facebookIn Times of Economic Crises, Daiso Thrives. Here's Why




In Times of Economic Crises, Daiso Thrives. Here's Why

profileRebecca Liew

Ever wondered why some stores make you feel a certain way upon stepping in?

Relaxed, maybe — or excited.

For me, Daiso’s one of those places.

It’s hardly aesthetically pleasing at first glance, yet Marie Kondo and minimalism have nothing on the budget chain giant, whose ability to drive impulse purchases is second to none.

Thanks to its curious selection of kitschy toys and achingly impractical (but, ugh, cute) ceramic figurines — wedged between scores of everyday household items, from box organisers to gardening necessities — I’ve more often than not found myself leaving with a bagful of stuff I didn’t actually need.

Source: giphy

But could Daiso’s success really be down to its clever flat-pricing structure — in Singapore, at least?

Birth of the 100-Yen Store: A Brief History

Maybe it’s the fact that rewarding yourself for your hard work is justification enough for an impractical purchase, or that paying a small amount hurts the wallet less…

…but the heart wants what it wants.

Hirotake Yano spotted that gap before most did — and, 43 years on, now sits on a net worth of at least US$1.9 billion.

Collectively, Daiso operates 2,800 stores within Japan, and another 860 stores globally.

Source: LemonGreenTeaPH

At his lowest point, though, the man behind Daiso Sangyo and its namesake chain store — a household name that most of us regard with much endearment — was forced into filing for bankruptcy when his father-in-law’s fishery business took a turn for the worst.

Undeterred, Yano came up with idea of selling household wares from the back of his truck in 1972.

To cut on the time taken to price each item, he sold them at a flat rate of 100 yen (S$1.34), therein becoming one of Japan’s first businesses to run on a flat-price structure.

In 1977, and fuelled by his early success, Daiso was born.

An early 100-yen Daiso store in Japan. Source: Wikimedia Commons

Unlike most success stories — don’t they all seem to run on a similar theme, replete with setbacks and a touch of luck? — Yano ran his business without a solid plan or budget, instead choosing to let destiny run its course (his words).

If it sounds like a shaky, risky move, it couldn’t have been better timed.

To convince consumers that Daiso products were of respectable quality despite their low price point, the company purchased higher quality goods from suppliers, therein decreasing its profit margins — from 30 yen (S$0.40) to just 20 yen (S$0.27) per item.

Source: giphy

Naturally, the growing demand for Daiso goods has translated to bulk purchases from manufacturers — and, along with it, lower wholesale prices.

Around 40% of its goods are now manufactured in China, where cheaper labour costs translate to increased profits.

It’s all worked to the Japanese lifestyle store giant’s benefit, of course: the company posted sales of 478 billion yen (S$6.35 billion) for the year ended March 2019.

For the Greater Good

But what’s more fascinating is the fact that Daiso has endured — thrived under, even — inflation and economic downturns.

Source: giphy

These dire times often spell slowed sales as consumers opt for leaner, more frugal lifestyles.

In turn, inflation drives cost prices up, causing businesses like Daiso to earn less over time.

It’s partly what drove the lifestyle giant to introduce a revised price tier structure in 2004, starting in its home ground: Japan.

Goods are today sold in five price tiers of between 100 to 500 yen — something that’s been replicated in selected Daiso stores ’round the globe, from Australia to the Philippines.

Power to the People

When was the last time you spotted a Daiso commercial? Chances are low to none, simply because so few exist.

Even as its competitors spend significant sums on marketing their businesses, Daiso’s remained at the top of the heap by relying solely on its selling point: affordable, quality household goods.

Some 1,000 products are tested and developed monthly, adding to the company’s growing inventory of over 90,000 products.

This, helped along by astute product sourcing, have allowed the budget store to thrive through the good and bad.

Source: SpongeBob SquarePants via giphy

Like that unnecessary purchase you didn’t know you needed, Daiso has endured the trials of time because it offers want you want, and all in a welcoming space that doesn’t discriminate.

I celebrate its business model, even as it feeds off my very broke state — and that’s okay with me.

About Rebecca Liew
Lactose-intolerant, but also BS-intolerant. Having written for the likes of Marina Bay Sands and Time Out, I now spend my days saving up for my stationery shop retirement dream.
You can contribute your thoughts like Rebecca Liew here.

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