Kitanotatsujin Corporation

The Group is subject to numerous laws and regulations, including the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, the Pharmaceuticals and Medical Devices Act, and the Act on the Protection of Personal Information, and there is a risk that violations or future legal amendments and new legislation could make it difficult to conduct business activities as planned. In particular, the introduction of new internet-related regulations could restrict operations in the Health & Beauty Care Related Business (Kitanotatsujin Corporation). As countermeasures, the Group implements compliance controls through management meetings, training for officers and employees, and the use of outside experts.

If a system failure occurs in the computer systems and internet infrastructure that underpin the business, due to server overload, unauthorized external intrusion, or errors by officers or employees, there is a risk that order-taking and delivery operations could be suspended, halting business activities. Since a loss of trust in the system directly affects business performance, the impact could be widespread. As countermeasures, the Group has strengthened security and established a backup system for critical data.

The Group holds a large amount of customer personal information, and if a leak occurs, it could directly lead to a decline in credibility, cancellations by existing customers, and a decrease in new customer acquisition, as well as the possibility of claims for damages. Given the nature of the EC business, damage to the customer base could have a significant impact on business performance. As countermeasures, the Group has obtained Privacy Mark certification, established personal information protection regulations, implemented system security measures, and conducted training for all officers and employees.

If a safety issue arises with food or beauty products, or if the response to such an issue is inadequate, there is a risk of brand damage and adverse effects on business performance. Although the Group pays close attention to hygiene and quality control, risks exist throughout the entire supply chain, including outsourced manufacturers. As countermeasures, in addition to complying with relevant laws and regulations, the Group has established its own quality check standards covering 1,475 items.

The Group outsources product storage, receiving/shipping, and delivery operations to external vendors, and there is a risk that service disruptions or suspensions caused by force majeure events such as earthquakes, or circumstances at the outsourcing partners, could hinder business operations and affect business performance. Contract changes or price increase demands from outsourcing partners could also be factors causing fluctuations in business performance. As countermeasures, the Group is working to diversify its business locations and build good working relationships with external vendors.

To achieve continuous growth amid intensifying competition, it is essential to secure and develop professional personnel with high expertise and potential, and there is a risk that failure to secure and develop appropriate personnel could make it difficult to conduct business activities as planned. Since human resources are positioned as the greatest factor in growth, failures in recruitment and development directly affect business expansion. As countermeasures, the Group is securing recruitment budgets, expanding recruitment methods, reviewing organizational structures, and strengthening training systems through both internal and external training programs.

While the Group is focusing on new product development to expand the Health & Beauty Care Related Business, there is a risk that the initially expected results may not be achieved due to prolonged development periods, failure to meet commercialization standards, or lack of market acceptance. Since the Group makes continuous investments in development, the cost burden in cases where results are not achieved could put pressure on business performance. As countermeasures, the Group is strengthening its product development structure, expanding development genres, selecting OEM partners including overseas partners, and reviewing sales methods.

Competition is intensifying in the EC market, which has low barriers to entry, and with the shift in consumer purchasing behavior from physical stores to EC leading to an increase in new entrants, there is a risk of falling into price competition and declining profitability. Intensifying competition particularly affects the profitability of the mainstay products in the Health & Beauty Care Related Business. As countermeasures, the Group is differentiating itself through the sale of proprietary original brand products, strengthening product competitiveness based on a quality-first approach, and customer support provided by specialized staff.

While the Group has a policy of actively utilizing M&A to accelerate growth and diversify its revenue base, there is a risk that if unexpected risks materialize after an acquisition or if expected effects are not achieved due to changes in the environment, impairment losses on fixed assets or goodwill could be recorded, affecting business performance and financial condition. As countermeasures, the Group is conducting due diligence using outside experts and thoroughly implementing an appropriate corporate valuation process.

In the Health & Beauty Care Related Business, the Group conducts foreign currency-denominated transactions such as manufacturing outsourcing overseas, and there is a risk that sharp fluctuations in exchange rates could cause changes in cost of sales and other items, affecting business performance and financial condition. Because of the fabless business model, the majority of manufacturing costs depend on external outsourcing, making the impact of yen depreciation particularly significant. As countermeasures, the Group adjusts transaction volumes according to exchange rate trends, gathers appropriate information, and considers diversifying business partners.