Forward's March

On a visit to New York in 1956, the young Mexican was fascinated by its bustling discount stores, spent most of his time studying their price cuts and pragmatic merchandising. "This is a revolution that is here to stay.'' Jeronimo Arango Jr. wrote his two younger brothers in Mexico City. "We'll go into it when I get back." They did, opening Latin America's first tienda de descuento in Mexico City. Today, having been paid the flattery of imitation by dozens of other Latin American stores, the pioneering Arango brothers--Jeronimo, 37, Placido, 32, and Manuel, 26--are Latin America's biggest discounters, with 1962 sales of $16.6 million. This week their Almacenes Aurrera, or Forward Stores, are opening a seventh store in Mexico City, and have set a May opening for their eighth and biggest, a $1,200,000 store in the city's upper-class residential area of Lomas.*

No Fly-by-Night. The Arango discount stores have had a profound effect on Mexican retailing. Their price cutting has forced down the profit on most items sold in Mexico City stores some 12%, and even small stores around the city have learned that the way to draw business is to advertise themselves--truly or falsely --as discounters. The Arangos' impact is the more remarkable because the brothers, all college-educated in the U.S., were treated as outcasts by their own class when they opened their first store with a loan from their wealthy father, a textile tycoon and onetime store-chain owner himself. Mexico City's department stores banded together to drive out the upstart that dared to offer brassieres at 13% under list, kitchenware at 15% and refrigerators at 20% under. But Mexican shoppers nearly overran the store, sometimes scooping up goods so fast that the brothers had to lock the doors before closing hours. Borrowing a spy-movie technique, department stores staked out a cameraman in a room across from the store to photograph unloading trucks, then threatened wholesalers with the loss of bigger business.

The brothers hung on grimly, traveled to Acapulco, Monterrey, Guadalajara and beyond to get their merchandise. They sponsored a television show called The 64,000-Peso Question, used some air time to whip up public opinion. The turning point came when the Arangos opened two new stores. ''They knew then," says Jeronimo, president of the chain, "that we weren't any fly-by-night operation. We were in business forever."

Sales & Savings. Today only a handful of manufacturers refuse to let the Arangos discount their products, and the brothers concentrate on pushing well-known name brands. "We have to," says Placido. ''In underdeveloped countries, people are distrustful. They've been cheated too often.'' Because of lower salaries, cheaper construction costs and the absence of a need for warehousing (most of Mexico's distributors are right in Mexico City), the Arangos make a 5% profit on their operation, compared with an average 2% made by U.S. discounters. The brothers are aiming for 1963 sales of $25 million, are considering expanding out of Mexico, but have ruled out South America because, says Jeronimo, it is "too unstable."

For the time being, they will concentrate on Mexico City, where they cruise about in their Mercedeses looking for likely sites on which to place what they hope will be 40 more stores in the capital alone. "These boys have done something for Mexico," says Jeronimo Arango Sr., surveying his sons' work. "And for ourselves," adds Jeronimo Jr. with a grin.

* The Arangos have had better luck than one of the originators of chain discounting that Jeronimo Arango studied in New York. In Manhattan last week, with $4,000,000 in bills piled up, Masters, Inc., filed a bankruptcy petition. Masters, which has seven stores in the New York area and four more in Pennsylvania and Florida, blamed its fall on too rapid expansion and poor store locations.

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