Don Don Donki’s store openings – which often require barriers to keep crowds in check – generate a level of excitement that has been rarely seen this year. So what exactly is this discount format all about and how is it making a success out of physical retail?
Don Quijote was founded in the 1980s by Takao Yasuda, who remains involved with the business to this day. It is now part of Pan Pacific International Holdings, which consists of a discount arm (primarily trading as Don Quijote in Japan and Don Don Donki in Southeast Asia) and general merchandise business (including Apita and Piago supermarkets).
In its last full year of trading, the group generated sales of ¥1.7 trillion (US$16 billion). It is also a very profitable business, having grown profits for 31 consecutive years and achieving a gross margin of 28.6 per cent – that’s a high level for a discounter.
Ironically, it was Yasuda’s retirement to Singapore that sparked the creation of the Don Don Donki format in 2017. Shocked with the prices of various goods in Singapore, Yasuda saw an opportunity for Don Quijote, which was facing a shrinking market back in Japan due to its declining population. Since the Don Quijote name was already taken in Singapore, Yasuda settled on Don Don Donki and has since exited retirement to oversee its international expansion.
Not exactly Instagrammable
Despite putting most discount retailers to shame, the Don Don Donki format is not keeping with the latest retail trends of Instagrammable experience-led stores. If anything, the shopping experience leads something to be desired for.
The megastores are laid out as a maze spanning multiple floors. A Don Don Donki jingle (called ‘Miracle Shopping’) is on repeat every 30 seconds and accentuated by animal cries in various areas of the store. Customers often find themselves humming the song (which only contains the words ‘Don Don Donki’) long after leaving the store – but perhaps that is the point.
But where Don Don Donki excels is its product offer. The stores are considered to be a real Aladdin’s cave, with shoppers perhaps coming in with a vague idea of needing to buy something, but then leaving with a whole host of other products as they navigate through the store.
Don Don Donki carries a very wide product range, from perishable and packaged foods to home and living, health and beauty and toys. All products are either made in Japan or have a Japanese concept. In Asia, consumers crave Japanese products for their perceived quality and uniqueness. Fresh Japanese food including wagyu beef, cured fish and seasonal fruits are big draws in the Hong Kong stores.
Clever sales tactics
Behind the messy interior, Don Don Donki employs several clever sales tactics to make sure customers part with their hard-earned money. This already starts when you enter the store, where it has set up a stall selling its very popular baked sweet potatoes. Other delicious dishes are also prepared in open kitchens on the ground floor, their aroma no doubt tempting many customers.
Don Don Donki uses compressed displays, with items displayed in clusters, which make the aisles feel like mazes. The retailer calls this approach ‘hard to find, hard to take, hard to buy’. While it may seem like a counterintuitive approach to modern retai, customers actually seem to value the treasure hunt involved in finding products. This also plays into the retailer’s goal of increasing dwell time.
It is also striking to see the total absence of in-store technology. Don Don Donki has no self-checkouts, with its Causeway Bay store in Hong Kong featuring over 40 manned checkout counters.
On the offensive
Not many retailers can or will even want to copy Don Don Donki’s unique approach to retail. But if there is a lesson to be taken away from its success – it is an unwavering commitment to growth during tough times.
This was already on display in Hong Kong in 2019, when the retailer announced ambitious expansion plans during the height of the city’s protest activity. Pandemic-stricken 2020 has given the business further opportunities to snap up properties at very attractive rents – not only in Hong Kong, but elsewhere in Asia too.
While many retailers are understandably in survival mode, Don Don Donki has gone on the offensive. This puts it in pole position when the economic upswing does start to materialise, with fellow retailers unlikely to secure property deals at such low rates.