[NEWS IN FOCUS] From coffee to cosmetics: How Daiso went from humble dollar store to catch-all retail giant

Industry

Published: 27 Jan. 2024, 07:00 Updated: 15 Feb. 2024, 14:30

[NEWS IN FOCUS] From coffee to cosmetics: How Daiso went from humble dollar store to catch-all retail giant

A citizen browses through a Daiso store in Yongsan District, central Seoul [NEWS1]

Shin Hee-yeon, a 28-year-old freelancer in Seoul, recently found winter sleepwear at Daiso, the "1,000-won ($0.75) shop" in Korea akin to Dollar Tree or Poundland.

"Daiso had them for 5,000 won, compared to other sleepwear pants that start at a minimum of 15,000 won, so I decided to give it a try," she said. "I was pleasantly surprised that they are not only much cheaper but also perform really well. I even bought another pair for my boyfriend."

Daiso, once known for budget household goods, now offers a diverse range, from winter fleeces and eyeliners to capsule coffee too, all for just a few 1,000-won bills. It is also constructing new logistics centers to open more stores and further establish its presence in the online market.

Daiso's winter fleeces sold for 5,000 won ($3.74) [ASUNGDAISO]

30,000-won cosmetics to 3,000-won
Recently, the spotlight turned to Daiso's 5,000-won fleeces, making waves as a Uniqlo competitor offering a significantly lower price compared to Uniqlo's 29,900-won option.

The success doesn't stop at clothing. The "VT Reedle Shot Ampoule" from Daiso became a sought-after cosmetic, challenging Olive Young's price which exceed 30,000 won.

Videos of YouTubers trying out Daiso's VT Reedle Shot Ampoule, a skincare product enhancing skin absorption with cica-coated fine needle ingredients, priced at 3,000 won. A similar product at Olive Young costs over 30,000 won. [SCREEN CAPTURE]

Daiso's strength lies in its uniform pricing strategy, all ranging between 500 won to 5,000 won. However, it's not merely about inexpensive items, it's about offering budget-friendly items that align with trends and appeal to consumers.

From its humble beginnings in 1997 as a "1,000 won shop,” Daiso initially focused on budget household items like bath baskets and scrubbers. Over time, it expanded its range to include snacks and hobby items such as for home gardening and camping.

Daiso's capsule coffee, ranging from 3,000 won to 5,000 won [ASUNGDAISO]

Its beauty products used collaborations with well-known brands like Nivea, Nature Republic and Too Cool for School. Hailed as the "department store of Generations Zalpha (Generations Z and Alpha),” Daiso posted a 180 percent increase year-on-year in the cosmetics category from January through October last year.

Foreign customers are also on the rise, with a 130 percent increase in overseas transactions on-year in 2023. This is because the actual number of tourists visiting Korea rebounded after the Covid-19 pandemic, along with a shift in traveling trends from group tourists to individual travelers who can freely schedule their itineraries on their own.

No BTS or Blackpink in ads
Daiso's affordable pricing strategy is achieved through meticulous cost-cutting measures.

"The company minimizes packaging, avoids advertisements featuring high-cost celebrities, and simplifies distribution by engaging directly with manufacturers," explained a company spokesperson.

The Reedle Shot Ampoule, for instance, is a version exclusively available at Daiso. While sharing key ingredients with similar products from channels like Olive Young, Daiso's product has adjusted mixing ratios, resulting in a significantly lower price point.

Daiso introduces a special Seollal hairpin featuring a red daenggi, a traditional Korean ribbon used to tie and adorn braided hair. [ASUNGDAISO]

The cornerstone of Daiso's revenue growth strategy is rooted in mass sales at low prices, consistently introducing hundreds of new items monthly.

With over 1,500 stores nationwide, Daiso also became a hotspot for casual browsing, drawing in office workers who, with spare time on their hands, explore and end up purchasing items like stickers, letter pads and accessories.

Daiso's annual revenue [YOO YOUNG-RAE]

Based on these efforts, Daiso has achieved a steady annual revenue growth rate of around 100 percent, and is expected to have 3 trillion won in revenue in 2023 — making it stand out as a solitary success story amid the ongoing challenges faced by other retailers in the current economic downturn and low consumer sentiment.

Beyond offline stores
Capitalizing on robust profit growth from brick-and-mortar establishments, Daiso is now expanding its online presence.

Last month, the company streamlined its mobile app "Sharp Daiso" and online marketplace "Daiso Mall" into a unified platform and introduced next-day delivery services.

Simultaneously, it is investing in logistical hubs.

Daiso currently operates logistics centers in Anseong and Yongin in Gyeonggi, and Busan.

It invested 350 billion won in establishing a large-scale hub center in Sejong City. Set to commence construction in June with a target completion date of 2026, this hub is expected to serve as a logistics center for the southern Gyeonggi and Chungcheong regions. Daiso additionally announced plans to construct a Yangju Hub Center, becoming a logistics hub in the northern Gyeonggi region.

Daiso's store in Myeong-dong, central Seoul [ASUNGDAISO]

Mitigating "pro-Japan" risks
One of the most feared risks among Korean businesses is the “pro-Japan” risk, where businesses with ties to Japan face consumer boycotts — and Daiso was no exception.

Korea's AsungDaiso had its second-largest shareholder, Japanese entity, Daiso Sangyo, holding over 30 percent of its shares — becoming one of the victims during the nationwide “No Japan” boycott movement in 2019. While the company emphasized that the Japanese shareholder had no interference in its management, it did not alleviate consumers' skepticism.

In December, Daiso acquired the entire 34.21 percent stake held by Daiso Sangyo reportedly for 500 billion won, eliminating potential issues.

"We aim to re-establish ourselves as a home grown Korean store," the company said.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]