The Magic of Dollar Shops: Seria vs Daiso

Average- 7 Min Read

With inflation pushing prices up everywhere, dollar shops are gaining more influence among consumers. In Japan, these stores are popularly known as “100 Kin,” referring to the 100-yen price tag (about a dollar). The power of these “one coin” shops has strongly established their place in the retail market.

But, you might have noticed something interesting: dollar shops rarely advertise on TV or the internet. So, how do they make a profit when selling products at such low prices? And what kind of “magic” do they use to attract so many customers?

To understand this, let’s take a look at how the dollar shop market grew within Japan’s economy.

The History of Dollar Shops

Dollar shops initially began as a way to sell surplus products that remained unsold in regular stores. Owners gathered these items and sold them at the low, fixed price of 100 yen (about a dollar), making calculations straightforward. Because these products were purchased at extremely low cost, the gross margins in the early days were high, often exceeding 70%.

However, in the 1990s, Japan entered a period of deflation known as the “Lost Decades.” From 1990 to 2010, economic growth slowed down significantly compared to the previous period. During this time, while people’s salaries were lower than before, the prices of imported products, such as food, remained high, making life difficult for many.

During this challenging period, dollar shops began to grow. Their consistent 100 yen pricing offered affordability and stability. Consumers rushed to these stores for essential items, helping 100 Kin integrate into daily life and become a vital part of Japanese society.

Today, dollar shops are a mainstream shopping choice. They offer a wide range of products at budget-friendly prices. While these stores initially made a profit by reselling surplus goods, they have changed. Modern 100 yen shops like Daiso and Seria now design and produce their own products.

This transformation raises an interesting question.

How do they make a profit when prices are so low?

Dollar shops use two main strategies to increase their profits: increasing the number of customers and reducing the cost of running the business.

These are basic strategies that most companies use, but for dollar shops, they’re especially crucial. Let’s dive into why both of these strategies are so important for their business model.

Increasing the Number of Customers

This first strategy is the most vital for dollar shops to make a profit.

Although their gross margin isn’t as high as before due to rising production costs, they can lower costs by purchasing large quantities of the same products. But the costs vary depending on the product. For example, a toothbrush might cost only 1 yen (about 1 cent) to make, while other products could cost over 100 yen (about a dollar).

Also, by encouraging customers to buy several products at once – each with varying production costs – they can increase their gross margin. This is why dollar shops can afford to sell such a wide range of products. The key to their profitability is getting customers to purchase more items in one visit. This increases the revenue per customer, making it easier to cover the cost of running the business.

To achieve this, they focus on driving more customers into their stores. The more people who come in, the more successful the business will be.

Dollar shops know that customers are more likely to buy multiple products during their visit because the fixed price at 100 yen reduces stress while shopping and customers don’t need to worry about checking the price of each item. This leads to them filling up their baskets without hesitation.

Therefore, companies should focus on creating an environment that makes customers eager to enter the store.

To encourage people to visit, dollar stores often set up shop in malls. Malls typically don’t have doors separating the store from the outside, which works well for attracting customer visits.

As shown in the image, products in these stores are often visible from outside, drawing people in. Once they enter the inside, they may notice seasonal items such as Halloween and Christmas decorations. These special products are strategically placed at the entrance, where they catch shoppers’ attention.

These items, priced at 100 yen, offer customers the chance to purchase affordable products for parties, events, or personal use. But once inside, customers often become excited to explore the entire store, which ultimately leads them to purchase more.

Another strong strategy of dollar shops is their constant rotation of new products. For example, Daiso, one of the largest dollar store chains, introduces 800 new items every month. This ever-changing inventory creates a sense of excitement and curiosity, motivating customers to return and check out the latest products.

This variety of new items keeps customers coming back to see what’s new, offering them a fresh experience with every visit. It’s a clever strategy that fosters customer loyalty.

By combining these strategies – driving more customers to the stores and encouraging them to buy more items – dollar shops effectively increase their gross margin and profits. With their attractive pricing and variety, they have mastered the art of creating repeat customers and sustaining growth in a competitive market.

Reducing the cost of running the business

Secondly, they focus on reducing operational costs as much as possible. Again, this is something every company aims for, but in a business model that sells products at such low prices, minimizing costs is essential for making a profit.

Fortunately, this isn’t difficult to achieve due to the structure of the business.

The simplicity of employees’ tasks means that technical skills aren’t required to run these stores, allowing most of the workforce to be part-time employees. This significantly reduces labor costs compared to having full-time staff. In fact, part-time employees make up over 85% of the workforce in these stores.

(Source: https://www.mag2.com/p/news/388791/3)

Another cost-saving advantage is the minimal need for advertising.

Why? Because the concept of a “dollar shop” itself acts as a powerful catchphrase. The selling point is easy for customers to understand. These stores rarely need to run promotional campaigns or sales to attract attention.

Even in this digital era, dollar stores maintain their position in the market. Online shops can’t match their pricing because of additional distribution and shipping fees. This helps physical dollar shops distinguish themselves from e-commerce competitors

This business model is strong from a marketing perspective.

However, competition among dollar stores is tough. To succeed, companies need to highlight what sets them apart from their rivals.

Let’s now look at how the top two companies in the 100-yen market, Daiso and Seria, differentiate themselves.

Daiso’s strategy

Daiso’s strategy is clear: focusing on scale. They differentiate themselves through the total number of products and stores.

While most competitirs offer 20,000 to 30,000 products, Daiso offers 80,000 items, introducing 800 new products every month. This variety allows them to attract a wide range of customers. Shoppers are more likely to find what they want, leading more frequent visits. It drives Daiso’s profitability and market dominance.

Daiso also leads in store count, with over 3,000 locations in Japan and more than 2,000 overseas, while Seria operates only in Japan.

Let’s look at their strategy abroad.

Internationally, Daiso combines affordability with the trusted quality of Japanese products. While dollar stores are often avoided for their low-quality goods, Daiso overcomes this by utilizing Japan’s reputation for reliable craftsmanship. This strategy effectively helps to get trust of customers about product quality.

This approach has led to great success. For instance, in Las Vegas, Daiso’s opening drew crowds of over 500 people, with wait times of up to two hours. This reflects the brand’s strong appeal abroad.

By emphasizing their Japanese identity, offering a vast range of products, and expanding their global presence, Daiso successfully reaches diverse customers and achieves significant profits.

Seria’s strategy

In contrast to Daiso, Seria uses a more targeted approach to attract customers.

Their slogan, “Color the Days,” reflects their focus on offering stylish and trendy products. Despite their affordable prices, Seria’s items have a fashionable appeal. This strategy effectively targets young women, who make up nearly 60% of their customer base. It clearly indicates that their approach works successfully.

By offering well-designed products, Seria aims to build a loyal fanbase. Increasing the number of repeat customers is essential for growth. By appealing to their core audience with aesthetically pleasing products, Seria encourages customers to return.

The differences between these companies are summarized in the graph above. To stand out in the market, companies develop unique strategies. While their product lines and store designs often look similar — as this is the most effective approach — they differentiate themselves through their targeting strategies.

As we can see, a good business model like 100 Kin is powerful in generating profits. However, to truly stand out in the market, companies must develop effective marketing strategies.

Since the economy is always changing, learning about the right tools and skills is essential for starting and running a successful business. This knowledge can also offer fresh perspectives on everyday life.

Let’s continue exploring this new approach together in our next post!