Don Quijote (Donki) opens its third store: Surviving and thriving in retail

Don Quijote, a Japanese discount store famously known as “Donki”, looks to open another retail store at City Square mall by January 2019. This will mark as its third retail outlet in Singapore, second store at Tanjong Pagar, which opened couple of months ago. Meanwhile, its flagship store was opened in Orchard last year.Donki aims to position itself as the “Japanese brand specialist” by offering products that are either made or designed in Japan and its retail DNA revolves around convenience, discount and amusement.The brand has not yet responded to Marketing's  queries on the new retail outlet.The retail scene in Singapore hasn't been the easiest to navigate over the past few years. According to Johan Vrancken, managing director of Nielsen Singapore, from a macro economical point of view, consumers in Singapore are still more pessimistic about spend as compared to Southeast Asia markets. This is largely due to consumers' concerns around job security (which directly impacts their spending capacity). He added that Nielsen's research found that 59% of consumers spent less on clothes this year compared to last year.Vrancken explained that before retailers decide on a retail strategy, it is important to evaluate the channel strategy and decide if an online store or a brick and mortar concept, or in some cases both, is necessary.  Consumers in Singapore, he added, "are very sophisticated and look for greater shopping experiences" in brick and mortar stores.While they are still price sensitive and looking out for special deals, shoppers do not want to compromise on quality.According to Vrancken, retailers in Singapore need to first get the basic hygiene factors right, know their consumers and go beyond the classic segmentation such as age, gender to ensure success. He added that thorough research needs to be conducted in terms of location, convenience and importantly, understanding the target audience.Luke Lim, CEO of AS Louken Group added that be it digital or offline,retailers have to understand the behavioural, psychographic and demographic of its target consumers. This is where marketing plays a big role from curation of content to engage customers, to of course, personalisation. Lim said that this is the key to succeeding in the era where Artificial Intelligence driven customer experience can be curated to re-target customers.Chiming in on the location aspect of stores, Jaime Syjuco, managing director of Havaianas Singapore and Malaysia, said that placing stores at locations which positively contributes to the brand image is key. He added that it is about knowing the "hot" and the "not" locations for brands. If the brand is targeting locals, the location and trends of the brand has to cater to that target customer audience.Furthermore, Syjuco outlines several other considerations for retailers to take note of when scouting a new location in Singapore.  Firstly, in a Southeast Asian market, to achieve a 15% ROI on store investment would require an occupancy cost of 20% or less. However, the high rents as opposed to store sales mean that 20% occupancy is not usually possible, Syjuco added. As such, local retailers contend with a 25% to as high as 35% occupancy to enter and/or stay in the market.Ideally as a rule of thumb, Syjuco said that the revenue per square foot of the store would be SG$100-150. However, he said that many retailers settle for less than SG$100 in recent times. It is also essential that the investment put in a store returns in two years and also have the option to renew the store lease for another three years. As most locations in Singapore are not within these parameters, Syjuco advised that retailers keep renovation cost to a minimum to protect the profits. He also added that labour to be kept at 10% and systems to 2% of whole profit.According to Syjuco, before deciding on going forth with opening a store, the brand has to understand the traffic passerby to the location as well. Competitor positioning and also understanding a landlord's agenda for the lease space, are also vital considerations as brands have to move strategically to not lose out to competitors. He also added as Singapore is a small area, the chess game of "capturing good" locations has to be quick and decisive with only one to three years availability."Leases generally last and renew every three years [in Singapore], so it is hard to compensate for a bad move early in the game. The move you make now determines how the game plays out for [approximately] the next three years," he said.