1. Introduction

1.1. Research Background

Don Quijote Co., Ltd, commonly known as Donki, is a Japanese multinational discount store chain with over 160 locations throughout Japan [1]. Donki has expanded globally, with stores in Singapore, Hong Kong, Thailand, and Taiwan [1-2]. The company has adopted the Don Don Donki branding in Singapore and Hong Kong [1]. Donki’s expansion strategy is to specialize in Japanese products, mainly foods, and operate at reduced costs through the company’s direct trading [3]. Donki’s unique business format has successfully promoted sales of Japanese food and created new, unique business formats [3]. The company’s late-night operation to serve diversifying lifestyles, combined with a display concept and merchandise mix that amuses, has contributed to its success [4]. Due to the company’s global presence and unique business format, Donki’s expansion into the UK market is an important research topic. The analysis of Donki’s global strategy and the factors influencing its entry into the UK market is necessary to understand this topic’s commercial and social value. The commercial value of this topic lies in the potential impact of Donki’s entry into the UK market on the retail industry. In contrast, the social value lies in the potential impact on the availability of Japanese products in the UK.

1.2. Literature Review

Donki, a Japanese discount store chain, specializes in offering Japanese products, particularly food, and maintains low operating costs by engaging in direct trading. The company has been steadily expanding its global presence. In December 2017, it established its first overseas business format from scratch in Singapore. Donki serves as an incubator for creating innovative spin-off business formats. An excellent example is Sen Sen Sushi, which debuted in Hong Kong in autumn 2021 and quickly gained popularity among locals. Currently, there are three outlets of this brand in Hong Kong as of June 2022, and the company has ambitious plans to open numerous additional locations in other area in the future.[5]

Donki’s unique retail strategy has been successful in Asia, with customers attracted to its cluttered discount retail stores [6]. However, the factors influencing its entry into the UK market are unclear. A systematic literature review can provide insights into the potential challenges and opportunities for Donki in the UK market. Sánchez et al. analyzed the emergence of the sharing city and its social practices using a systematic literature review [7]. This study can provide an understanding of the sharing economy, which is relevant to Donki’s business model of operating at reduced costs through direct trading. In addition, Mayuko reported that Donki is expanding in Southeast Asia, offering affordable, hard-to-find quality products to win the heart of consumers [8]. This article can provide insights into Donki’s expansion strategy and how it can be adapted to the UK market.

Overall, the literature suggests that Donki’s unique retail strategy has been successful in Asia, but its entry into the UK market may face challenges due to cultural differences and competition from established retailers. However, Donki’s expansion strategy and store design can be adapted to the UK market to attract customers.

1.3. Research Gap

Most of the literature reviewed has focused on Donki’s expansion and unique retail strategies in Asia. The literature reviewed has provided insights into Donki’s business policy and strategy, its expansion strategy in Southeast Asia, and its store design and layout in Hong Kong. These insights can inform the problem’s analysis and suggest potential solutions for Donki’s entry into the UK market.

In contrast, there is a research gap in the literature on the factors that may influence Donki’s entry into the UK market. Specifically, there is a lack of research on the cultural differences and competition from established retailers that Donki may face in the UK market. Additionally, there is a lack of research on how Donki’s expansion strategy and store design can be adapted to the UK market to attract customers.

Therefore, this paper aims to address the research gap by analyzing the cultural differences and competition from established retailers that Donki may face in the UK market and suggesting how Donki’s expansion strategy and store design can be adapted to the UK market to attract customers. The structure of the paper will be a case description, an analysis of the problem, and suggestions.

1.4. Research Framework

This study will follow a logical structure to achieve the research objectives. Firstly, it will introduce Donki’s global strategy and its success in Asia. Secondly, it will conduct a literature review to identify the factors influencing Donki’s entry into the UK market. Thirdly, the study will describe Donki’s entry into the UK market as a case study. The case description will include an analysis of Donki’s expansion strategy and store design, as well as the challenges and opportunities for the company in the UK market. Fourthly, the study will conduct a problem analysis to identify the key challenges and opportunities for Donki in the UK market. The problem analysis will use a comparative study to identify similarities, differences, and important lessons from Donki’s experiences in Asia and the UK market. The study will use case studies, comparative analysis, and quantitative data to thoroughly assess the factors influencing Donki’s entry into the UK market. Finally, the study will recommend Donki’s entry into the UK market. The recommendations will be based on the literature review findings, case description, and problem analysis. The recommendations will include strategies for adapting Donki’s expansion strategy and store design to the UK market and addressing the challenges and opportunities identified in the problem analysis.

2. Case Description

Donki’s unique retail strategy has been successful in Asia, attracting customers to its cluttered discount retail stores. However, Donki’s entry into the UK market will require careful consideration of the entry mode, competitors, and shop design. Donki will need to differentiate itself from established retailers to attract customers, and it will need to carefully consider the design of its stores to ensure that they are attractive and welcoming to UK customers.

2.1. Mode of Entry

Donki’s mode of entry into the UK market will be a critical factor in its success. The literature suggests that there are several modes of entry that Donki can consider, including exporting, licensing, franchising, joint ventures, and wholly-owned subsidiaries [9]. Each mode of entry has its advantages and disadvantages, and Donki will need to carefully consider which mode of entry is most appropriate for the UK market. For example, exporting may be the easiest and least risky mode of entry, but it may not give Donki the control it needs to succeed in the UK market. On the other hand, wholly-owned subsidiaries may give Donki the most control, but they may also be the riskiest and most expensive entry mode.

2.2. Competitors

Donki must take into account its competition within the UK market, which is known for its high level of competitiveness, particularly with the presence of well-established retailers like Tesco, Sainsbury's, and Asda leading the way [9]. To attract customers effectively, Donki will need to set itself apart from these already dominant players. A potential approach to achieve this is by emphasizing its successful retail strategy from Asia, which centers around cluttered discount retail stores. This uniqueness could potentially appeal to UK customers seeking something distinct from the offerings of established retailers.

2.3. Shop Design

Donki’s shop design will also be a critical factor in its success in the UK market. The literature suggests that a retail store’s design can significantly impact customer behavior and sales [10]. Donki’s cluttered discount retail stores may be attractive to some customers, but they may also be overwhelming to others. Donki will need to carefully consider the design of its stores to ensure that they are attractive and welcoming to UK customers. For example, Donki may need to consider a more minimalist design to appeal to UK customers who are used to established retailers’ more organized and less cluttered stores.

2.4. Laws and Regulations

Donki must comply with the UK's strict laws and regulations regarding food safety and labeling when entering the UK market. This includes registering with the local authority if they serve or supply food or drink of any kind, and ensuring that their products comply with the Food Safety Act 1990, which provides the framework for all food legislation in England, Wales, and Scotland. Donki must also consider the impact of Brexit on their entry into the UK market, as Brexit has created uncertainty for businesses operating in the UK market. However, the UK government recognises that businesses will need time to adapt to new labelling rules, so there is a proportionate and risk-based enforcement approach for labelling requirements.

2.5. Supply Chain

Donki needs to consider the supply chain in the UK market. Donki’s unique retail strategy relies on direct trading to reduce costs. Donki needs to identify reliable suppliers in the UK market and develop a supply chain supporting its business operations. Donki also needs to consider the impact of supply chain disruptions, such as the COVID-19 pandemic, on its business operations.

3. Analysis of Problem

Donki’s entry into the UK market presents several challenges and problems that need to be analyzed. This section will examine the current situation of the UK supermarket industry and the operation of imported Japanese shops in the UK, such as the Japan Centre. Then, this paper presents the problems with real evidence and analysis the causes of the problem. This analysis will help identify the competitive landscape and potential opportunities and challenges for Donki’s entry into the UK market.

3.1. UK Supermarket Industry

3.1.1. Business Model

UK supermarkets typically follow a large-format store model, offering various products, including groceries, household items, clothing, and electronics. They often emphasize competitive pricing, loyalty programs, and online shopping options.

3.1.2. Dominant Players and Market Share

In the UK, the supermarket sector is largely dominated by well-established retailers like Tesco, Sainsbury's, Asda, and Morrisons [11]. These companies hold significant market influence and boast extensive store networks. Notably, Tesco stands as the UK's largest supermarket chain, commanding a market share of 27.5 percent as of the close of 2022 [12]. Sainsbury's and Asda are also prominent players in the industry. Despite this, the UK supermarket market remains fiercely competitive, with retailers vying in areas such as pricing, product quality, convenience, and customer service. Retails such as Lidl and Aldi have been making strides in gaining market share by providing more affordable alternatives.

3.1.3. Japan Center

Donki could learn entry mode and marketing strategies from those Japanese import supermarkets that have been successfully rooted in the UK. Japan Centre is a well-known imported Japanese shop in the UK, offering a wide range of Japanese food, drinks, and other products [13]. It operates both physical stores and an online platform. Japan Centre specializes in Japanese products, including snacks, beverages, fresh produce, and kitchenware. It aims to provide an authentic Japanese shopping experience for customers in the UK. Moreover, Japan Centre primarily targets consumers interested in Japanese culture, cuisine, and products. It attracts both Japanese expatriates and non-Japanese customers who appreciate Japanese goods. For its Store Format, Japan Centre operates physical stores in key locations, such as London, where customers can browse and purchase products. It also offers an online platform for convenient shopping and nationwide delivery.

3.2. Problems

3.2.1. Market Entry Methods

Donki’s mode of entry into the UK market will be a critical factor in its success. The company can choose between various entry modes, including exporting, licensing, franchising, joint ventures, and wholly-owned subsidiaries [14]. However, some of these entry modes may fail in the UK market. For example, licensing and franchising may not be suitable for Donki’s unique retail strategy, which focuses on cluttered discount retail stores. Because licensing and franchising models may limit Donki’s control over its brand and business operations and dilute Donki’s brand image and uniqueness [15]. Donki’s brand is built on its unique retail strategy, which may be difficult to replicate through licensing and franchising models.

3.2.2. Competitors

Donki will face stiff competition from established retailers such as Tesco, Sainsbury’s, and Asda [16]. These retailers have a significant market share and may be difficult to compete with. However, Donki’s unique retail strategy may be a competitive advantage in the UK market.

3.2.3. Regulations

The UK has strict regulations against imported food, which may make it difficult for Donki to import its Japanese products [17]. Donki must ensure its products meet UK safety and quality standards and comply with UK food regulations.

3.2.4. Supply Chain

Transporting Japanese food to the UK may be a challenge for Donki. Transporting fresh food from Japan can be difficult in terms of time and cost. For example, shipping parcels from Japan can cost anywhere from 2,750 yen to 8,850 yen, depending on the size and weight of the package. About time, transporting fresh food from Japan can take several days or even weeks, depending on the mode of transportation and the destination. For example, shipping parcels from Japan can take 4-6 days, while surface shipping can take 1-3 months. Moreover, there are restrictions on what can be shipped internationally, and fresh foods may not be suitable for shipping. For example, frozen or chilled products may require a separate service, and some products, such as perfumes and cacti, cannot be sent internationally [18]. Additionally, Donki must ensure that its products are delivered to its stores in the UK at a competitive price.

3.3. Causes of Problem

3.3.1. Intense Competition

The dominance of established retailers in the UK market results from their long-standing presence, brand recognition, and extensive distribution networks. Donki’s entry into the market as a new player will face the challenge of breaking into a highly competitive landscape.

3.3.2. Regulatory Compliance

The strict regulations and standards for imported food in the UK are in place to ensure consumer safety and product quality. However, complying with these regulations can be time-consuming and costly for companies like Donki, which specializes in imported Japanese food products.

3.3.3. Market Entry Method Selection

The choice of market entry method is crucial for Donki’s success in the UK market. Selecting the wrong method can lead to inefficiencies, increased costs, and limited market penetration. It is essential for Donki to carefully evaluate and choose the most suitable entry method that aligns with its goals and resources.

3.3.4. Logistical Challenges

Transporting Japanese food products to the UK while maintaining freshness and quality can be complex. At the same time, the cost and time of transportation should be considered. Establishing efficient and reliable supply chain networks is crucial for Donki to ensure that its products reach the UK market optimally.

In conclusion, Donki’s entry into the UK market presents several challenges and opportunities. The company must carefully analyze the market and develop a successful entry strategy that addresses the challenges identified in this analysis. Donki must differentiate itself from established retailers, comply with UK regulations, and ensure its supply chain is efficient and reliable.

4. Suggestion

Based on the problems identified in the previous section, the following suggestions are proposed to address the challenges and maximize the opportunities for Donki’s entry into the UK market:

4.1. Market Entry Approach

To ensure a successful entry into the UK market, Donki should consider the following suggestions:

First, wholly Owned Subsidiary. Establishing a wholly owned subsidiary can give Donki maximum control over its brand and business operations in the UK market. This approach allows Donki to maintain its unique retail strategy and brand image without dilution. It also gives Donki direct control over its supply chain, distribution, and customer experience.

Second, partnerships with Local Retailers. Collaborating with local retailers can help Donki navigate the complexities of the UK market and leverage its existing customer base and market knowledge. Donki should consider forming strategic partnerships with local retailers in the UK. This collaboration can provide several benefits. Partnering with local retailers allows Donki to tap into its existing customer base and leverage its market presence. This can help Donki quickly gain visibility and attract customers in the UK market. Secndly, local retailers have in-depth knowledge of the UK market, including consumer preferences, shopping habits, and regulatory requirements. By partnering with them, Donki can benefit from their expertise and insights, which can inform its market entry strategy and help navigate the complexities of the UK retail landscape. Thirdly, collaborating with local retailers enables Donki to share resources, such as distribution networks, warehousing facilities, and marketing campaigns. This can help optimize costs and operational efficiency, especially in the early stages of market entry when establishing a standalone presence may be challenging. Lastly, partnering with reputable local retailers can enhance Donki’s brand exposure and credibility in the UK market. It provides an opportunity for Donki to showcase its unique retail strategy and Japanese products to a wider audience, leveraging the trust and reputation of the local retail partner.

Examples of successful retail partnerships include Starbucks and banks inside grocery stores, collaborations between Walmart and BuzzFeed, and partnerships between J.Crew and WeWork [19-20]. These examples demonstrate the potential benefits of partnering with local retailers to tap into their audience base, share resources, and drive brand awareness.

4.2. Competitors

To effectively compete with established retailers in the UK market, Donki should consider the following suggestions:

First, Differentiation. Donki can create a shopping experience different from traditional UK supermarkets by offering a wide range of Japanese products, a unique store layout, and affordable prices. For example, Donki can create a section in its stores dedicated to Japanese products, such as snacks, drinks, and beauty products. This section can be designed to resemble a traditional Japanese market, with colorful displays, Japanese signage, and unique product offerings. Donki can also offer affordable prices for its products, attracting price-sensitive customers looking for value for money. In addition, Donki can differentiate itself by offering unique services unavailable in traditional UK supermarkets. For example, Donki can offer cooking classes that teach customers how to prepare Japanese dishes using its products. Donki can also offer cultural events, such as Japanese tea ceremonies or calligraphy workshops, to attract customers interested in Japanese culture. By offering these unique services, Donki can create a shopping experience that is not only focused on buying products but also on learning and experiencing Japanese culture.

Second, it is essential for Donki to focus on localized marketing approaches aimed at establishing brand recognition and enticing customers. These strategies may encompass targeted advertising initiatives, active engagement on social media platforms, and collaborations with local influencers or organizations. By gaining insight into the preferences and shopping patterns of UK consumers, Donki can customize its marketing endeavors to effectively connect with the local market.

4.3. Regulations

To navigate the strict regulations on imported food products in the UK, Donki should consider the following suggestions:

First, Compliance and Quality Assurance. Donki must ensure that its products meet the safety and quality standards of the UK and comply with the country’s food regulations. This can involve rigorous quality control measures, product testing, and documentation to demonstrate compliance. Donki should also establish strong relationships with local suppliers and distributors who are familiar with the UK regulations and can assist in meeting compliance requirements.

Second, Partnerships with Local Suppliers. Collaborating with local suppliers can help Donki overcome regulatory challenges and ensure a smooth supply chain. Local suppliers can provide insights into the UK market, assist with product sourcing and distribution, and help navigate the regulatory landscape. By partnering with trusted local suppliers, Donki can ensure the availability of its Japanese products while complying with UK regulations.

4.4. Supply Chain

To address the challenges in transporting Japanese food products to the UK, Donki should consider the following suggestions:

First, Optimized Logistics. Donki should work closely with logistics partners to optimize the transportation of its products from Japan to the UK. This can involve exploring different modes of transport, such as air freight, and renting an entire aircraft for Donki’s shipment can be useful for large or time-sensitive shipments. This option can provide Donki with greater control over its supply chain and ensure timely delivery. In addition, Donki should also leverage technology and data analytics to track and manage its supply chain efficiently, ensuring timely delivery and minimizing costs. For example, Donki can use data analytics to track and manage its supply chain efficiently, ensuring timely delivery and minimizing costs. Donki can also consider partnering with local logistics providers familiar with the UK market and can assist in optimizing its supply chain.

Second, Local Sourcing. To reduce transportation costs and ensure the availability of fresh products, Donki should consider sourcing certain products locally in the UK. This can involve establishing partnerships with local suppliers or even exploring opportunities for local production. By sourcing locally, Donki can reduce transportation time and costs while supporting the local economy and meeting the preferences of UK consumers for locally sourced products.

In conclusion, by adopting a strategic market entry approach, differentiating itself from competitors, complying with regulations, and optimizing its supply chain, Donki can enhance its chances of success in the UK market. These suggestions address the identified problems and provide relevant recommendations for Donki’s entry into the UK market. It is important for Donki to carefully evaluate and adapt these suggestions based on the specific market conditions and dynamics in the UK.

5. Conclusion

In conclusion, this paper has analyzed Donki’s global strategy and the factors influencing its entry into the UK market. Several key insights have been identified through a comprehensive literature review, case description, problem analysis, and suggestions.

The market entry approach is crucial for Donki’s success in the UK market. Donki can maintain control over its brand and operations while leveraging local expertise and distribution networks by considering a wholly-owned subsidiary or partnerships with local retailers.

Competitors pose a challenge for Donki, but its unique retail strategy can be a competitive advantage. By emphasizing differentiation through unique offerings, store layout, and affordable prices, Donki can attract customers seeking a distinct shopping experience.

Regulations on imported food products in the UK require Donki to ensure compliance and quality assurance. By establishing partnerships with local suppliers and implementing rigorous quality control measures, Donki can navigate the regulatory landscape and meet UK standards.

The supply chain presents challenges in transporting Japanese food products to the UK. Donki can optimize logistics through collaboration with logistics partners and explore local sourcing options to reduce transportation costs and ensure the availability of fresh products.

In conclusion, by implementing the recommendations provided in this paper, Donki can enhance its chances of success in the UK market. These recommendations include a strategic market entry approach, differentiation strategies, compliance and quality assurance, and optimized logistics. By addressing the identified problems and capitalizing on the opportunities, Donki can establish a strong presence in the UK market and attract customers with its unique retail strategy and Japanese products.

Donki needs to adapt these recommendations to the specific market conditions and dynamics in the UK. Continuous monitoring and adaptation to consumer preferences and market trends will be essential for Donki’s long-term success in the UK market. Further research and analysis can provide deeper insights into the implementation of marketing strategies and the impact of Donki’s entry into the UK market.

Overall, this paper contributes to understanding Donki’s global strategy and provides valuable recommendations for its entry into the UK market. By leveraging its unique retail strategy, adapting to local regulations, and optimizing its supply chain, Donki can position itself for success and establish a strong foothold in the competitive UK market.