Daiso aims for 5 trillion won in sales: The reason why they sell even '5,000 won windbreakers'

Daiso, well known as a low-priced lifestyle goods store, is shaking up the distribution industry with fearsome growth. According to a SUBUSUNEWS video, Daiso recorded 4.5364 trillion won in sales and 442.4 billion won in operating profit last year. This represents a 14.3% increase in sales and a 19.9% increase in operating profit compared to the previous year. With this rate of growth, projections suggest that surpassing 5 trillion won in sales this year is possible.

'Decide the price first, then match the cost'... Daiso's reverse-thinking strategy

The core driver behind Daiso entering its 'second heyday' beyond being a simple cost-effective store is the expansion of its strategic product categories. In particular, the growth of the cosmetics category is dazzling. Daiso's beauty sales last year increased by about 70% compared to the previous year, and in the first quarter of this year, they also increased by about 30% compared to the same period last year. Beauty products, which were 26 brands and about 250 types at the end of 2023, surged to about 170 brands and about 1,900 types as of the end of April this year.

A phenomenon is also appearing where large corporations such as AMOREPACIFIC and LG H&H are entering the store by creating brands exclusive to Daiso. Brands like JUNGSAEMMOOL BEAUTY and ETUDE also operate separate lines for Daiso. The secret to being able to purchase JUNGSAEMMOOL foundation for 5,000 won or TONYMOLY eye cream for 3,000 won lies in Daiso's unique 'reverse engineering' strategy. Usually, the selling price is determined by adding a margin to the cost, but Daiso chooses a method of first reducing costs and expenses to match a fixed uniform price (3,000 won to 5,000 won).

The video analyzed that in the case of cosmetics, which are items with high marketing costs, Daiso secured price competitiveness by adjusting the volume or lowering the unit cost of ingredients instead of spending separate marketing expenses. Additionally, Daiso's unique fast product turnover rate was cited as a key factor that enables low supply prices.

The reason why large corporations create exclusive brands for Daiso

The reason large corporations jump into the ultra-low-priced market, which may seem low in profitability, is because of the powerful marketing effect and customer inflow capability possessed by Daiso. Just by attaching the Daiso name, spontaneous content from influencers is generated on SNS whenever a new product is released, leading to sell-out frenzies.

The affordable prices lower the entry barrier for consumers, which is advantageous for securing the teenage demographic who will continue to use cosmetics in the future as customers. Just as cosmetic road shops in the past disappeared after being pushed out by CJ Olive Young or ultra-low-priced distribution channels, Daiso is targeting that void by providing an experience where products can be seen and touched directly in offline stores. As a result, a win-win structure is being formed where large corporations secure stable supply sources and Daiso increases its reliability with high-quality products.

Expanding territory into fashion, the remaining task is 'fairness'

Daiso's next target is fashion. In the first half of this year, Daiso's fashion division sales surged by 140.1% compared to the previous year. The number of product types also increased from about 300 types at the end of 2024 to about 1,000 types currently. The 5,000 won windbreaker introduced last February is a representative example. It is evaluated that they accurately tapped into the trend of seeking 'basic and reasonable ultra-low-priced clothing' in the apparel market led by SPA brands.

Daiso has recently launched beauty-specialized stores where about 80% of all products are filled with cosmetics and is also accelerating the expansion of its logistics network. However, there are also challenges to be solved along with rapid growth. These are controversies regarding fairness with suppliers that arise as the company's size grows. The video pointed out that due to the nature of the distribution industry, as a company grows, its bargaining power increases, which can lead to temptations regarding contract terms, mentioning that "since the good image built so far can collapse in an instant, employee management and contract management are important."