Don Don Donki not fazed by tight labour, pricey rentals here

Japanese discount chain's appeal to both workers and landlords has helped it overcome retail challenges and expand rapidly.

STIFF labour conditions and pricey property rents may be the bane of retailers in Singapore, but Don Don Donki is not letting such troubles get in the way of its rapid expansion.

Since the end of 2017, the Japanese discount chain has opened three sizeable stores at Orchard Central, 100AM at Tanjong Pagar and City Square Mall - considerably premium locations - with more on the way.

Donki certainly has deep pockets - its founder and chairman is one of the richest men in Japan. But hearing from Takao Yasuda himself, the key to the retail chain's success in overcoming the twin challenge of labour shortage and high rental to expansion is not money; it's Donki's appeal to both workers and landlords.

Being able to draw crowds to quieter parts of malls, landlords are happy to offer lower rents for Donki to set up shop.

"We can't say how cheap our rents are, but we receive quite reasonable price offers," Mr Yasuda told The Business Times in an interview at his office at Marina Bay Financial Centre.

The first Donki store in Singapore was opened at Orchard Central's basement after Far East Organisation approached them with a good rental price. Other property owners soon came knocking on Donki's doors.

"Orchard Central's basement used to be very quiet but after we opened, a lot of people came and shopped at other stores in the area too," said the 70-year-old who resides at Sentosa Cove with his wife and two sons.

"It's the same for the other locations we opened at - they used to be unpopular places."

And as the retailer's presence grows in Singapore, so has its staff strength.

Donki now employs 700 people (including part-timers) across all three outlets, up from 300 when it started. It said it has not faced difficulty hiring, and will not be hit even when Singapore tightens the foreign worker quota for the services sector next year because most of its employees are local.

Mr Yasuda, an avid diver, said the company appeals to employees - even attracting those from other retail businesses - because they are treated as managers instead of mere workers, and are given autonomy.

Like what Donki does in Japan, stocking decisions are left to store staff. They can even decide the extent of discounts to place on products.

All these stand Donki in good stead to entrench itself in Singapore's challenging retail scene.

Last June, it revealed plans to hit a total of five stores by 2019, and 10 stores by 2020 - those stores are being rolled steadily out of the oven like Donki's famed baked sweet potatoes.

It's reported that a fourth outlet will open at Novena's Square 2 and, Mr Yasuda disclosed, a fifth at Clarke Quay Central this year.

Two more outlets will follow in Jurong East, one by December and another next January. This comes as the retailer looks to bring its fascinating range of wares to the suburbs, where it sees huge opportunity. It means Donki may also set up shop at MRT stations in residential areas, he said.

Currently, all three outlets appear bustling although Mr Yasuda said it is still too early to share actual footfall.

But new store formats - like giant Mega Donki stores - are unlikely to be introduced to local consumers.

"Mega Donki stores sell more than just Japanese goods whereas we're specialising in Japanese food and products in Singapore," Mr Yasuda explained. "If we open that in Singapore, we will be competing with local retailers and won't be welcome."

From Singapore, Donki's Tokyo-listed parent Pan Pacific International Holdings continues to push its overseas frontier too.

The first Don Don Donki store opened in Bangkok in February and another is due to open in Hong Kong within the next few months. Plans call for opening stores in Taiwan, the Philippines and Malaysia as well, said Pan Pacific's chief executive Koji Ohara at the Bangkok opening.

He wants to see 200 stores overseas in the next five years, up from 42 stores now. In comparison, Pan Pacific operates 656 stores in Japan as of end-January.

Challenges have certainly risen, from different countries' import restrictions to language and cultural differences, Mr Yasuda shared, but he believes the issues can be solved over time. Pan Pacific is also not ruling out joint ventures with local partners, especially for countries which restrict the entrance of foreign companies.

Backed largely by foreign institutional investors, Pan Pacific is worth some 1.16 trillion yen (S$14 billion).

Mr Yasuda himself, the son of a teacher and housewife, is worth about US$2.8 billion, according to Forbes.

The company saw H1 2019 profit attributable to shareholders rise 26.4 per cent year on year to roughly 23.6 billion yen, though same-store sales have weakened from the start of this year.

The declines were expected and due to insufficient inventory, according to Mr Yasuda. Sales recovered in the following months and Pan Pacific is confident of posting another year of growth.