H2O Retailing Rebuilds Japanese Retail Around Unified Commerce

The Japanese retail group's transformation shows that unified commerce is not simply about introducing more technology. It is about connecting data, AI, stores and human service around a single customer relationship.

For years, retailers have described unified commerce as the future of the industry.

Far fewer have explained what it takes to make it a reality.

At NRF APAC, Alex Rezvan spoke with Toru Koyama, Executive Officer and Head of IT and Digital Promotion Group at H2O Retailing Corporation, about one of Japan's most ambitious retail transformation programmes.

With approximately 24,000 employees, 500 stores across 50 companies and ¥25.9 billion committed to IT and digital investment, H2O Retailing Corporation is modernising its technology foundations to create a business capable of serving customers across physical and digital channels.

The conversation offered an important reminder that digital transformation is no longer simply about launching e-commerce platforms or deploying artificial intelligence.

It is about redesigning how retailers understand, communicate with and serve their customers.

Covid Exposed the Cost of Disconnected Systems

Like many retailers, H2O discovered during the pandemic that its greatest challenge was not simply the closure of its stores.

It was the loss of its traditional way of communicating with customers.

Even while locations remained closed, customers continued calling and emailing to ask for products they wanted to purchase.

However, the retailer's systems were not designed to support those requests across channels.

Store inventory and e-commerce inventory operated separately. Products available in physical locations could not always be sold online because the underlying systems were disconnected. This was particularly restrictive for luxury merchandise that had traditionally depended on store-based relationships and service.

The experience changed how H2O viewed the role of retail.

Selling products was no longer enough.

The business needed to maintain its relationship with customers regardless of whether an interaction began in a store, through an email, over the phone or online.

Unified Commerce Begins With the Technology Foundation

While many transformation programmes prioritise visible customer-facing innovation, H2O began with the less visible systems supporting the business.

Koyama explained that Japanese retailers have historically designed highly specific business processes around local customer expectations, then asked technology providers to build customised systems around them.

That approach supported differentiated service, but it also created complex and costly technology environments that became increasingly difficult to maintain.

H2O is now separating the areas where customisation creates genuine customer value from those that can follow established global standards.

Back-office functions such as finance do not necessarily need to be unique.

Customer-facing systems may require greater flexibility because they directly influence service, personalisation and the retailer's relationship with shoppers.

The goal is not to standardise every part of the business. It is to concentrate investment where differentiation matters most.

H2O Wants to Become a Communication Retailer

One of the most important ideas in the discussion was Koyama's vision of becoming a communication retailer.

Historically, many store employees focused primarily on serving the customer standing directly in front of them.

That model is no longer sufficient.

A customer may discover a product on a smartphone, contact an associate by email, visit a department store to examine it and later complete the purchase through a digital channel.

Every interaction should feel like part of the same relationship.

For H2O, communication is therefore not an additional retail service. It is becoming central to the retail proposition itself.

This requires systems that allow information to move with the customer rather than remaining trapped within individual channels.

AI Strategy Depends on Data Independence

Artificial intelligence featured prominently in the conversation, but Koyama repeatedly returned to a more fundamental priority.

Data.

Rather than attempting to predict which technology company or AI platform will dominate the market, H2O is building a digital foundation capable of connecting with different systems as the technology landscape evolves.

The group uses multiple cloud environments according to its technical requirements. However, it also wants to retain strategic control over its central data repository rather than allowing its future to depend entirely on one provider.

This reflects a pragmatic view of AI transformation.

Platforms will change.

New protocols will emerge.

Retailers therefore need technology architectures that allow them to adapt without repeatedly rebuilding the entire organisation.

Data Could Become a New Source of Growth

H2O's transformation also responds to a wider economic challenge facing Japan.

The country's population is ageing, while some regions outside Tokyo are experiencing long-term population decline.

For a retailer deeply connected to Osaka and the wider Kansai region, those demographic changes create pressure to identify new sources of growth.

H2O has traditionally generated revenue by selling products through department stores, supermarkets, convenience stores and other retail formats.

Those businesses also produce valuable insight into local customer behaviour.

The group is now exploring how that knowledge could support partners seeking to understand the Kansai market more deeply. This may include analytics, collaborative services and other data-enabled business models.

The ambition is not merely to sell customer data.

It is to use aggregated retail insight in collaboration with partners to create value for H2O, other businesses and the communities the group serves.

Retail Media Must Not Become Another Silo

Retail media is one of the opportunities emerging from H2O's data strategy.

The group has begun piloting retail media activity in supermarkets, including branded promotions, digital displays and camera-supported measurement.

However, Koyama warned that retail media should not operate as another isolated business.

Its value depends on connecting exposure with customer behaviour.

Retailers need to understand not only how many people viewed a promotion, but also how that interaction influenced purchasing activity. The strongest proposition comes from linking media engagement with broader customer and transactional data.

That connection could help retailers demonstrate effectiveness more clearly while giving brands a deeper understanding of how marketing affects real-world behaviour.

Unified Commerce Must Serve Humans and Machines

H2O's vision for 2030 recognises that retailers may soon serve two different types of customer.

The first is the human shopper.

The second is the digital agent acting on that shopper's behalf.

A younger customer may ask an AI assistant to find and purchase a product automatically when it becomes available at a certain price.

An older customer may still prefer to visit a store, feel the material, examine the colour and speak with an associate before making a decision.

Many customers will move between both experiences.

For Koyama, unified commerce means responding to each of these journeys without losing continuity. Whether a purchase is initiated by a person, an AI agent or a store associate, the interaction should remain connected and transparent.

Human Hospitality Remains the Differentiator

Despite the scale of H2O's technology investment, Koyama does not believe technology alone will create lasting competitive advantage.

Retailers may sell many of the same luxury brands and products.

The question is why a customer chooses to buy those products from one retailer rather than another.

For H2O, the answer lies in hospitality, loyalty, trust and the strength of its own brand.

AI can help employees understand customers more effectively, anticipate needs and remove friction from the shopping journey. It should not eliminate the human qualities that make the experience distinctive.

Koyama's long-term ambition is therefore to integrate AI capability with human hospitality.

Retail Transformation Starts Before Customers Can See It

Many digital transformation programmes begin with visible additions such as apps, digital screens or AI-powered services.

H2O Retailing Corporation is taking a more fundamental approach.

It is modernising core systems, integrating data and reducing silos before attempting to deliver the next generation of customer experiences.

That work may be less visible initially, but it addresses one of retail's most persistent problems.

Customers do not think in channels.

They expect retailers to recognise them, understand their needs and provide consistent service wherever the interaction begins.

H2O's transformation shows that the future of unified commerce will not be defined by how much technology a retailer purchases.

It will be defined by how successfully that retailer connects technology, data and human service around one trusted customer relationship.