Don Quijote: wreaking havoc in Japan retail

Written by Rowan Ewart-White

16 January 2018


Mega Don Quijote Uny

These are extraordinary times at Don Quijote, Japan's leading discount retail operator, which finds itself the retail destination of choice for growing legions of inbound tourists, not least Koreans who, according to social media, regard it as the place to visit. 
 
One can see the logic. Jump on a budget airline flight from Seoul to Haneda & go & spend time & money in a shop that sells everything from loo roll to rubber ducks at dirt cheap prices, makes the whole experience fun & is being raved about by your friends. 
 
But although inbound demand is helpful, particularly as overseas tourists spend 4.5x more than the average customer, it remains a small piece of the DQ jigsaw. 
 
This is a company that's destroying the competition on both price & execution. Its SG&A:sales ratio is comparable to Walmart, with costs under constant pressure. 50% of a store manager's wage is performance based. Prices are typically 10-35% below competitor stores. And the competition continues to wilt, with resulting store closures ironically providing a constant stream of store opening opportunities for DQ. 
 
What must be terrifying from where Ito Yokado & Aeon are sitting, is the potential havoc DQ is about to wreak from its deal with UNY, in which it acquired a 40% stake in Nov 2017. On paper it sounds good: joint procurement with FamilyMart UNY, digital platform sharing, leveraging FamilyMart's China/Asia presence to expand its own footprint & the prospect of Mega Don Quijote UNY stores (see photo), the first of which is due to open in Yokohama at the end of Feb. 
 
In practice the first store on which the 2 companies have collaborated is already open. What used to be an Ito Yokado store in Toyohashi reopened as a Mega Don Quijote in Oct 2017. Store sales are expected to have tripled or quadrupled! 
 
Get in touch if you would like to read our Dec 14th upgrade report, 'Echoes of Bicester Village', or our Jan 15th In Brief, 'Market share gains'.


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