Mexican Retailer Plans to Take America
By George Anderson
Grupo Famsa SA sees most of its growth south of the border but it also intends to “aggressively” pursue expansion in the U.S., reports Bloomberg News.
Humberto Garza Valdez, CEO of the furniture and household-products retailer, said the company plans to open 10 new U.S. stores this year and another 10 in 2007.
The chain currently has 21 U.S.-based stores with locations in California, Nevada and Texas. It is looking at Arizona, Florida, Illinois and New York as potential new markets because of the growth of Hispanic populations in those states.
Eventually, the chain is looking to have 300 stores operating in the U.S.
The company recently purchased National Furniture, a five-store operation based in San Antonio.
It has also experimented with in-store kiosks in supermarkets catering to Hispanic consumers, such as Fiesta Mart and Carnival Food Stores. One kiosk located at a store in Plano does $100,000 a month in sales, according to Ted Caffey, FAMSA’s director for Texas, told the San Antonio Express-News.
Moderator’s Comment: Does its Mexican base give Grupo Famsa SA an advantage with Hispanic consumers in the U.S. including those with a country-of-origin
other than Mexico? Ultimately, do you see Grupo Famsa making the leap beyond Hispanic consumers to a wider audience? If yes, what will it take to be successful? –
George Anderson – Moderator
As with many retailers that cater almost exclusively to the Latino community, often with an emphasis on the Mexican community (and specifically the credit-poor less acculturated Mexican consumer), Famsa will most likely be successful enough to profit their ownership/investors. This may not be considered a success in US retailer terms, but the business model will likely include a whole host of profit centers including credit and financial services. The measurement of success is often a subjective matter. They will compete with La Curacao and Deardens more so than they will with Sears or Penneys. There are consumers worth catering to and dollars to be had on both sides of the border.
We already know that new unacculturated consumers will shop at retailers they already know. However, within a short time these new arrivals learn that there are other choices and begin to expand their set of considered purchase options. If the Mexican owned business offers a product and service that is equivalent or better to what is commonly offered, then they will be able to retain and grow their business in the Hispanic and broader Anglo market. Sears has/had a good “image” in Mexico, this as not translated to a huge upside for Sears. I think it is because the consumer soon adapts to the choices that they have for goods and services.
This looks like a close parallel to the El Pollo Loco story, over the past 20 years. This fresh, flame grilled whole chicken operation had a great start in Mexico, beginning as a road side vending operation. The expansion into the southern California market was a HUGE success, with a real friends-from-back-home relationship with large numbers of Hispanics, and quite ready acceptance across a broad swath of non-Hispanic Americans.
After Denny’s bought the chain, there were repeated efforts to extend the chain, for example into Florida and Texas. At least in the first few years, it seemed like nothing worked. “The Crazy Chicken” (El Pollo Loco) just couldn’t export its culture and leverage that culture with other Hispanic markets.
I think this is relevant to the question posed here, but I wouldn’t hazard a guess as to present prospects for Grupo Famsa SA.
I am familiar with this operation having consulted for a competitor, Grupo Elektra. Famsa will not be a major success in the US. The concept will not translate outside of extremely high concentration Mexican communities with the States. I used the word Mexican rather than Hispanic or Latino because Famsa is peculiarly Mexican, and no more relates to Puerto Rico than it does to Minnesota.
Famsa stores are very much like the old Woolworth stores. And we know what happened to them. Or like Ben Franklin, or even Variety City. There is a very limited niche in the undermarket not served by Wal-Mart.
Will Famsa open successful outlets? Probably. Is there any real potential? No.
FAMSA is on the right track. There are many Hispanics who thrive on their retailing concepts already. Bringing this to more American locations, using their retail expertise only empowers FAMSA to further exploit their strengths. No matter how they do this, even in kiosk or full-store implementations, FAMSA will continue to draw upon the successes which their Mexican operations have defined.
Until American-based organizations truly recognize the large potential which the Hispanic market offers, they will continue to ignore this tremendous opportunity.
I think they have a step up. Often, US based companies end up with nothing more than a generic “Taco Bell” version of Hispanic retailing and just can’t quite seem to pull it off. Grupo Famsa knows that birds of a feather flock together and they found a new place to nest.
Non-contiguous expansion is much riskier than continued location growth in California and Texas. Building Florida and New York locations would seem ill-advised until the markets adjoining Texas and California are saturated.