Business

Founder of Don Quijote empire revels in breaking all the rules

by Taiga Uranaka

It’s a jungle in there: Tacky, handwritten cardboard signs bearing dubious slogans vie for space with garish rolls of toilet paper, sex toys and Louis Vuitton handbags.

Yet nocturnal urban denizens routinely succumb to this mysterious allure and usually find themselves saddled with a plethora of yellow store bags at the end of their trip.

Welcome to the world of Don Quijote, which has broken every rule in the retail book and has recently achieved hero status for its efforts to counter rigid bureaucratic practices.

“Japanese retail is built on the concept of saving time. We want our customers to spend more time at our stores,” says Takao Yasuda, president and founder of Don Quijote Co.

While the country’s retail industry has generally suffered at the hands of fragile consumption, Yasuda’s stores have enjoyed red-hot growth.

For the year ending in June, the firm’s net profit jumped 40 percent to 5.6 billion yen, on revenue of 158.6 billion yen, up 37.4 percent.

Since the first Don Quijote store opened in Fuchu, western Tokyo, in 1989, the chain has expanded to 78 outlets, including stores in Hokkaido and Osaka and Fukuoka prefectures.

Some are open on a 24-hour basis, with most others remain open until the early hours; this is what makes them ideal hangouts for nocturnal fun-seekers, who have dubbed the stores “Donki.”

Most characteristic of its break from conventional chain-store wisdom is its chaotic store display, with items in some cases filling the entire space between floor and ceiling.

Yet this is a carefully calculated strategy designed to foster in shoppers a treasure-hunt mentality.

“The point of the display is hard to find, hard to take and hard to buy,” Yasuda says, citing the firm’s slogan for this technique, known as “compressed display.”

“Shoppers always leave the store feeling they missed something. And they discover something new every time they visit.”

These unorthodox retailing tactics have made Yasuda a black sheep in the industry, though the 54-year-old was hardly a mainstream figure in the first place.

A graduate of the prestigious Keio University in Tokyo, Yasuda spent most of his college days playing mah-jongg.

After pulling all-nighters, he returned home in the morning, traveling against the flow of morning commuters.

“That feeling of sadness, emptiness as I walked past these people,” he said. “That enables me to fathom the deepest feeling of nocturnal people.”

Unlike typical business executives, he sticks to a similar lifestyle even now, going to bed around 3 in the morning and getting up at 10.

“There is a saying that the early bird catches the worm, but if I were an early bird, the company would have gone bust a long time ago,” he says.

At the chain, people even younger than Yasuda was when he launched Don Quijote’s predecessor at the age of 29 serve as store chiefs.

It is a big responsibility on these young shoulders, with the average Don Quijote outlet earning annual sales of between 2 billion yen and 3 billion yen.

Yasuda delegates the bulk of authority to those on the lowest rungs of the corporate ladder. At Don Quijote stores, new recruits with a few months of experience are entrusted with selecting, buying and even pricing merchandise.

“We delegate merchandising to the young, because shoppers are young,” Yasuda says.

Every retailer claims that it operates a customer-first policy — but few actually put these slogans into practice, he says.

An extreme example of Yasuda’s deference to his customers is the stores’ wide array of sex toys. When the company was listed on the Tokyo Stock Exchange five years ago, some of those around him suggested he should abandon such racy products.

“No — businesses that ignore the nether regions are wrong,” he says. “It’s a very sacred matter. Anyway, it goes against our customer-first principle.”

Yasuda also claims that his recent tussle with the health ministry was further evidence of his commitment to putting his customers first.

In response to the shortage of certified pharmacists willing to work late-night hours, the chain in August started selling drugs at its stores with shoppers connected to pharmacists at remote locations via videophone.

Yet the health authorities raised a red flag, alleging the practice violates the pharmaceutical law, which mandates the physical presence of certified pharmacists on the premises.

Don Quijote backed down — but then said it would start giving away drugs in emergency cases during late-night hours after shoppers conferred with pharmacists via videophone.

In announcing the program in August, Yasuda said authorities had no business intervening because he was offering simple giveaways. He added that there are people who need medicine when drug stores are closed.

But regulators blocked this initiative as well, sparking a public outcry against this show of bureaucratic intransigence.

Ultimately, the matter was effectively resolved in a de facto victory for Don Quijote, with regulators now expected to approve nighttime drug sales by remote pharmacists early this year.

“I do not like picking fights with the authorities,” Yasuda says. “But if necessary, I am ready.”

Asked what he would do if he was the manager of a corporate revival fund, Yasuda says he would be interested in buying a department store — a store located at the opposite end of the retail spectrum — and turn it around in the Don Quijote fashion.

“First of all, I would make a store where shoppers do not have to be conscious of clerks’ eyes,” he says. “At today’s department stores, they cannot relax when they are shopping.”

He also says department stores lean too much on apparel items and should pursue greater merchandise diversity.

His unique business style and success is hard to find elsewhere, according to retail analysts, who are used to seeing depressed numbers these days.

“Many businesses have tried to emulate Don Quijote because of its success, but none has been able to as yet,” says Dairo Murata of Credit Suisse First Boston Securities (Japan) Ltd.

“The company culture is totally different.”

Murata says that what makes the company special is “the superb balance between delegating authority and control,” which pumps staff morale while minimizing potential risks.

But don’t finicky consumers ever tire of Don Quijote, which has prospered on its quirky mix of amusement and retailing?

Yasuda says he is not in the least bit worried. “Bored shoppers means losing them to rivals, but we don’t have any rival to speak of,” he says.

He admits, however, that the stores are losing their “surprise appeal” in the Tokyo area.

“But again, Don Quijote has become woven into people’s lifestyles. For them, spending time at one of our stores has become part of their lives,” he says.

Asked whether he will ever lose his penchant for a challenge, Yasuda, who describes himself as “naturally perverse,” says this is not likely.

“If Donki becomes a docile donkey, this company is finished,” he says.