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Japan’s Don Quijote rides high on rule breaking reputation

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TOKYO, (Reuters) – Japanese discount retailer Don Quijote Holdings Co Ltd was once the industry’s enfant terrible, overturning standard retail practices with its cluttered and chaotic stores that sell everything from faux leopard-skin rugs to designer watches.

These days, however, Donki – as it popularly known – is more of a role model, defying Japan’s weak retail environment to last week report its 29th year of unbroken sales and profit growth.

With sales projected to hit 1 trillion yen ($9 billion) this year, Donki is joining the top ranks of Japan’s heavyweight retail market, among the likes of Aeon Co Ltd, Uniqlo parent Fast Retailing Co Ltd and convenience store operator Seven & i Holdings Co Ltd.

The company says its success lies in its ability to amuse customers, who have tired of the efficient yet predictable shopping experiences at other Japanese stores.

“Our biggest rival is not Amazon or Aeon, but customers’ losing interest,” Mitsuo Takahashi, Don Quijote’s chief financial officer, told Reuters in an interview.

After struggling to find sites in some areas to fuel its sustained expansion, Donki has tied up with FamilyMart Uny Holdings Co Ltd to convert its struggling big box stores, delivering a rapid turnaround at the first six outlets to try the new format.

As Amazon grows rapidly in Japan, Donki aims to increase the fun of visiting stores by making its app more interactive – with points to collect and discounts to find – in a doubling down on its store-focused approach.

“If Amazon is like downloading music, we are like a concert venue. Both are needed,” Donki chief executive Koji Ohara said on Monday.

Shoppers at Donki are welcomed by tanks of exotic fish before they enter a maze-like warren piled high with goods ranging from face-massaging gadgets to oversized bags of potato chips.

First-time customers often come away bewildered and humming the store’s unending earworm of a theme song, but return for more, drawn back by a constantly changing array of goods.

Many of the products Donki sells are cast off from other retailers, a result of the Japanese penchant for a huge variety of seasonal, limited edition and experimental products, from cans of beer splashed with cherry blossom patterns to yogurt-flavored water.

With every store catering to local tastes, “you cannot create a strategy that will be effective against all of their stores,” Jefferies analyst Michael Jon Allen said of Donki’s rivals.

Donki’s newest frontier is overseas, with two “Don Don Donki” stores opened in Singapore in the last year and another due to open in Bangkok this year.

Founder Takao Yasuda, who moved to Singapore after retiring three years ago, drove the expansion there after finding Japanese products too costly. Prices are as much as 50 percent lower than rivals, said Mr Takahashi

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