Syuppin Co., Ltd.

The Company sells primarily used goods, and its main procurement method is cash purchases from general customers. As such, changes in economic conditions, an increase in competing purchasing businesses, and shifts in customer sentiment may make it difficult to secure a stable supply of used goods in terms of both quality and quantity. Unlike new products, the volume of used goods procured is difficult to adjust. Although the Company is diversifying its procurement channels through the establishment of purchasing centers and the implementation of home-delivery purchasing services, deterioration in the procurement environment directly affects sales and profit.

In the used goods industry, new entrants have become notable even in the Company's product categories such as cameras, watches, and writing instruments, and competition for purchases has intensified due to the spread of internet-based buying and selling. Increased competition may make it difficult to secure popular products and cause fluctuations in purchase price levels. In addition, in sales of new products, intensifying price competition with discount stores raises concerns about declining sales prices.

The products handled by the Company (cameras, watches, writing instruments) carry the risk of a rapid decline in value in a short period due to economic obsolescence driven by changing trends or fluctuations in foreign exchange rates. Sales trends are heavily influenced by the presence or absence of leading popular products or hit items, and if projected demand fails to materialize, losses may arise from write-downs of slow-moving inventory, potentially affecting the Company's financial position and business performance.

The Company primarily procures funds for inventory acquisition through borrowings from financial institutions, and as of the end of the fiscal year under review, it held interest-bearing debt of ¥4,617 million against total assets of ¥18,096 million (25.5% of total assets). Because the purchase of used goods requires cash payment, reliance on borrowings is high, and if interest rate levels rise due to future changes in financial conditions, increased interest expenses may affect business performance.

Under regulations of the Secondhand Articles Business Act, the Company acquires and records customers' personal information at the time of purchase, and also manages credit card information and other data. In the event of an information leak, there is concern about loss of social trust and the incurrence of substantial expenses for subsequent response measures. Although the Company has taken measures such as obtaining Privacy Mark certification (JIPDEC-accredited) and strengthening internal regulations and security, the risk of leakage cannot be completely eliminated.

As the Company relies on its EC site as a primary sales channel, cyberattacks (such as ransomware), communication failures, or system failures could cause the EC site to go down, delay order-receiving and shipping operations, or result in the loss or leakage of critical data. Such events could reduce social trust and stagnate business activities, potentially affecting the Company's financial position and business performance. While measures such as distributing servers across multiple data centers and strengthening network monitoring have been implemented, responding to increasingly sophisticated cyberattacks remains an ongoing challenge.

The Company's stores are concentrated in Shinjuku, and the department overseeing EC sales is also located at the head office sales department in Shinjuku. In the event of a large-scale disaster, all locations could be affected simultaneously, potentially making it difficult to resume operations. From the perspective of business continuity planning (BCP), this concentration of locations constitutes a significant operational risk.

The products handled by the Company fall under the category of "secondhand articles" as defined by the Secondhand Articles Business Act, and are subject to regulations such as permits from the Public Safety Commission, identity verification, and management of secondhand articles ledgers. In the event of a violation of these laws, the Company's permit could be revoked or a business suspension order could be issued. Furthermore, if stolen goods are discovered to have been purchased, the Company is obligated to return them to the victim free of charge within one year, and a large-scale purchase of stolen goods could result in substantial procurement losses. Although the Company has established management systems such as linking secondhand articles ledgers with POS data, the risk of fraudulent incidents occurring cannot be eliminated.

In addition to compliance with related laws and regulations such as the Secondhand Articles Business Act, the Personal Information Protection Act, and the Act on Specified Commercial Transactions, compliance issues such as inappropriate conduct or misconduct by officers and employees could, if they occur, reduce social trust and damage brand value, potentially affecting the Company's financial position and business performance. The Company is working on fundamental strengthening of its governance framework, including correcting concentration of authority in specific individuals, conducting harassment training for officers, and reviewing its executive structure, but complete elimination of such risk remains difficult.

In the Company's business, which requires authentication of used goods and specialized product knowledge, securing and developing excellent personnel is a key factor for continued growth. If the Company is unable to secure personnel as planned, or if key personnel leave the Company, this could affect business activities and performance. Personnel with specialized knowledge and experience are essential to preventing the purchase of counterfeit or defective goods, and human resource risk is thus linked to quality control risk.