Bargain stores are big in Japan

At Daiso, all merchandise have a single price – an idea founder Hirotake Yano started to save the time it took to attach price tags.
At Daiso, all merchandise have a single price – an idea founder Hirotake Yano started to save the time it took to attach price tags.PHOTO: BLOOMBERG

Founder of the largest discount store, Daiso, is a billionaire who has opened more than 3,150 outlets in the country

TOKYO • Selling everyday items to bargain hunters has made the founder of Japan's biggest discount store chain a billionaire.

Mr Hirotake Yano, founder and president of closely-held Daiso Sangyo Corp, the self-described "Japanese shopping wonderland", was one of the country's first vendors to adopt a single-price model.

He used that strategy to build a net worth that the Bloomberg Billionaires Index values at US$1.9 billion (S$2.6 billion).

"His timing was perfect," said Mr Pascal Martin, a partner at OC&C Strategy Consultants. "Opening the first 100-yen store in 1991, a couple of years after the burst of the Japanese economic 'bubble', which was the beginning of a profound shift in Japanese consumer culture."

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Mr Yano, 74, declined to comment on his fortune, according to a Daiso spokesman.

What is known is that his path to entrepreneurship was anything but direct. After graduating from Chuo University in Tokyo, he drifted through a series of jobs that included running his father-in-law's fishery until it went bankrupt, according to Daiso's website.

He began hawking goods from the back of a truck in 1972 and came up with the idea of charging 100 yen for all his merchandise.

The reason? To save the time it took to attach the price tags.

He incorporated Daiso, which translates to "creating something big", in 1977.

Stagnant wages and a sputtering economy has led to a fundamental shift among Japanese consumers in recent decades, spurring them to seek greater value for their money.

That has proved to be a boon for the nation's discount retail industry, with annual revenue of about US$5.4 billion, UBS Group said in a note to clients in March last year.

Daiso, the largest of the discount players, operates more than 3,150 stores domestically and 1,800 overseas, including in Singapore.

Meanwhile, rival Seria, Japan's second-largest discount retailer, has surged 39 per cent in share price this year.

Seria benefits from same-store sales growth that is about a percentage point higher than peers, according to Nomura Holdings analyst Kousuke Narikiyo.

The company seeks to gain a competitive advantage through an inventory management system, compared with Daiso, which puts more emphasis on volume to generate higher profits.

Daiso sells about 70,000 household items, an offbeat collection that includes mannequin heads, fake money, pet clothes, chair socks and comic book storage bags.

Revenue climbed 6.3 per cent in fiscal year 2017.

Mr Yano attributes his success to astute product sourcing, which lets Daiso offer high-quality items alongside quirky must-haves, all for 100 yen apiece. His in-house buyers negotiate directly with manufacturers to order large quantities at low prices.

It is a strategy similar to the one used by Bentonville, Arkansas-based Wal-Mart Stores, the world's biggest retailer.

While Japan's economy has sprung to life - posting five consecutive quarters of growth, its longest run in a decade - the desire for deals remains firmly rooted in the minds of consumers.

"Japanese people just want more savings these days," Mr Narikiyo said. "They won't abandon the habit of buying budget goods developed over the past 20 years."

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on July 05, 2017, with the headline 'Bargain stores are big in Japan'. Print Edition | Subscribe