Don Quijote Gaining Momentum; Fundamental Reason Why it was Able to Make a Hit on “Amazing TV”
Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote, Don Quijote
On February 10, Pan Pacific International Holdings (Don Quijote), which operates the large discount store Don Quijote and other stores known for their distinctive in-store background music, announced its consolidated financial results for the second quarter of the fiscal year ending June 30, 2022 (July-December 2009).
Net sales were 917.68 billion yen (up 7.6% YoY), operating income was 43.644 billion yen (down 11.5% YoY), ordinary income was 44.523 billion yen (down 7.6% YoY), and net income was 30.148 billion yen (down 7.6% YoY).
Although suffering from the Corona disaster, Donki still has momentum, as it achieved “32 consecutive quarters of increased sales and profits” in its consolidated results for the fiscal year ended June 2009. Furthermore, Donki has been busy creating a buzz. The other day, it launched a “TV that can’t watch TV,” which became a hot topic on the Internet as “a TV that doesn’t require you to pay subscription fees to NHK,” and is said to be selling like hotcakes. The official name of the product is “42V-type Full HD tunerless smart TV with Android TV function. The price is 32,780 yen including tax. The TV tuner, which is necessary to watch NHK and commercial TV, has been removed from the regular TV.
Although it can only watch video streaming services such as Netflix and TVer, the cost is lower because of the reduced functions, and it is more than 10,000 yen cheaper than a Chinese TV with the same specifications. This is exactly what I was looking for! This is exactly what I was looking for!” and within a month of its launch, the initial production of 6,000 units had been sold out.
Maintaining momentum against environmental factors. What is the magic of Donki? Where does the magic of Donki lie?
In order to understand the secret of Donki’s rapid progress, it is easy to look at the reform of the sales floor of UNY, which became a group company. UNY, which had been a standard large supermarket, was transformed into a highly profitable sales floor by “Donki-izing” it.
What were the reforms to achieve this? It was the introduction of the “single product management” method.
When a store is opened and continues to operate, the manager tends to fall into the trap of believing that consumers will come to the store. Even those who were seriously worried about whether customers would really come when they first opened the store take it for granted that customers will come.
However, with other stores selling similar products at almost the same price, there must be some special “motive” or “reason” for people to come all the way to your store to purchase your products. It may be because they are on their way to work, or because it is close to home.
For each product, we place an order, keeping in mind the reasons why we think “this will sell” or “this won’t sell anymore,” and if it doesn’t sell, we figure out why.
For example, “Tomorrow is a field day at a nearby elementary school, so we should increase our stock of beverages” or “If we put 10 items in a row and sold 5, and 3 items in a row and sold 3, A sold more, but B, which is sold out, is more likely to sell. Let’s order more of B tomorrow,” etc. Don’t just think that the sales floor is doing well, but look at the reasons why each product sells well.
This is a method of repeating hypotheses and verifying whether or not each product will sell properly, as sales may vary depending on the store, the season, the weather, and other factors. This is called “single item management.
Looking back on the time when UNY joined the Donki Group, Kenji Sekiguchi, the managing director of Donki, said, “From my point of view, UNY looked like a ‘gold mine. We were operating 200 stores in one way, not 200 different ways” (February 10, 2022). Therefore, the company implemented “store reform.
This store reform is called “individual store management” by Donki, and it is a management technique in which Donki excels, in which prices and products are selected to meet the local needs of each store. This concept is similar to the “single product management” mentioned earlier.
In fact, in the sales floor of UNY before it became a subsidiary of Donki, cheese and desserts were mixed together, but the employees at the time did not pay attention to this “oddity. As the company became part of Donki and “individual store management” spread to the part-time employees on the shop floor, cheese and dessert were placed separately. Cheese and desserts are now placed separately, and all products are arranged in a surprisingly clean manner.
Cheese and dessert may look like the same product line, but from the consumer’s point of view, it is easier to buy when they are displayed separately.
As mentioned above, one of Donki’s recent hit products is a TV that can’t watch TV. What a surprise, they have dared to remove the TV tuner from the TV. Although it can only watch video streaming services such as Amazon Prime and Netflix, the cost is lower because of the reduced functions, and it is more than 10,000 yen cheaper than a Chinese TV with the same specifications.
However, the cost is lower because of the reduced functions, and it is more than 10,000 yen cheaper than Chinese TVs with the same specifications. Within a month of its release, the initial production of 6,000 units had been sold out.
In fact, this is the second generation of the product. The first generation failed to capture the needs of customers because it did not offer high image quality and was not compatible with the Android OS, and sales ended up being sluggish. However, thanks to the persistent “hypothesis and verification” efforts of the development team, they were able to sell the second generation, which included what was truly necessary and eliminated unnecessary functions. This led to a huge hit.
In the end, Donki’s strength lies in its thoroughness in “always thinking from the consumer’s perspective” and repeating hypothesis and verification. Keisuke Hamane, deputy chief researcher in the research and consulting division of NRI and a specialist in management strategy, has this to say about the future of Donki
The company has continued to expand its scale, recording an increase in sales and profits for 32 consecutive fiscal years in the last fiscal year. In April 2009, Donki acquired GRCY Holdings, the holding company of the Gelson’s chain of high-end supermarkets in California. In April 2009, the company acquired GRCY Holdings, a holding company for Gelson’s, an upscale supermarket chain in California, U.S.A. Although inbound demand at Corona disappeared, the company was able to offset the decline in sales at existing stores by expanding the number of stores. In the future, the key to the company’s growth strategy will be how it can expand its lineup of attractive, high-margin PB products, such as TVs without TV tuners.
This is the key to its growth strategy.
How far will Donki’s rapid progress continue? Consumers’ expectations are high.
Reporting and writing： Kenichi Ogura
Director, ITOMOS Research Institute