced obstacles ever since it opened its first Canadian outlet, in 2003, in Coquitlam, B.C. Real estate has been hard to come by, especially for its Super H-Mart superstore format (80,000 sq. ft. and up).

That, combined with Canada’s highly competitive ethnic grocery sector, has resulted in a slow but steady rollout of stores compared to its faster U.S. experience.

To date, H-Mart has eight stores in Canada: four in B.C., and four in the Toronto area, including its first urban convenience format outside of Manhattan. Called M2M, the store opened this spring.

Chun says H-Mart wants to be a grocery store for the masses, not just for Koreans living in North America. Among H-Mart’s customers at the Richmond Hill store, 50% are Korean; 30% Chinese; and 20% “others.”

READ: H-Mart opens urban convenience format in Toronto

But the chain hopes to diversify its customer base. In American H-Marts, for instance, “others” account for half the traffic.

Also at H-Mart U.S. stores, half the staff and management are non-Korean, says Chun. Multicultural consumers are attracted to the American stores because, in addition to carrying both western and Asian food, H-Mart stocks some Hispanic goods, says Jisi Guo, a research analyst with RetailNet Group.

Ken Wong, a marketing professor at Queen’s School of Business, says T&T Supermarket’s success was bound to lead others into the ethnic arena. “It will be interesting to see whether that arena is siloed [e.g., Chinese, Korean, Japanese] or whether it’s really about being an ‘Asian’ grocery store that sells kimchi, sushi materials and the like,” says Wong.

Although H-Mart has yet to achieve the kind of mainstream popularity in Canada that it enjoys south of the border, it is distinguishing itself with the delivery of authentic Korean food for non-Koreans.

Unlike many of its ethnic rivals, H-Mart does not aim for the lowest prices on its offering. That’s especially true on seafood. “We can’t compete with Chinese markets on price. Instead we want to offer quality,” says Chun.

READ: Tap into convenience with ethnic HMR offerings

On a recent morning that strategy seemed to be working. One Chinese customer said she comes every week to H-Mart to get her fiddle- heads, sliced ginger and Korean sushi. Even though she admitted the prices are better elsewhere, she said she comes to H-Mart for its Korean products.

“They taste different than the products at the Chinese grocers, and they’re more fresh,” she says.

A key component to authentic Korean cuisine is the national dish: kimchi, or spicy pickled cabbage. Chinese grocers are already making their own in-store versions of kimchi, says Chun, which he calls too sweet and not spicy enough.

To capitalize on the popularity of the dish, H-Mart is setting up a kimchi factory in Toronto, as part of its wholesale arm, Seoul Trading. Next year, H-Mart will roll out kimchi under its private-label brand, Choripdong, to supply the dish to other grocers and foodservice outlets.

At the Richmond Hill location alone, there are no fewer than 20 different types of kimchi available in dedicated refrigerated cases–everything from white cabbage kimchi to young radish kimchi.

Along with kimchi, Korean meals typically have anywhere from two to 12 side dishes, so H-Mart makes sure it has enough choice available.

Another competitive plus for H-Mart is the company’s extensive supply chain network, centred in California and South Korea’s southern port city of Busan.

READ: The rise of protein…and it’s just getting started

Chun says more than 60 containers from California, and two from Korea are shipped weekly to its Toronto and Vancouver distribution facilities by air or sea. They consist of fresh and frozen consumer packaged goods, including H-Mart’s private-label products under brands including Choripdong and Fremo.

A competitor who didn’t want to be identified says that H-Mart’s ability to source items from Korean manufacturers is an advantage. In the long term, the chain’s buying power can only expand by being able to source not only from Korea, but in North America, too.

For instance, through its California DCs, Chun says H-Mart is able to procure better quality Korean specialty produce, such as hami melons, Lago grapes and Napa cabbage (used to make kimchi), faster than its competitors.

“Whether you’re an ethnic grocer or conventional, western grocer, you can’t beat freshness, speed and selection,” says Chun

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