As giants like Forever 21 and Toys “R” Us file for bankruptcy, the media have been quick to declare that retail is dead. Experts even coined the term “Retail Apocalypse,” referring to brick-and-mortar retailers getting driven out of business by online competitors such as Amazon.com.
Is it even possible for traditional retailers to stay relevant in the modern age and survive digital disruptions?
Don Quijote, a Japanese discount store enjoying thirty years of continuous growth, seems to be sending forth a resounding yes.
However, this isn’t to say their business model isn’t innovating to keep up with customer needs.
Don Quijote is unlike any retail store most people have ever seen. I still remember the first time I stepped inside one fourteen years ago. The displays were chaotic. Products ranging from food to electrical appliances to even adult toys were stacked all the way up to the ceiling on both sides of every narrow aisle. It completely changed my perception of Japanese stores.
Conventional Japanese management wisdom emphasizes tidiness and order through 5S—sort, set in order, shine, standardize, and sustain. Don Quijote, however, has defied all existing rules and created its own model based on convenience, discounts, and amusement.
I (like many other visitors to Don Quijote, I’m sure) found myself losing my sense of time as I walked through the jungle of merchandise…but not in a bad way. It was fun. I’ve since gone back again and again, often purchasing things that I never intended.
But how is it possible that so many people are drawn to chaos when the online experience of, say, Amazon is so streamlined?
In effect, what Don Quijote has done is match online retailers in terms of convenience and price while creating a distinctive shopping experience. That experience includes elements of surprise, discovery, and amusement, all of which come through innovations in three areas: store layout, product displays, and procurement.
Store Layout
“The point is to make things hard to find, hard to take, hard to buy,” says Takao Yasuda, founder of Don Quijote.
While typical retail stores focus on saving customers’ time, Don Quijote carefully maneuvers to the opposite experience. The maze-like layout, which the company actually refers to as a “jungle,” is designed to trap customers, making it hard for them to leave without looking at everything. To counteract repeat customers getting used to navigating the jungle over time, Don Quijote redesigns its layout every few months.
You’d think this would frustrate people, but the effect has proved to be more of a win-win, creating a sense of surprise and fun.
Product Displays
Don Quijote adopts a proprietary technique called “compression display” which packs every shelf and hook with merchandise, often all the way up to the ceiling. This display method allows for maximum use of limited store space to showcase a much wider variety of products than other retailers. It also reduces the need for storage space, as almost everything is out on the floor.
Goods that move quickly, like bottled drinks and snacks, are simply stacked up in their shipping cartons. The efficient display and use of space helps to reduce operational costs, as well.
Procurement
Don Quijote positions itself as a general merchandise store that sells everything from food to household goods, including electrical appliances. It offers customers the convenience of one-stop shopping. While 60% of the products are standard items which can be found in supermarkets and other retail stores, the remaining 40% are either unique or heavily discounted products sourced by expert buyers. These include product samples, off-season goods, and leftover inventory.
Unsurprisingly, then, the variety of products sold in Don Quijote is ever changing. And by offering late night shopping, the store manages to match or even surpass ecommerce rivals.
Of course, designing the store layout, setting up displays, and procuring goods are all easier said than done. These require specialized skills and fresh eyes. To find them, the company frequently organizes product display contests for employees, enabling them to share their voices and learn from each other. Furthermore, employees have autonomy to decide store layouts. Store managers are responsible for comparing prices with competitors in their regions and adjusting prices accordingly.
Don Quijote proves that digital disruptions can be overcome by understanding the psychological needs of customers and offering an exceptional shopping experience. We are living in the age of an experience economy (a term coined by B. Joseph Pine II and James H. Gilmore). Forward-thinking educational institutions like GLOBIS aren’t offering courses in digital marketing psychology and emotion-driven innovation to teach people how to drop everything and go online. Modern business leaders need to learn to tackle modern business challenges.
Welcome to the jungle.
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