I’ve always struggled to describe Donki Hote (Don Quijote).
Some say it’s a discounter with cut throat pricing, what discounters sell an eclectic range encompassing fresh sushi, car accessories, fashion and more besides?
The chain is famous for its Aladdin’s range of merchandise including many import items. It’s fun to visit (unlike many European discounters) and has a cult following particularly with younger shoppers and tourists.
Donki boastfully aims to be Japan’s no 1 tourist destination. Given the huge number of tourists landing on these shores this is not a modest target.
Behind the scenes, Donki’s ways of working are anything but conventional.
Last week NHK Japan published a report announcing that Donki’s parent company, Pan Pacific International holdings (PPIH) is now Japan’s 4th biggest retailer after Aeon, Fast Retailing (Uniqlo) and 7&I holdings. The report also included a revealing interview with the chain’s President, some excerpts I’ve cited here.
Whilst PPIH has several retail banners, Donki, is undoubtedly its crown jewel.
Investors have noticed. Two years ago PPIH stock was trading around ¥2500 and now it’s over ¥4025.
Company President Yoshida came across as being long on action, and short on bureaucracy. Unlike many Presidents he doesn’t wear a suit either.
All the Donki stores I know are in stand alone locations. Donki’s are not in Aeon or Ito Yokado malls.
Store staff manage ranging decisions according to NHK, not head office. Yoshida-San preaches that the consumer is always right.
Several years ago there was a plan to ditch Donki’s mascot, DonPen which resulted in a consumer backlash. The idea was quickly shelved.
Donki stores are a labyrinth, and it’s not uncommon to get lost. It’s a deliberate merchandising strategy.
When you get lost (in Donki) you’ll discover things you’ve never seen before
Geraldine Chua, Donki’s Singapore Marketing Manager
Store layouts and category locations are changed frequently to encourage linger time. Donki knows that linger time correlates to basket spend, a key KPI.
Currently Donki is putting even more emphasis on private and exclusive brands.
I think that most private brands emphasise low prices. But it’s really important that the contents are interesting. We think it’s very important to have something that makes you chuckle, or an interesting hook, like, ‘Wow there’s this much of this.’ That way, customers are interested not just in the price, but also in the nature of the product
President Yoshida of Donki Hote
Donki now has over 4000 pb items, branded “do”.
Is its supply chain complicated? I think so and its wide range (over 15000 SKUs per store) surely explain its low gross margin, less than 5%.
Donki has had more success outside of Japan than many. It has stores in Singapore, Thailand, Hong Kong, Malaysia, Taiwan and last year opened in Guam.
Looking forward, Donki is putting more emphasis on its app, as it manages the transition from off to online. The app has 14m members and is being used for product development, according to NHK.
I like Donki’s POSM (Point of sales materials). Did you know that each store has at least one full time designer?
Watch this video (sorry Japanese only) where the store manager makes a merchandising display, new POS is created within a few minutes and it’s implemented immediately with a dramatic increase in shopper offtake.
Retail media may be the big story in Western retail but this is something else.