SINGAPORE -- Four months after venturing into the Singaporean market, Japanese discount store operator Don Quijote Holdings already has a firm toehold in the city-state, posing a potential threat to local competitors.
Don Quijote, popularly known as "Donki" in Japan, opened its first Southeast Asian outlet on Orchard Road, Singapore's commercial hub, on Dec. 1 last year as part of its global expansion strategy.
Sales are humming at Don Don Donki, as the store is known, with customers coming for the wide range of products sold at bargain prices -- from fresh seafood to cosplay costumes.
Japanese retailers in Singapore are increasingly alarmed by Donki's expanding influence, as Japan's "discount king" attempts to upend their conventional business model.
The Singaporean outlet is significant to Don Quijote's global expansion drive. Based on what it learns in Singapore, Don Quijote intends to "expand operations, not only in Southeast Asia but also around the world," said Takao Yasuda, the Tokyo-based company's founding chairman, who lives in the city-state.
Don Quijote is now building its second Singaporean store in a business district and plans to enter the Thai market in November.
Well-traveled Singaporeans, many of whom have become aficionados of Japanese products, are hooked on the Don Don Donki store on Orchard Road. It offers about 30,000 Japanese items spread across 1,400 sq. meters of floor space.
"Do they have Amaou?" wondered a man in his 20s who was searching for the premium strawberries from Fukuoka Prefecture one Friday in late March. "They're my favorite." In another corner of the store, a couple was trying on funny latex masks. After 9 p.m., the emporium was even more crowded with customers who were out shopping after dinner.
"It's unpredictable and fun walking through the aisles," said Yu Poh Leng, describing her frequent visits. "Every trip I make, I find new discoveries, new surprises -- be it a mask, a new cheese brand or a new snack," the public relations professional said.
A spokesman for Don Quijote said sales at the Singaporean outlet, which is located in a shopping mall run by Singaporean property developer Far East Organization, are stronger than the retailer expected.
Mavis Seow, Far East Organization's chief operating officer, said total sales and the number of visitors to the mall have both risen, thanks to the opening of Don Don Donki.
Competitive pricing is Don Don Donki's strongest point.
At a news conference immediately before the opening of Don Don Donki last December, Chairman Yasuda said: "I was surprised to learn that Japanese products are expensive in Singapore. We have to do something [about] this price gap."
Don Don Donki can sell Japanese products at low prices because it buys items in bulk and ships them directly to the Singaporean outlet, bypassing wholesalers and importers. A package of five servings of instant noodles sells for 5.90 Singapore dollars ($4.49) at Don Don Donki, about 40% cheaper than at competing supermarkets. A Singapore-based economist pointed out that Don Quijote has stimulated demand for Japanese food and general merchandise in the city-state through the extremely low prices of its products.
According to the Japan External Trade Organization, Singapore's food imports from Japan surged 15.7% by value in 2016 from a year earlier. But Japanese products accounted for only 2.5% of Singapore's total food imports in value terms. Part of the reason appears to be the high cost of Japanese food.
Don Quijote is working to change that with its low-price offerings. This could increase Singapore's imports of food from Japan.
Japanese retailers operating in Singapore, including Isetan Singapore, which also has a store on Orchard Road, are watching Don Quijote closely.
"Our supermarket business is [steady]," an Isetan official said. "Though they sell fresh food items, we focus on the premium Japanese fresh food. The handling process is different."
An executive at Meidi-Ya, operator of the largest Japanese supermarket in Singapore, put the arrival of Don Quijote in a positive light, saying, "If the market for Japanese foods expands, it will bring benefits to the entire industry."
But, the executive added, "The local subsidiaries of manufacturers and wholesalers are supporting a stable supply of Japanese products in overseas markets like Singapore. Bypassing wholesalers and others blindly will not be in the interests of customers and producers over the long term."
Don Quijote's biggest challenge is managing its inventory. The process of ordering products and shipping them to Singapore is a lengthy one. Items that it offers online sell out more frequently than at competitors.
But if Don Quijote's global expansion is successful, its supply chain will develop and it will be able to benefit from economies of scale. Other retailers will no doubt keep one eye on their upstart competitor.