Of course there’s demand. Depending on geography, much of the demand may come from passers-through going to other parts of the city, not just immediate residents.
But there are lots of other factors in why businesses locate where they do. Zoning, real estate pricing, start-up costs for different kinds of businesses, ease of access for distributors. (I can’t run an American-standard large general grocery store without a loading dock that can accommodate multiple big trucks.)
Because a dense ethnic neighborhood is a good business opportunity for an appropriate ethnic grocery, duh. They can be profitable in a relatively small retail space, not least because of the dearth of larger generalized groceries.