SAN JOSE, CA (By Michele Chandler, Mercury News) October 25, 2007 — Francisco Trejillo browsed recently through washers, dryers, kitchen appliances and televisions at the new FAMSA store in San Jose, searching for the right items for his mother, who lives in Mexico.

A thirty something waiter who grew up in Mexico and now lives in San Jose, Trejillo could feel right at home. Mexican flags decorate the walls, employees are bilingual and signs advertise goods in both English and Spanish.

Trejillo was shopping at the newest location of FAMSA, a Mexican retailer that recently began a push into the United States in its quest to tap into the Hispanic market on both sides of the border. The Monterrey, Mexico, retailer, with 350 stores in its home country, is expanding its U.S. presence to take advantage of changing demographics in this country.

The chain figures it can sell appliances, furniture and electronics that Hispanics in the United States can use in their homes or send back to family and friends in Mexico.

One of FAMSA's hallmarks is a service that lets customers order and pay for items at a U.S. location that are then delivered from a store in Mexico to friends or relatives there. While many U.S.-based retailers operate numerous stores in Mexico, they don't offer a similar service.

Opening new locations in U.S. Hispanic communities is a cornerstone of the company's plan for growth as it goes up against Wal-Mart, which operates hundreds of stores in Mexico, and other competitors.

Catering to newly arrived Spanish-speakers who can send items to relatives and friends in Mexico from a store willing to help them establish credit when other stores might not "is a very clever model,'' said Susanna Whitmore, senior vice president of business development for New American Dimensions, an ethnic market research firm. "There will always be immigrants coming to this country.''

Bay Area first

FAMSA opened its first U.S. store in Southern California four years ago and now has nine locations there. The company's two Northern California stores opened this fall — in Fresno in September and in San Jose earlier this month. Another FAMSA store is scheduled to open in Oakland next year.

The San Jose outlet that opened in the new Plaza de San Jose shopping center on the southeast corner of Story and South King roads, in the city's heavily Hispanic east side, is the first FAMSA in the Bay Area.

For Trejillo, the new store carries good memories along with familiar brand-name goods and competitive prices.

"I was driving by and saw the name FAMSA and I said, `I know that store, it's a good store.' So I stopped. The prices seem just a little bit cheaper here,'' Trejillo said.

Items carried include everything from Sony camcorders to Serta beds. The store even offers an in-store money transfer service, enabling shoppers to send cash to people in Mexico. Customers are charged a $1 service fee.

Some high-end items carried here — like 60-inch, $5,000 LCD televisions — aren't sold in Mexico, where they're considered too pricey.

The "buy-in-the-U.S., deliver-to-Mexico'' service accounts for about 15 percent of business so far at the chain's San Jose and Fresno stores, said Ignacio Ortiz, chief operating officer for FAMSA's U.S. operations.

"When you analyze the San Jose market, you find out some of the Latinos are first-generation, with a lot of ties still in Mexico,'' said Ortiz. "As long as we have them, I have an opportunity.''

The store also hopes to differentiate itself by enabling recent arrivals with scant or no credit history to get credit for their purchases. As they repay that loan, they can use that history to gain more credit.

Easy credit

"We are willing to give an opportunity to guys that we think can pay us back. We believe a little bit more in people than just their credit scores,'' said Ortiz. "Little credit history or no credit history in the credit bureau do not mean bad credit.''

He said the company's losses from unpaid loans are about equal to losses of credit cards backed by major U.S. banks.

FAMSA now has 11 locations in California and 3 in Texas. New stores will open before the end of the year in Hispanic sections of Las Vegas and Houston, boosting the number of U.S. stores to 16 by year's end.

FAMSA still sees growth in Mexico, where it expects to open about 15 stores a year until it has about 500 locations. "Some of our competitors in Mexico decided to go to Central America. We made the decision to go to the U.S.,'' said Ortiz. "So far, so good.''

The formerly blighted corner at the corner of San Jose's Story and South King was turned into the new Plaza de San Jose shopping complex through the efforts of the San Jose Redevelopment Agency and Blake Hunt Ventures developers.

Area residents have long asked for better retail services in that neighborhood, said San Jose City Councilwoman Nora Campos. "It's going to be a regional draw because FAMSA is so well known in Mexico,'' she said. "It's like Ikea. People will travel from outside the city to go there for what it offers.''