itsumo.inc.

There is a risk that the physical goods EC market, centered on platforms such as Amazon and Rakuten, may contract due to the rise of new business formats such as the factory-direct sales model exemplified by Chinese companies. As the Group's main business is EC support services, market contraction could directly affect its financial position and operating results. As a countermeasure, the Group's policy is to continuously observe and analyze market trends and implement timely plan changes.

Numerous competitors, including major advertising agencies and venture companies, exist in the EC consulting and marketing support domain, and sophistication of services through technology utilization and low-price competition are progressing. If the Company fails to establish a clear competitive advantage strategy, this could affect its financial position and operating results. As a countermeasure, the Company strives to maintain a strong position by leveraging its strengths in the breadth of coverage across the entire value chain and its abundant EC talent.

The speed of technological innovation and changes in consumer needs on each EC platform such as Amazon, Rakuten Ichiba, and Yahoo! Shopping is fast, with new services being introduced one after another. If the Group fails to respond to these changes as expected, the services it provides could become obsolete, affecting its financial position and operating results. As a countermeasure, the Group strives to secure and train engineers and to gather technical information and apply it to service development.

The number of new contracts and the retention rate in One Commerce Service are important elements of revenue, and if both indicators continue to significantly fall short of expectations due to misjudged measures or troubles, this could affect the Group's financial position and operating results. The Group is working to secure new contracts and maintain and improve the retention rate through marketing activities such as web seminars and measures to improve convenience, but it is stated that it is not reasonably possible to predict the timing of occurrence or the degree of impact in advance. As a countermeasure, the Group's policy is to strive to improve services by enhancing customer satisfaction.

Logistics services in the Collaborative Brand Partner Service depend on outsourcing to partner logistics warehouse companies, and if the necessary capacity cannot be secured, or if freight rates rise or it becomes difficult to find new partner companies, the smooth provision of services and active order-taking activities could be hindered. Currently, the Group maintains long-term, stable business relationships with leading partner companies, but it is stated that advance prediction is not reasonably possible. As a countermeasure, the Group strives to diversify risk by selecting and outsourcing to the logistics warehouse most suitable for each product category.

Most of the products sold by the Group are purchased based on demand forecasts, and if actual orders exceed the forecast, a loss of sales opportunity occurs, while if they fall short, excess inventory occurs, either of which could affect the Group's financial position and operating results. This is recognized as a risk that could always materialize due to economic conditions and changes in demand in major markets. As a countermeasure, the Group's policy is to analyze market trends and control appropriate inventory levels.

The Group primarily imports the products it handles from overseas, and for some brands, sells to overseas distributors including those in China, so there is a possibility that cost increases or procurement difficulties could arise due to China's economic conditions or geopolitical risks. In addition, a decrease in orders due to a decline in demand from overseas customers could also affect the Group's financial position and operating results. As a countermeasure, the Group closely monitors international conditions and works to diversify risk by reviewing procurement sources and expanding sales channels.

Securing and developing excellent personnel with advanced specialized knowledge and experience is positioned as the most important management issue, and if the necessary personnel cannot be secured and developed at the necessary time, this could affect the Group's financial position and operating results. The Group is working to strengthen its development system by fostering a free and creative corporate culture, delegating authority, and building internal training programs, but the increase in demand for personnel accompanying business expansion remains a challenge.

The Group's business is subject to legal regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and the Act on the Protection of Personal Information, and business could be constrained by the enactment of new laws or changes in the interpretation of existing laws. There are also many countries where legal regulations targeting cross-border EC have not been established, presenting overseas regulatory risk as well. As a countermeasure, the Group implements the development and strengthening of a compliance system, employee training, regular exchange of information with retained legal counsel, and monitoring of trends in relevant legal amendments.

When conducting M&A or capital and business alliances, if the business environment changes after prior due diligence and the initially expected results are not achieved, or if a capital and business alliance is dissolved or modified, impairment losses on goodwill or equity-method investments could occur, affecting the Group's financial position and operating results. This is recognized as a risk for which reasonable prediction is difficult, and as a countermeasure, the Group continuously monitors business performance and has established a system to take measures before impairment losses occur.