LIMA-Peru's hottest music store, Phantom Records, feels like a funky college apartment. Its narrow winding hallways, plastered with Elvis portraits and R.E.M. album covers, open up to reveal niches with comfortable sofas. An intense stereo system booms everywhere.
Phantom defies all retailing rules: The store on the third floor of this ancient building near Lima's main park has no outdoor sign. Yet an average of 1,000 visitors climb two flights of stairs to reach it every day.
In less than five years, this bro-and-sis venture has grown into Peru's most celebrated music, cafe, video and rock concert promotion empire. Peruvians know that much of Phantom's American merchandise cannot be purchased anywhere else in the country-and they made it the unchallenged hot shop in Lima, where they spent $5 million last year.
At the heart of the operation are the Fefer siblings, 23-year-old Samy, Phantom's general manager, who got his start over Christmas break from college in 1989, and Ety, 21, who promotes both the store and concerts as well as works the floor.
After one semester at Dade Community College in Miami, Mr. Fefer returned home with a thousand compact discs, purchased for a dollar apiece through a bankrupt distributor. When he sold them all for $16 each through the classifieds in Lima daily El Comercio within the week, he knew he was onto something.
He quit school and opened the store in Lima's trendy Miraflores neighborhood in a room in his parents' lagging clothing factory. Phantom tripled floor space in 1992, knocking walls out and adding a music cafe, where customers watch opera on big-screen TVs or listen to live jazz.
Mr. Fefer gets U.S. CDs in his store as much as three months earlier than rivals by being his own distributor. As a result, he can afford to charge as much as $24, often $4 higher than rivals, for his discs.
"We are a small company that makes a lot of noise," says Mr. Fefer, relaxing in his mod black office in John Lennon-style eyeglasses and yellow Sitting Bull T-shirt.
To promote their merchandise, the Fefers provide CDs and promotional material including photos and biographies to local radio stations.
"I sell more copies from one store than the U.S. labels sell in the rest of Peru," he claims.
Last year Mr. Fefer pushed several songs to the top of the Lima charts, including 1993's top single, "Go Pato," by English reggae star Pato Banton. The single sold 500 copies at Phantom-phenomenal in a genre that appeals largely to buyers of pirated music tapes, which sell at street stands for as little as $2.
Phantom Productions has promoted successful concerts as well. Last year it brought Polygram artist Jon Anderson, lead singer of English rock band Yes, to Lima-without paying for advertising. Instead, Mr. Fefer flooded the local media with information and obtained Warner-Lambert's Chiclets as a sponsor, which ran outdoor ads promoting the concerts by JWT Peruana.
Mr. Fefer is now considering setting up a Phantom record label, as well as a distributing arm to represent major U.S. labels in Peru. Even though this would eliminate Phantom's advantage of having records first, the prestige and resulting revenue would outweigh that benefit, he says.
The Fefers also plan to open two more Lima stores by yearend and are researching other Peruvian sites.
"We want to be everywhere. But we won't just open a store," said Mr. Fefer. "We'll open an excellent place to come and buy music."