National / Media | BIG IN JAPAN

Will Don Quijote tilt its lance at the Amazon giant?

by Mark Schreiber

Contributing Writer

A somewhat cynical commentary attributed to the late American TV comedian Jackie Gleason goes, “Anybody who says money can’t buy happiness doesn’t know where to shop.”

Shopping per se, however, is an essential daily activity for many, and no one was particularly happy when the owner of a major retail chain signaled its intention to bail out of the market — as U.S. giant Walmart did in July when it announced plans to divest itself of its Seiyu stores.

For a number of reasons, Walmart’s “Everyday Low Price” business model adopted by Seiyu did not resonate with consumers in Japan.

While drug stores have also been carving out a larger share of the retail trade — a few have even begun emulating convenience stores by setting up counters for customers to eat and drink — the biggest threat is clearly online shopping. In a survey of 520 consumers conducted by Nikkei Business (Sept. 5), 50.2 percent of respondents said they’ve increased their purchases via the internet, as opposed to 35.8 percent who had not changed. (Only 7.3 percent said they cut back on their online shopping.) Sales of apparel in particular have been significantly affected.

So in terms of the “threat” of a foreign incursion, Walmart is now off the hook, which leaves the media to take aim at Amazon.

“Until now, the strength of general supermarkets (of which Seiyu is one) was that they carried all kinds of products under one roof,” Norio Seki, editor of the Keizaikai business magazine, told Shukan Post (Sept. 14). “However, Amazon lets you use your smartphone to order up to 200 million items that can be delivered to your door. From 2010 to 2017, its sales grew threefold to about ¥1.33 trillion. In terms of sheer efficiency, it can’t be matched.”

Taking a cue from Miguel de Cervantes, Shukan Post urged Don Quijote to “thrust its lance” into the “retailing trade’s huge windmill” — Amazon.

It seems that Tokyo-based Don Quixote Holdings, a nationwide chain of 421 discount stores, might become Seiyu’s next owner. On Aug. 13, Koji Ohara, president of “Donki” (as Don Quijote is popularly called), made remarks to the effect that his 38-year-old company was looking into acquiring the chain.

Donki posted total revenue of ¥941.5 billion in the fiscal year ending in June, an increase of 13.6 percent over the previous year. It currently operates 421 outlets and foresees expansion to 500 by 2020.

“In this day and age, that rate of growth by a retail organization is astonishing,” an unnamed business reporter told the magazine.

Don Quijote, however, has proved a difficult business model to emulate. Shukan Post refers to the company as an onikko (a badly behaved child).

“When you browse at a Don Quijote shop, you get the sense that merchandise is heaped willy-nilly almost to the ceiling,” the aforementioned Seki remarked. “And instead of the symmetrical aisles in supermarkets, it’s like negotiating a maze, where you might unexpectedly encounter cheap goods — kind of like being on a treasure hunt. I guess that has the effect of extending the time customers spend in the stores.”

Meanwhile, not all is rosy for Amazon or rival e-commerce firms such as Rakuten. In a 32-page special section, Toyo Keizai (Aug. 25) examined the worsening crisis in the transport business, particularly an acute shortage of drivers of delivery vehicles. According to Ministry of Health, Labor and Welfare data, there were 2.71 jobs for every driver application in June. (A government survey in 2016 found that 83 percent of transport companies were overworking their drivers.)

The employment crunch has led to higher driver salaries, with the resultant cost increases passed along in the form of higher delivery rates. The transport companies have been forced to redouble efforts to cut down on second (or third) visits due to missed deliveries.

Over the past year, Amazon and Rakuten have cut back sharply on their reliance on Yamato Transport. The main beneficiary of this change has been Japan Post, which increased its share to 20.7 percent of the market, third after Yamato and Sagawa Express at 43.3 percent and 28.9 percent, respectively.

To cope with the driver shortage, Amazon, Rakuten, Yodobashi Camera and other firms have been tying up with smaller regional transport companies in Hokkaido and elsewhere, and Rakuten is also said to be mulling setting up its own fleet of vehicles, as does Yodobashi, which operates some 300 vehicles driven by its own staff.

Some consumers appear to prefer online shopping to stores because when visiting the latter they “tend to purchase things they don’t need.” This indeed seems to be one of the rationales behind Don Quijote, which crams its outlets with cheap and glitzy merchandise that appeals to impulse buyers.

Nevertheless, Keizaikai’s Seki reserved praise for Donki’s business model.

“One of Donki’s strengths is that it harnesses ‘people power,’ allowing outlets to set their own sales strategies,” he told Shukan Post. “In the future, for instance, if stores are able to devote more attention to specific customer needs, such as in neighborhoods with a large population of frail elderly customers, this may open up a “wind-hole.”

Seki’s choice of words — “kazeana” (wind-hole) — is double-edged: Literally, it means to physically penetrate an opponent’s body with a spear or arrow; but the expression may figuratively mean to breathe new life into the shopping experience. Interpretation of the article’s conclusion, like its pugnacious headline, is left to Shukan Post readers to decide.