Q&A: Impact of Tariffs
Question: Regarding the impact of tariffs, the plan shows them as a downside risk on the slide, but could you please reiterate your thinking? I suppose there will be a certain amount of impact on Chinese products, etc. Please also tell us if there is any impact on actual demand, etc.
Kaneko: Since it is still early days since the tariff issue began to become significantly more apparent, it is difficult to read long-term trends. However, we think that it is having an impact on the short-term consumer mindset of North American consumers. We have confirmed some of these comments through social media.
We intend to simulate multiple risk scenarios and take measures to prepare for them.
In reality, about 30% of EC sales are overseas, and another 30 to half of those sales are in North America. Therefore, we guess that 10 to 15% of EC sales could be strongly affected by the tariffs. Therefore, we believe that measures should be taken both economically and in terms of providing services to our fans.
A large percentage of the products sold on the EC today are made in China. We intend to implement a variety of measures in the short and long term, such as promoting localization of production and distribution, shifting some of the products made in China to Japan if the lot size is small, optimizing the way consumers and companies bear tariffs, and designing products so that the amount borne by consumers and the company's costs are win-win. We intend to implement a variety of measures in the short and long term.
As to whether the tariff issue will cause a short-term and fatal decline in sales in Merchandising service, I think the situation is not absolutely fatal, as overseas sales in Merchandising are dispersed throughout the region. However, we are aware that the situation does not allow for optimism, and we are assessing the situation.
Question: Are you saying that you will operate in such a way that it will not have that much impact on the company-wide performance plan?
Kaneko: In terms of quarterly, it may be difficult to control some aspects, especially for the first half of the year. This is one of the reasons why we are conservative in our budget planning for the first half of the year. However, within the full year, we would like to be passive in the various measures I mentioned earlier.