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Foreign adventures at Don Quijote light up social media

A trip to the quirky retail chain is a highlight for many visitors to Japan

This Don Quijote outlet in Osaka has a ferris wheel on its facade.

TOKYO -- When a Russian woman posted a picture of herself on Instagram giving a peace sign and wearing a crab costume at a Don Quijote discount store, the social media site lit up with comments in various languages, such as "cool!" and "perfect!" The image got 25,000 "likes."

Similarly, a YouTube video by a British man of himself walking around a Don Quijote, calling it Japan's "greatest store," got more than 400,000 views.

Stores operated by the discount retailer Don Quijote Holdings have become hugely popular with foreign visitors to Japan, especially South Koreans, Chinese and Russians. Many visitors are posting pictures and videos on social media.

The chain's signature "compressed display" system -- merchandise packed tightly into cluttered stores -- and late night shopping hours have enticed many overseas visitors. Accounts of labyrinthine store layouts and vast product selections, from food to daily necessities, home appliances and party costumes, have spread like wildfire.

"We want to give a wonderful shopping experience to our customers," said President and CEO Koji Ohara.

At Don Quijote's Dotombori outlet in Osaka, 60% of sales come from foreign visitors.

The company's sales of tax-free products to foreign visitors jumped 55% on year to 25.1 billion yen ($233 million) in the six months through December, exceeding those of rival department stores Takashimaya and Daimaru Matsuzakaya Department Stores, which had sales of around 20 billion yen each. Robust sales of tax-free products helped Don Quijote's market capitalization top 1 trillion yen for the first time in January.

The chain's outlets in Osaka's Dotombori district, the historic city of Kyoto, and Tokyo's Roppongi and Shibuya neighborhoods are especially inviting to customers with a taste for late-night shopping.

Late on a recent Saturday night, Don Quijote's store in Osaka's Dotombori neighborhood was crowded with South Korean and Chinese customers. Many were buying Lion's Kyusoku Jikan leg-cooling gel sheets, and Shiseido's Perfect Whip cleansing foam.

"Drugs, such as eyedrops and stomach medicine, and gummy candy and other foods are popular," said Senior Managing Director Mitsuo Takahashi.

Don Quijote has aggressively kept the prices of flagship products down. Kyusoku Jikan costs about 30% less at Don Quijote than at nearby drugstores.

Tax-free sales to foreigners have been key to supporting Don Quijote's bottom line. In the July-December period, 20% of the sales increase was accounted for by tax-free sales. Net profit rose 14% to 18.6 billion yen.

The ratio of tax-free sales to total sales could increase to about 10% in the fiscal year through June 2020, from 6% in the fiscal year through last June, Takahashi said.

Sales of tax-free products in the July-December period per customer were flat, but customer numbers were up more than 50% from a year earlier, a gain most likely explained by foreign visitors.

A customer examines some of the many items on offer at the Don Quijote outlet Tokyo's Ginza district.

The company's share price has fallen in recent weeks, in tandem with the overall market. But the company's share price jumped about 50% over the past year, far more than the Nikkei Stock Average's 14% rise.

Don Quijote's return on equity was 13% in the last fiscal year, among the highest for retailers. Its ongoing appeal among foreign visitors bodes well for its stock price going forward.

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