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CNBC Transcript: Takao Yasuda, Founding Chairman, Pan Pacific International Holdings/ Founder, Don Quijote and Don Don Donki

Christine Tan: In Japan, you are known as a King of Discounts as the Founder of Don Quijote. You spent the last 30 years building up a retail empire, overcoming the weak Japanese retail environment, posting solid sales for the past 30 years. What's your secret?

Takao Yasuda: Well, in the past 30 years since our founding, our company has been enjoying increased sales and profit every consecutive year. This despite the fact that the retail and distribution industries in Japan have not grown in value in the last 30 years. Why have we been able to grow for so long, consecutively? I believe the answer boils down to us being able to find the only one unique formula.

Christine: And what is that formula?

Yasuda: Well, general chain store is not something that we do. We are definitely not a chain store concept. While most retailers in Japan and in the world follow chain store theory, we don't. For us, we give authority to individual stores and treat each individual store independently, so that the store management can do what they want to do. They are given authority, sovereignty so to speak. So, that is a very different approach to retail.

Christine: You're known as the King of Discounts in Japan. So, you've actually proven that you can actually buy low and sell low and make money at the same time?

Yasuda: We are obviously a discount store. So, unless we sell our products at a low price, we are not really living up to our mission. So that's why we have been proving that we can buy low and sell low, and still make profits for the past 30 years.

Christine: What are your margins like?

Yasuda: Of course, margins differ greatly from product to product, but on average, I would say our margin is 24 to 25 percent.

Christine: You're the son of a teacher and a housewife. You have a law degree from Keio University in Tokyo. How did you stumble into the world of retail?

Yasuda: There wasn't a lot I could do. I didn't have particular skills. I didn't excel in anything compared to other people. If I had wanted to start an F&B store, I didn't know how to cook. I didn't have a science or technology background either. So, after eliminating these options, I'm left with selling merchandise.

Christine: You didn't want to become a lawyer?

Yasuda: I didn't because I didn't really like to study in school.

Christine: Your first store was a general merchandise store called the Thieves Market. It gave you the retail experience you needed to start Don Quijote in 1989. What were some of the valuable lessons you learnt during your first venture?

Yasuda: Well, in department stores, the layout was easy to see, easy to find, easy to pick up products and easy to purchase. That was the theory. But at that time, our Thieves Market did opposite of all that. Our products were difficult to see, difficult to buy, and difficult to pick up. The Thieves Market offered something new and exciting. Every time the customer visited, there was a discovery.

Christine: After spending more than 20 years building up your retail empire. You decided to retire and relocate to Singapore. But at the end of the day, you ended up driving the company's expansion here in Singapore. You opened your first store here in the city, in Singapore. What happened?

Yasuda: Well, I always wanted to live somewhere other than Japan after retirement. So, I was researching various countries to decide which country to move to. Singapore was the country which I thought would be the best place to live. That is why I moved here in 2015. At that time, I did not even dream of being involved in opening a store here at all.

Christine: Tell me honestly, you didn't want to retire correct?

Yasuda: Emotionally, I was ambivalent. My feeling was swaying between whether to do that or not. But at 65 years old, I thought it was time because of our management principles which I put together. It had one article: a leader must remove his or her authority and give it to the successor. So, unless I myself do it as an example, there really was no meaning in coming up with the management philosophy. So, even if I did not want to retire, I had to put myself in a corner and do it.

Christine: So, you're now driving the expansion outside of Japan here in Asia. Here in Singapore, you already opened six stores with plans to have a total of 10 stores by 2020. Do you think Don Quijote has the right formula to survive the tough retail market here in Singapore?

Yasuda: In the first place, here in Singapore, I couldn't find in any other retail store with a similar concept like ours - that is mainly selling Japanese products with a focus on fresh food at a low price. In fact, when I moved to Singapore, something surprised me greatly -- that was how expensive the price of Japanese foods here were. As I looked at those high prices, I became a bit angry. And I wanted to create a store where people can really buy Japanese food at low prices. That would make Japanese producers happy, Singapore customers happy, everyone happy.

Christine: You recently opened a store in Bangkok and you've also opened a store in Hong Kong. What's the response like?

Yasuda: Just as good or probably better. The response has been better in Bangkok and in Hong Kong than in Singapore. We have had the best response in Hong Kong so far.

Christine: The demonstrations, the protests are not impacting sales?

Yasuda: We have been impacted a little because the store was located in a place where the demonstrators gathered. So, we had to close the store for some hours even though it was supposed to be a 24-hour operation. There's a shortage of labor too. So, there is some impact. But having said that, in Hong Kong, a single store alone is selling about three times the sales of a single Singapore store.

Christine: Does the situation in Hong Kong make you think twice about expanding further in the city?

Yasuda: In fact, we are looking for more retail space in Hong Kong. We have informally decided to open two more - one by the end of the year. Another one next year. So, we are looking for more spaces. There are political issues, but we are quite sure that there will be some support for our store.

Christine: So, apart from Singapore, Bangkok and Hong Kong. You also have plans to open in Taiwan, the Philippines and Malaysia. How many overseas stores outside of Japan could you possibly have in Asia in the next three to five years?

Yasuda: When you look at the market potential, 500 stores is possible. But then, when you look at the real estate that we have to secure, there is a limit. So realistically, for the time being, I would say 100 stores or so.

Christine: What sort of timeframe are you looking at?

Yasuda: Well, I would say, seven or eight years. Possibly, ten years.

Christine: Will the retail format be different in the individual markets in Asia?

Yasuda: In Singapore, Hong Kong, Thailand, Taiwan and Malaysia, the store format should be similar and that should be okay. But when it comes to Philippines and Vietnam, I would think that the percentage of food items will be lower than what we have in other Asian countries, because there are some challenges when it comes to customs clearance for some fresh Japanese food. So, their store format might be more similar to what we see in Japan.

Christine: As the founder based in Singapore, will you be the one driving the company's expansion for Don Quijote?

Yasuda: Until the top management of operations in each country has grown and developed enough to a certain level, I will be the one driving expansion. But I hope to nurture the local top management as soon as possible, so I can hand over.

Christine: I understand you're also eyeing the U.S. market where you already have a supermarket business called Marukai. How will you merge your existing business there to expand in the U.S.? Are you looking to develop a new different formula, a different retail formula for the US market?

Yasuda: In the U.S., I believe the business approach is quite different from ASEAN.

Christine: How different?

Yasuda: For example, in Singapore, Hong Kong and Thailand, we stock a lot of Japanese fresh fruits which sell very well, but not in the United States. They don't sell that well. Maybe the Americans don't have as much trust or confidence in Japan-produced goods. So, what I have in mind is - if we can create a big dine-in space in the shop selling oriental food, that would be very unique. Americans love to party and love barbecue. So, if we can sell cooked food for dine-in while offering takeout at the same time, this will be great because there is demand. There are not many stores in the U.S. with this kind of format. So, that's the idea I have in mind.

Christine: So, it's a totally new retail format for the U.S. market?

Yasuda: Exactly. It'll be a totally new format that didn't exist before. In fact, we have rolled out several such stores already and there has been great support from the Americans. It's called, "Tokyo Central".

Christine: How many stores could you ultimately have in the U.S.?

Yasuda: I would say, the sky's the limit. But then, right now, we are still testing the market to find the perfect formula. We are almost there but not completely. So, when the perfect formula is found, if sales do pick up, we can really roll out a huge number of stores in the U.S. because the population and land are huge in the United States. There is no limit. At least, during my lifetime.

Christine: How many stores do you dream of having?

Yasuda: I would say there's potential to have around 2000 stores in the U.S.

Christine: That means it would be bigger than your homegrown Japanese market?

Yasuda: Yes, it will be bigger than our home market. Because in a small country like Japan, we have 700 stores, so the U.S. can be bigger. But in Japan, each store is a big store. But in the U.S. - even though the market itself is bigger - each store is considered a specialty store and smaller than those in Japan. That's why I think 2000 would be possible. But if we include sales in the U.S. and ASEAN together, total overseas sales will surpass Japan in the not so distant future. It's already in sight.

Christine: What sort of percentage are we talking about in terms of overseas contributions?

Yasuda: Depends on what timeframe we are talking about. Anyway, it will not be that soon -- maybe in 10 years from now, the overseas contribution could probably equal contributions from Japan. And in 20 years' time, overseas contribution would probably be bigger.

Christine: How much bigger?

Yasuda: Well, you asked me how much. Very difficult to give you a specific answer about potential wise. If we take Japan's current sales of 1.7 trillion yen and envisage overseas sales to be bigger, then maybe 2 trillion yen?

Christine: In Japan itself, you've managed to expand at a time where Japanese retailers are struggling. Recently, you've also taken over the remaining stake of Family Mart's general merchandise unit Uny. It has given you an additional 200 locations. What else are you looking to buy in Japan? There was some talk you might be interested to buy Walmart's Seiyu supermarket chain. Are you interested?

Yasuda: If and that's a big if Walmart wants to sell, then depending on the terms and conditions, we are interested. But it looks like Walmart is not intending to sell it at all right now. So, I would just say: if there is an opportunity, then yes.

Christine: Have you approached them?

Yasuda: We have never approached them.

Christine: If they approached you, the answer would be yes?

Yasuda: Only if there is a very clear approach and if the terms and conditions are right.

Christine: You have over 700 stores in Japan. The consumption tax will be raised to 10 percent. Do you think it will impact sales in your Japanese stores?

Yasuda: Right after the consumption tax hike, there will be an impact -- two to three months after the hike. But after that, the new rate will be the new normal. So, the impact will not persist.

Christine: The company you founded was renamed Pan Pacific International Holdings this year. Since it went listing on the Tokyo Stock Exchange in the year 2000, Donki has actually managed to post 19 years of unbroken sales and profit growth. Are you confident you can continue to maintain this growth trend?

Yasuda: For the time being, I have this feeling that this pace of growth will continue. I would not be able to say 10 to 20 years from now because you don't know how the world will change. But for several years to come, I think the ability to successfully increase revenue and profit every year will probably continue.

Christine: How do you expect to do this financial year?

Yasuda: It's almost certain that we'll have higher revenue and profit than last year.

Christine: You retired as CEO in 2015 but instead of retiring, you've come back to drive the overseas expansion of the company founded. What motivates you? What inspires you? What keeps you going?

Yasuda: In fact, I don't see work as something painful. I don't see what I do as work. It's not a duty or obligation either. I'm delighted that I'm able to involve myself in the business. I used to work for money or do business for money, but now, it's different. I work for the happiness of others. And so, when other people are happy, I am extremely happy. So, my work means I'm creating happiness for everybody. I'm extremely pleased to be able to do that.

Christine: You're a happy man?

Yasuda: Sometimes I wonder how can this be? Is this okay? I am so happy.

Christine: You're one of the richest men in Japan with a net worth of $2.7 bn. How would you describe your leadership and management style?

Yasuda: I have full respect for the people who work on the ground, on our shop floors. This respect that I have for these people will translate to respect from my executive board and the executive officers for the people at the sales floor. That really signifies and symbolizes my leadership style.

Christine: The company you founded has undergone some management changes. The CEO Koji O'Hara has now stepped down. The person who's taken CEO role is now Naoki Yoshida. You remained as the company's Supreme Advisor. What does that mean? Are you still in charge?

Yasuda: No. From the company act or legal point of view, I am not heading the board of directors. But on the other hand, I am the founder. So, on one hand, there is a group who are babysitting. They are very talented, because the company is my baby. So, I'm like the mother, the blood mother and there is a babysitter group who is really nurturing the company. So, there is no comparison between the two.

Christine: You think you might be willing to let go one day?

Yasuda: Yes, of course, eventually. But the company or corporate entity will continue. I am human after all. I will be gone one day so I'm preparing food for the time when I'm gone. I am trying to put a system together, so that the company can go on forever. That's the essence of my job right now.

Christine: And finally, you're known as the King of Discounts in Japan and now elsewhere in the world. You spent the last 30 years building up your retail empire. What advice would you give others on how to build a lasting and successful business?

Yasuda: For advice, what I've always done is to change the subject of a sentence from "I" to the customer, meaning put yourself in the customer's perspective and position. Every shop wants to sell a lot of things to customers and be profitable. But if you're just doing that, you cannot survive the competition. Everybody else is doing the same. So, you have to put yourself in the customer's position and see how we can delight the customers. How we can let them open up their wallet and part with their money. For this to happen, what should we change? We are not going to change the customers, so we have to go deep into the customer's psyche and identify what would make them happy. Then, change ourselves and the way we do things. So, put the customer as the subject of a sentence.

Christine: So that's the secret to creating a lasting business?

Yasuda: Exactly. Yes, it is.

Christine: Yasuda-san, thank you for talking to me.

Yasuda: Thank you so much Christine.

ENDS

For more information:
Clarence Chen
Communications Manager APAC, CNBC International
D: +65 6326 1123
M: +65 9852 8630
E: clarence.chen@cnbc.com

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