A Retailer Breaks All The Rules

Don Quijote won a cult following in Japan by giving local stores unprecedented control. Can that strategy work internationally?

- James E. Ellis

Entering a branch of Don Quijote, the ubiquitous Japanese discount chain, can be a jarring experience. At the entrance of every location is an array of exotic fish that would put many pet stores to shame. It might feel like a drugstore inside, with rows of obscure unguents—think cream for damaged skin made from fish roe—for sale. Go upstairs, and every floor takes on a different identity: a clothing shop with rows of kitschy shirts next to a boutique area with Coach bags, then an electronics shop that sells iPhone accessories as well as cassette tapes.

For years, Don Quijote—an unclassifiable seller of everything from humidifiers to sex toys—has been a cult phenomenon in Japan, favored by the cash-strapped households of the so-called recession generation. Now it’s big business. Thanks largely to the discounter’s rabid fan base, its parent company, Tokyo-based Pan Pacific International Holdings Corp., is on track to become Japan’s fifth-largest retailer, with revenue likely to reach 1.4 trillion yen ($12.5 billion) in the fiscal year ending June 30. That’s a remarkable feat for a chain that barely sells online and does almost no conventional marketing.

Now Don Quijote is trying to come up with a strategy to take its unique formula across Asia, eyeing locations in Hong Kong, Indonesia, Malaysia, and the Philippines to add to recent experiments in Singapore and Thailand. Chief Executive Officer Koji Ohara and founder Takao Yasuda are betting that an only-in-Japan retail phenomenon can translate abroad and buck the trend toward online shopping that’s hobbled merchants worldwide.