Japanese Variety Store Don Quijote’s Secret to 36 Consecutive Years of Sales and Profit Growth
Monetizing Overstock and Late-Night Blind Spots
Joy of Discovery Through ‘Chaotic Displays’
Article at a Glance
There is a company that has increased sales and profits for 36 consecutive years despite Japan’s prolonged economic stagnation. It is Don Quijote, a variety store that holds a one-of-a-kind record among companies listed on the Tokyo Stock Exchange. The secret behind Don Quijote’s success can be found in its ‘contrarian management,’ which directly rejects the standardized formulas of the conventional retail industry. It built its own price competitiveness and a loyal customer base by preempting two blind spots, overstocked goods and late-night hours, that traditional retailers had ignored as unprofitable. It also boldly broke with the conventions of Japanese retail culture, which treats ‘5S(Sort, Set in Order, Shine, Standardize and Sustain)’ as an absolute principle. By adopting the ‘Compressed Display’ method, which creates deliberate chaos, it established the ‘joy of discovery,’ something online retail can never replace, as its core value. Its culture of boldly delegating authority over merchandise purchasing, pricing decisions and display methods to frontline employees is another competitive strength rarely found among other Japanese retailers. Through performance evaluations conducted every 6 months, Don Quijote simultaneously drives autonomy and accountability while continuously maintaining tension and a fighting spirit throughout the organization.
Last summer, on a sweltering morning, hundreds of people lined up at the entrance of The Hyundai Seoul in Yeouido, Seoul. The crowd, which had lined up even before opening hours, was headed not to a famous singer’s fan signing event or a luxury store launching limited-edition products. It was Don Quijote’s first pop-up store in Korea.
At 10:30 a.m., as soon as the doors opened, people pouring into the store moved through flashy fluorescent price tags and densely stacked shelves, sweeping food items such as konjac jelly and soy sauce egg rice sauce into their baskets. Registration for entry, limited to 1,400 people per day, closed within 30 minutes of opening. Consumers embraced the ‘B-grade sensibility’ that had crossed the sea and willingly opened their wallets.
Don Quijote is often described as an outlier in Japan’s retail industry. That is because it has walked its own path through contrarian management completely different from conventional formulas for success. The reason even Korean consumers are enthusiastic about Don Quijote also lies in a uniqueness that cannot be felt at other retailers. Its unprecedented record of never once losing growth momentum since its founding in 1989 is the result created by that very ‘difference.’ Japan has endured a deep and prolonged recession to the point that the phrase ‘Lost 30 Years’ emerged as it fell into the trap of a super-aged society and low growth. Where, then, does the strength of Don Quijote, which is creating the legend of 36 consecutive years of simultaneous growth in sales and profits within that environment, truly come from?
36 Years of Unbroken Growth
Japan’s retail industry has been like a vast graveyard over the past 30 years. Daiei, once the pride of Japan’s large discount store sector and the industry leader, went bankrupt in 2004 after the aftereffects of excessive expansion and destructive price competition, and was absorbed by rival retail group AEON. Global retail giant Carrefour also sold all of its stores to AEON in 2005, just 5 years after entering Japan, and withdrew from the market. Mycal, an urban-style mixed retail chain, and mid-sized supermarket chain Chujitsuya also shut down. Ito-Yokado, which can be considered the founding company of convenience store group Seven & i Holdings, was sold last year to U.S. private equity firm Bain Capital after failing to withstand worsening profitability in its supermarket business and pressure from activist funds.
There is a company that has increased sales and profits for 36 consecutive years despite Japan’s prolonged economic stagnation. It is Don Quijote, a variety store that holds a one-of-a-kind record among companies listed on the Tokyo Stock Exchange. The secret behind Don Quijote’s success can be found in its ‘contrarian management,’ which directly rejects the standardized formulas of the conventional retail industry. It built its own price competitiveness and a loyal customer base by preempting two blind spots, overstocked goods and late-night hours, that traditional retailers had ignored as unprofitable. It also boldly broke with the conventions of Japanese retail culture, which treats ‘5S(Sort, Set in Order, Shine, Standardize and Sustain)’ as an absolute principle. By adopting the ‘Compressed Display’ method, which creates deliberate chaos, it established the ‘joy of discovery,’ something online retail can never replace, as its core value. Its culture of boldly delegating authority over merchandise purchasing, pricing decisions and display methods to frontline employees is another competitive strength rarely found among other Japanese retailers. Through performance evaluations conducted every 6 months, Don Quijote simultaneously drives autonomy and accountability while continuously maintaining tension and a fighting spirit throughout the organization.
Last summer, on a sweltering morning, hundreds of people lined up at the entrance of The Hyundai Seoul in Yeouido, Seoul. The crowd, which had lined up even before opening hours, was headed not to a famous singer’s fan signing event or a luxury store launching limited-edition products. It was Don Quijote’s first pop-up store in Korea.
At 10:30 a.m., as soon as the doors opened, people pouring into the store moved through flashy fluorescent price tags and densely stacked shelves, sweeping food items such as konjac jelly and soy sauce egg rice sauce into their baskets. Registration for entry, limited to 1,400 people per day, closed within 30 minutes of opening. Consumers embraced the ‘B-grade sensibility’ that had crossed the sea and willingly opened their wallets.
Don Quijote is often described as an outlier in Japan’s retail industry. That is because it has walked its own path through contrarian management completely different from conventional formulas for success. The reason even Korean consumers are enthusiastic about Don Quijote also lies in a uniqueness that cannot be felt at other retailers. Its unprecedented record of never once losing growth momentum since its founding in 1989 is the result created by that very ‘difference.’ Japan has endured a deep and prolonged recession to the point that the phrase ‘Lost 30 Years’ emerged as it fell into the trap of a super-aged society and low growth. Where, then, does the strength of Don Quijote, which is creating the legend of 36 consecutive years of simultaneous growth in sales and profits within that environment, truly come from?
36 Years of Unbroken Growth
Japan’s retail industry has been like a vast graveyard over the past 30 years. Daiei, once the pride of Japan’s large discount store sector and the industry leader, went bankrupt in 2004 after the aftereffects of excessive expansion and destructive price competition, and was absorbed by rival retail group AEON. Global retail giant Carrefour also sold all of its stores to AEON in 2005, just 5 years after entering Japan, and withdrew from the market. Mycal, an urban-style mixed retail chain, and mid-sized supermarket chain Chujitsuya also shut down. Ito-Yokado, which can be considered the founding company of convenience store group Seven & i Holdings, was sold last year to U.S. private equity firm Bain Capital after failing to withstand worsening profitability in its supermarket business and pressure from activist funds.
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- This content was originally written in Korean in the DBR, and translated into English by the original author with the aid of AI
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