Member Exclusive   //   March 11, 2024

Modern Retail Index: How major retailers have upgraded their e-commerce fulfillment strategies

This report is the second installment of the Modern Retail Index, a research framework that analyzes and ranks a set of major retailers across e-commerce, ease of fulfillment and financial momentum dimensions.

Click here to read about the Modern Retail Index’s e-commerce experience ranking

As e-commerce sales in the U.S. rise, so does the need for retailers to build stronger distribution networks to fulfill these online orders. In the first installment of the Modern Retail Index, Modern Retail took a deep look at the digital platforms retailers have modernized to cater to customers’ online needs. Now, it’s time to examine how retailers get these online orders into the hands of shoppers quickly and efficiently. 

The “Amazon Effect” has been coined by industry experts for the effect Amazon’s digital fulfillment capabilities have had on customer’s expectations. Consumers now prioritize quick and easy shopping experiences with ultra-fast delivery speeds, free and flexible returns, on-demand package tracking and customer service, and convenient payment options. 

To further highlight the Amazon effect, Morning Consult found that eight out of 10 shoppers cite convenience as a top motivator growing in importance for them to shop online. To meet customer’s expectations for retailers, necessary attributes survey respondents say retailers must accommodate is free shipping (76% of responses), in-stock products (71% of responses), package tracking (68% of responses), fast shipping (66% of responses) and free returns (63% of responses). 

The second installment of the Modern Retail Index examines these attributes customers have identified as important motivators to online shopping. Retailer rankings are based on their e-commerce fulfillment strategies, including features like product accessibility through expedited shipping and delivery, post-purchase modifications and tracking, ease of online returns, and online payment options. The Index examines retailers within five cohorts — big box, drugstores, dollar and off-price stores, home goods and specialty retail — to understand which cohorts, and which retailers within those cohorts, are excelling at fulfilling e-commerce orders and why. 

Here’s how.


The Modern Retail Index (MRI) collects data from 30 retailers and scores the data into dimensions to create a total index average score as a benchmarking tool. Retailers are given a deviation percentage from the index average to denote above- or below-average performance. The average changes depending on the list of retailers and the time period of data collection to show a snapshot of the retailer space at specific points.

In essence, we analyze and rank retailers based on point-in-time data and their performance relative to the other retailers in the index. The ease of fulfillment dimension focuses on the retailer’s ability to get the end product into the consumer’s hands when purchases are made through its e-commerce platform. The index does this by assessing a series of sub-dimensions to provide a better sense of the retailer’s strengths and weaknesses. We contextualize that within the cohorts we analyze — which include big box, drugstore, dollar store/off-price, home goods and specialty retail — to create a fuller picture of how the largest retailers in the country approach fulfillment.

Within the ease of fulfillment dimension of our rubric, retailers are assessed across four different areas: Product Accessibility, Post Purchase, Returns and Payments.

  • Product Accessibility measures how easy it is for a consumer to obtain a product from the retailer. This includes the presence of different fulfillment methods, such as order online and pick up in-store and expedited shipping.
  • Post Purchase measures the presence of options available to the consumer after they complete a purchase, such as purchase tracking and post-purchase order modifications.
  • Returns measures the level of difficulty to return or exchange a product. 
  • Payments measures the presence of different payment options, such as quick pay, subscribe and save, and buy now, pay later. 

Within the indexed retailers, five cohorts were identified: Big Box, Drugstore, Dollar Store/Off-Price, Home Goods and, newly added, Specialty Retail. The index includes Amazon outside of any other cohort due to its unique positioning in the market. 

Big box stores revisit their distribution and re-imagine the shopping experience

Best Buy scores big for ease of online returns, but economic pressures force the retailer to re-evaluate its stores 

Electronics retailer Best Buy was the top-ranking retailer in the big-box cohort, above both Target and Walmart for its ease of returning online orders and ease of payment. Overall, it ranked No. 3, below Lowe’s and Amazon. Best Buy, like department stores Macy’s, Kohl’s and Nordstrom, struggled to revive its bottom line, resulting in many store closures throughout the year. To turn around performance, Best Buy has developed higher-quality distribution strategies for quicker fulfillment of digital orders and is re-evaluating its current store formats like opening small-format stores with more curated assortments shoppers can conveniently browse while picking up, returning or having work done on their online orders. 

As Best Buy closes more store locations, it’s using its online exchanges and free returns policy to relieve stores from the added pressure of handling returned inventory. In 2023, Best Buy closed 24 stores. Over the past five years, the retailer has closed approximately 100 stores — a 10% decline in store count during that time. As a result, Best Buy is streamlining operations in its remaining stores. 

During Best Buy’s third-quarter earnings call in November, the company’s CEO announced plans to build more fulfillment and inventory space, separate from traditional stores, so that employees will be able to focus on customer-facing services. As of the third quarter, Best Buy had the lowest ship-from-store volume as a percent of total since well before the pandemic, with approximately 62% of e-commerce small packages delivered to customers from automated distribution centers. “We have worked to optimize our ship-from-store hub footprint to maintain substantial coverage for faster offers and take shipping volume pressure off the majority of the stores to allow them to focus on in-store and pickup experiences,” said CEO Corie Sue Barry during the earnings call. 

Best Buy had the highest returns score among the big-box cohort thanks to its simple process for returning and exchanging products purchased online. Returns are accepted in-store and online through UPS. Members also have longer windows of time after purchasing to return items. But this free return policy does have a few limitations. Best Buy implemented a restocking fee for items that have been activated (excluding prepaid phones) and for tech gadgets like drones, digital cameras, camera lenses and electric bikes. 

Best Buy is one of the few big box retailers continuing to offer free returns for online orders as most have started to charge fees, including Amazon which has started charging  a $1 fee if a customer returns items to a UPS store when there is a Whole Foods, Amazon Fresh grocery store or Kohl’s closer to their delivery address. Many retailers have learned that free returns are expensive to process. About 40% of retailers are now charging return fees compared to 31% last year, according to Navar research. “Across the industry as a whole, we’ve seen more retailers start to charge for returns for at least some of their customer base,” said David Morin, vp of customer strategy at Narvar.

Target and Walmart expand their stores’ local fulfillment capabilities

Target and Walmart, two retail giants and veterans in e-commerce, have similar fulfillment offerings as last year. Target ranked No. 6 overall in the index but second below Best Buy in the big-box cohort — a similar position to last year’s index. Walmart also didn’t change in rank compared to last year, ranking 10th overall and fourth within the big-box cohort. By continuing to hold down costs and increasing the speed of delivery, Target and Walmart have better positioned themselves to ride the financial storm of high inflation costs and slower customer spending. 

Walmart and Target have largely undertaken a race to build up their fulfillment and delivery infrastructures in order to keep up with online giant Amazon’s expansive same-day delivery network and membership programs. Part of their plans to cut down on last-mile delivery costs have included building more micro-fulfillment centers and large-format stores that act as fulfillment hubs for online orders, including drive-up and same-day local deliveries. 

To help with local deliveries, Target Corp. invested $100 million to build a larger network of supply chain hubs, dubbed “sortation centers,” near Target stores in order to sort, batch and route orders that store staffers pack. With more sortation centers close to stores, Target can deliver more packages the next day. By January 2026, Target plans to have built 15 of these facilities. Target executives believe the store-based fulfillment model boosts inventory and supply chain capacity, and the retailer can fulfill demand across any of its omnichannel offerings, whether that’s drive-up, in-store sales or online orders.

The number of orders through same-day services for Target — including order pickup, drive-up and delivery service Shipt — grew by more than 8% by the end of the third quarter of 2023 in comparison to the prior year. Drive-up orders, in particular, grew by more than 12%, according to the company’s third-quarter earnings release. The retailer recently added drive-up returns and Starbucks beverage delivery.  “We’ve long said that drive-up receives the highest satisfaction rating of any service we provide,” said John Mulligan, Target’s evp and chief operating officer, during the company’s second-quarter 2023 earnings call. 

According to a report by Bloomberg, Target is considering adding a paid membership program to compete with offerings like Amazon Prime and Walmart Plus. This subscription program would go beyond Target’s current loyalty program to provide additional money saving options to repeat customers, with the expectation that it would bring more consistent sales. Membership programs like this promote spending online, in-app and in-stores; and consumers who spend across all platforms tend to spend more overall.  

To keep up with Target and its competitors, Walmart announced in 2022 that it would be building ‘next generation’ fulfillment centers slated to open by 2026. The fulfillment centers are intended to combine the manual labor of Walmart’s staffers with advanced technology and machine learning to increase shipping and delivery for orders. As of the first quarter of 2024, five next-gen fulfillment centers have been built. According to Walmart, these new facilities, combined with the rest of Walmart’s fulfillment network, will enable the retailer to reach 95% of the U.S. population with next- or two-day shipping.

With faster fulfillment capabilities, Walmart has also been able to expand its delivery options, like drone delivery and in-home delivery services for Walmart Plus members. Drone delivery is now available in 75% of the Dallas-Fort Worth area through Walmart’s partnerships with on-demand drone delivery providers Wing and Zipline. “Autonomous delivery is finally ready for national scale in the U.S.,” said Keller Rinaudo Cliffton, co-founder and CEO of Zipline. “Zipline is excited to enable Walmart’s vision of providing customer delivery so fast it feels like teleportation.” 

In September 2023, Walmart introduced express online pickup or delivery in as little as 30 minutes and late-night deliveries at 4,000 stores nationwide. A “Live Shopper” feature has also been added to Walmart’s app for customers to quickly make substitutions or additions to their orders. Walmart Plus members have the option to add “InHome” to their membership — a white glove delivery service that delivers orders straight to a customer’s refrigerator or kitchen counter. 

Department stores rethink store strategies due to closures

Department stores Macy’s, Kohl’s and Nordstrom fell behind specialty retailers with more limited fulfillment offerings. Macy’s ranked No. 7 overall in the index. Kohl’s and Nordstrom ranked No.13 and No.14 respectively. Macy’s and Kohl’s kept a similar rank position to last year. But Nordstrom fell two spots compared to last year. 

These three department stores scored lowest for online return. While they do allow for online orders to be returned, methods for returning items are more cumbersome. Returning in store is free for all stores, but Macy’s charges a $9.99 shipping fee for returns by mail. And none have options like curbside returns or partnerships with other retailers to set up drop-off locations. 

At the beginning of 2024, Macy’s announced it would be closing five stores and laying off 2,350 workers, roughly 3.5% of its workforce. But the retailer has shifted focus to downsizing stores. Macy’s is tripling the number of its small-format stores, which are designed to provide a more curated product assortment in a convenient shopping format. Beginning in 2024, it plans to open as many as 30 small-format locations across the U.S. This expansion is in addition to the nearly 15 small-format Macy’s and Bloomingdale’s locations that Macy’s, Inc. currently operates. “Our small-format stores are efficient to operate, provide the customer with a shopping alternative within our omnichannel ecosystem and present a unique opportunity to target high-traffic shopping centers,” said Adrian Mitchell, chief operating officer and chief financial officer at Macy’s.

Kohl’s had expected to close stores in 2023, but the retailer was able to turn around store performance through its shop-within-a-shop partnership with Sephora. During the third quarter of 2023, Kohl’s added Sephora shops to nearly 100 of its stores. There is now a Sephora presence in over 900 Kohl’s stores. “In 2023, we have re-established our stores as a key focal point of our strategy. I am pleased with our positive year-to-date stores’ performance, driven by strong growth in Sephora, and more recently, our home and gifting initiatives,” said Tom Kingsbury, CEO of Kohl’s during Kohl’s third-quarter earnings call last November. The company said it expects the collaboration with Sephora to generate $2 billion in revenue by 2025. In the same quarter, Kohl’s saw a total beauty sales increase of over 70% from the prior quarter. 

Unlike Kohl’s and Macy’s, Nordstrom’s supply is not as well developed for distributing orders quickly. Currently, Nordstrom only offers same-day delivery to shoppers in New York City, with an added $20 fee. Nordstrom closed 15 stores in 2023 — 13 located in Canada and two located in the U.S. This winding down of Canadian operations had a deep impact on Nordstrom’s sales in 2023, with the company reporting a 6.8% decrease in sales during the third quarter of 2023. 

As Nordstrom works to optimize its supply chain capabilities, the company decided to eliminate in-store fulfillment for Nordstrom Rack digital orders and to raise the free shipping minimum for ship-to-store delivery on This resulted in a 1.8% decrease in Nordstrom Rack sales for third-quarter 2023 compared to the same quarter in 2022. However, the decision to eliminate in-store fulfillment for digital orders on resulted in fewer order cancellations, simplified Rack operations and improved profitability, according to the company. 

Drugstores turn to AI and retail stores for quicker fulfillment

Similar to the big-box cohort, an area of interest for drugstores is strengthening their same-day local delivery networks and checkout processes. All retailers within the drugstore cohort have partnered with third-party delivery services, like DoorDash and Instacart, and all offer free delivery for orders over $35. This has resulted in high product accessibility scores across the cohort. The lowest score drugstores received was for returns and online payment options. Walgreens and CVS only accept PayPal for online orders. Rite Aid brought the cohort average up by allowing more quick-pay options like Apple Pay and Google Pay, as well as perks for American Express members. 

Aside from relying on third-party delivery services to fulfill online orders, drugstore chains have also worked to cut down on costs across their supply chains through initiatives like leveraging automated technology for increased warehouse efficiency and shortening distance of delivery miles by storing goods in locations closer to consumers — their neighborhood drugstores. For online orders of consumer products, Walgreens and CVS are looking to their retail stores to help fulfill local orders for delivery. 

Other publications have reported on the increasing rate of stores taking on double duties as warehouses and fulfillment centers for online orders to make more use of their physical sites, including CVS and Walgreens. The Wall Street Journal reported Walgreens closed a warehouse dedicated to e-commerce orders signaling the company’s commitment to utilizing its retail stores as micro-fulfillment centers, following the lead of other retailers like Target, Walmart and CVS. CVS Health sold a distribution center in Alabama for $22 million, instead relying on stores for online deliveries.

Rite Aid, on the other hand, isn’t able to lean on its stores for local fulfillment as much as Walgreens and CVS have been able to. After filing for Chapter 11 bankruptcy protection last year, Rite Aid announced plans to build a new high-tech distribution facility in Des Moines. The company will also close a distribution center in Wilsonville, Oregon, and transfer operations to Des Moines. The Des Moines facility will receive a full technology upgrade, including state-of-the-art technology and an automated goods-to-person solution that delivers items directly to associate workstations for greater productivity and faster output, according to Rite Aid. “The Des Moines facility is an integral part of our distribution network, and we’re now better equipped to execute with greater speed, agility and effectiveness that will position us for long-term success,” said Ron Gilbert, svp of Rite Aid’s supply chain, in a Nov. 29 press release.

Aside from building up localized fulfillment solutions in physical stores, Walgreens and CVS have also automated fulfillment, similar to Rite Aid, by building more AI-backed fulfillment centers to support their pharmacy businesses. Walgreens began using AI to accurately forecast demand and to optimize its network of fulfillment centers. It also implemented centralized services to control inventory and reduce workload. In 2021, Walgreens announced plans to open 11 fully automated micro-fulfillment centers by 2022. So far, nine of the automated centers have opened, but the company is now taking a step back to re-evaluate the benefits of its strategy. 

CVS currently uses AI-driven fulfillment centers to support more than 4,300 stores and to fill over 2.3 millions prescriptions each week across 29 states. A spokesperson for CVS said this has helped smaller store teams and pharmacists manage an increase in online orders. “We’re using technology, including robotics, automation, machine learning and artificial intelligence, as well as a new approach to dynamic workload sharing across our more than 9,000 stores – operating as one team and fleet, rather than managing workload at each store individually,” the spokesperson said to the periodical Drug Store News

The use of AI in healthcare has been a point of contention for many in the industry, and some experts have raised concerns about the rapid deployment of AI in healthcare. The American Medical Association, on one hand, found that 65% of physicians saw an advantage to AI in healthcare, with the greatest enthusiasm being for tools that could reduce administrative burdens. However, at the end of 2023, The White House announced a voluntary commitment from 28 healthcare organizations, including CVS Health, to use and buy “safe, secure, and trustworthy” artificial intelligence products.

To promote more repeat customer purchases, CVS and Walgreens have tested subscription memberships, similar to Walmart Plus and Amazon Prime. At the start of 2024, CVS announced a new tier to its ExtraCare membership called ExtraCare Plus. For $5 a month members are eligible for free same-day delivery on consumer products and prescriptions — as well as other perks like 20% off CVS Health brand products, a 24/7 pharmacist helpline and a $10 monthly bonus reward. 

Walgreens, on the other hand, was shuttered an auto-reorder and save program to streamline operations. However, the company recently announced the return of a savings program to assist consumers in finding deals on prescription medications. The “Rx Savings Finder” program allows customers to compare discounts from third-party coupons for free.  

Discount retailers continue focus on physical retail stores, proving not all stores belong online

Shoppers value in-person “treasure hunt” experience at off-price retailers over the convenience of online ordering

Dollar and off-price stores have consistently placed low in the fulfillment dimension since the first Modern Retail Index in 2021. This year is no exception. However, their low placement is mainly due to the group’s lack of an e-commerce presence when the index mainly measures online fulfillment options. All dollar and off-price stores ranked in the bottom 10 of Modern Retail’s Index. TJX Companies, the highest-ranking retailer among the group, came in at No. 20. A few retailers shifted one or two spots compared to last year, but they remained among the lowest-ranking retailers overall. On average, the dollar and off-price cohort scored lowest across every area: product accessibility, post purchase, returns and payments. 

Although most retailers in the index have felt pressure to keep up with the omnichannel strategies of online giants like Amazon, some have learned their businesses thrive offline, and their customer base values the in-person shopping experience. 

Late last year, TJX Companies made the decision to shut down the online business of HomeGoods, a sibling retailer to T.J. Maxx. There was a notable impact from that decision, as the company reported that it lowered earnings by $0.03 per share in the third quarter of 2023. Earnings in the period totaled $1.03 per share, so the hit was roughly 3%. Similarly, Ross Stores has never offered an online ordering option and Burlington hasn’t re-opened its online ordering since announcing in March 2020 that it was doing away with online sales. 

Foot traffic has been a major strength for these three players and for others within the cohort. According to research from, December 2023 foot traffic grew 3% at T.J. Maxx and 0.1% at Ross compared to the previous year. The key for stores like T.J. Maxx is what might be called the “thrill of the hunt.” Essentially, shopping at a T.J. Maxx store is akin to exploring for hidden treasures. It’s hard to replicate that experience online in the same way.

Additionally, as department stores continue to struggle to manage their inventory overhang, more high-end products end up at discount retailers like T.J. Maxx or Ross. But this also makes managing an online site for this type of retailer extremely unpredictable. Limited pieces or size ranges are often delivered and quickly snatched off shelves in-store. Therefore, these off-price stores continue to focus on physical retail stores with an online website for customer service inquiries and not for product searching or online ordering. 

Dollar stores have turned to social media and same-day delivery through DoorDash and Instacart to revitalize sales

Both dollar stores ranked in the index slightly improved in rank from last year’s performance. The current economic uncertainty has even consumers with higher incomes turning to dollar stores for affordable groceries and household supplies, as well as garnering interest from Gen Z on popular social media platforms. 

Dollar stores are also popular among Gen Z shoppers. According to data from Morning Consult, Dollar General was the 15th fastest growing brand amongst Gen Z in 2023 — the only generation to name the dollar store among its most-preferred retailers. Bargain deals offered at dollar stores often go viral on social media, and the dollar stores ranked in this index have amassed a large viewership under the TikTok hashtags “dollar general” and “dollar tree.” 

Pinterest boards dedicated to dollar store finds have been receiving increased consumer attention too, with everyone from home DIYers to teachers and party planners pinning items to the boards. Dollar Tree’s Pinterest profile has over 139,000 followers, and this boost in popularity on socials has brought an influx of bargain shoppers to Dollar Tree’s stores. 

During Dollar Tree’s third-quarter earnings call Rick Dreiling, chairman and CEO of Dollar Tree, quantified the increased foot traffic as 4.3 million new customers at Dollar Tree and 2.3 million new customers at sibling store Family Dollar. To keep up with increased demand, Dollar Tree has introduced services like pick-up in-store and same-day delivery services from Instacart (available in less than an hour) to streamline its in-store fulfillment operations. 

Likewise, Dollar General handed over same-day delivery services operations to DoorDash and partnered with FedEx to provide next-day and overnight shipping. Dollar General also added free returns for online orders, incentivising more online purchases of trial products. 

With these continued improvements to their in-store operations and online order fulfillment, dollar stores are also working to modernize their checkout experiences through digital offerings like online coupons and digital payment options. Dollar General added PayPal payment to its online checkout options. Dollar Tree expanded its PayPal partnership and now accepts PayPal Credit as a buy now, pay later payment option for customers. 

Additions of these last-mile delivery services and online payment options improved dollar stores’ rankings in our 2023 index compared to last year’s ranking. Dollar General ranked two spots higher compared to 2022 and Dollar Tree ranked one spot higher. 

Home goods retailers develop larger distribution facilities

Home improvement stores find ways to trim supply chain costs

Lowe’s ranked No.1 among all 30 retailers included in the index for ease of fulfillment. Lowe’s performed well for both product accessibility, post-purchase options and online returns. Its lowest score was for online payment options due to only accepting PayPal online. However, Lowe’s does offer various financing and buy now, pay later options for customers, as well as a subscription service to save on recurring purchases. 

Lowe’s and Home Depot both increased in rank compared to last year, regardless of the addition of specialty retailers cohort. Ace Hardware dropped two spots in this year’s index compared to last year. Although Ace’s offerings didn’t change much from last year, Ace was displaced by drugstores Walgreens and Rite Aid, which moved up three and four spots in the ranking respectively. 

Overall, home improvement stores Lowe’s, Home Depot and Ace Hardware ranked higher than other retailers in the home goods cohort, scoring higher on average. All three companies have found ways to trim supply chain costs and expand their distribution networks — but their methods are unique. 

Home Depot and Ace Hardware, like big-box stores, are investing more heavily in automation and mechanical technology to build more high-tech warehouses and distribution facilities. Over the past five years, Home Depot has built over 100 facilities with advanced capabilities, according to evp of Supply Chain and Product Development John Deaton. Home Depot has also streamlined its appliance delivery by managing it in-house rather than through a third-party, which Deaton said has reduced complexity and improved customer satisfaction. 

Ace Hardware opened a 1.5 million square foot facility in Kansas City, Missouri, to meet the growing needs of its stores. The facility acts as a retail support center to enhance inventory capacity and delivery services to its growing number of stores. The retailer has opened 850 new stores in the past five years thanks to a surge in sales.  

Lowe’s, like most retailers, has invested in opening more warehouses. However Lowe’s has taken a different approach, with a few of the facilities serving more highly specialized roles for the company like storage for seasonal and outdoor living items, only in demand during certain seasons. This system has served to provide a more flexible supply chain network for stores to move items more efficiently and to reduce the number of items that need to be marked-down in stores. By using these facilities to stow product, rather than for packing orders and delivering them to stores, Lowe’s is able to speed up distribution and transportation costs to transport items when they’re needed. “With our old model, we were locked in a fixed route from a distribution center to a store,” said Lowe’s evp of supply chain Don Frieson in an investor day presentation in December. “Now, we have increasing flexibility to flow product from whatever facility makes the most sense based on product availability and route efficiency.”

Lower-priced homeware retailers adapt to changing consumer spending habits

Consumer spending habits have drastically changed when it comes to shopping for homeware products. The effects of the COVID-19 pandemic altered consumers’ mindsets toward discretionary purchases like houseware products, with shoppers buying only what they need rather than want. Additionally, competitors like Amazon, Target and Walmart have online marketplaces equipped to send inventory quickly to customers. Customers can buy the same products but wait less time for purchases to arrive.  

Mid- to low-priced homeware retailers The Container Store, Wayfair, and Bed Bath & Beyond fell below home improvement retailers, but above luxury furnishing retailers, in the ease of fulfillment dimension ranking. Bed Bath & Beyond, which scored the lowest among the three homeware retailers,  predominantly operated sales through its physical stores but the retailer struggled to draw shoppers away from competitors. Ultimately, in April 2023, Bed Bath & Beyond filed for Chapter 11 bankruptcy. “Competition from Amazon, Target, IKEA, Walmart and other specialty retailers like The Container Store, were able to quickly adapt to consumer demand and supply chain upheavals,” said Brad Jashinsky, director analyst for Gartner on Bed Bath & Beyond’s struggle to attract more shoppers.

The Container Store and online-only retailer Wayfair offer more of a seamless digital customer experience, as well as a fresher assortment of options for customers. With more digital offerings, like free online shipping after a minimum dollar purchase and free online returns, these retailers are attracting more return visits from customers. “We’ll all agree that creating an excellent after-buy experience creates a long-lasting relationship and customer satisfaction, which in turn creates customer loyalty, repeat purchases, and also ensure[s] the customer won by providing 100% transparency during the life cycle for the entire journey,” said Dhriti Saha, chief operating officer of The Container Store. The Container Store is still building up its network of stores to support online order fulfillment like buy online, pick-up in-store. The Container Store opened its 100th store at the end of 2023, a small-format concept store. 

Wayfair has an average of over 109 monthly million visitors to according to AltIndex. Compared to The Container Store’s website, Wayfair’s site sees on average 30 times more monthly visitors. To keep up with demand and weather current economic constraints, Wayfair has built up its network of fulfillment centers to fill online orders, rather than expanding into brick-and-mortar stores. 

Wayfair announced it will open its first brick-and-mortar store in spring 2024. The retail location is expected to include “immersive and interactive experiences” across 19 home furnishing departments. Wayfair hasn’t provided details about what interactive experiences will be included. However, some industry experts are speculating the retailer will incorporate its extensive online marketplace, with ways to search products, trends and design inspiration in-store.

High-end furniture stores build up galleries and white glove delivery service

High-end home furnishing retailers Williams Sonoma, Ethan Allen and RH (formerly Restoration Hardware) have scaled their online operations slowly. All scored low for fulfillment, similar to last year’s index. With fewer monthly visitors to their sites than other home goods retailers, their focus remains on their showrooms and one-of-a-kind product offerings. Customers are deterred from ordering from their online sites as the orders come with extra fees. Currently, none of these luxury furniture retailers offer free shipping on their sites, and Williams Sonoma is the only retailer that allows shoppers to buy online and pick-up in-store.

Williams Sonoma scored the highest among the high-end furniture group for ease of fulfillment, and its online strategy seems to be working well. When comparing the number of monthly visitors to the three retailers’ websites, Williams Sonoma has much higher traffic than Ethan Allen and RH. By repositioning itself as a premium online furniture destination with a connected omnichannel experience, Williams Sonoma has made it easier for shoppers to select convenient delivery options and to return unwanted merchandise for free. 

Stores are still a crucial part of the retailer’s growth strategy but CEO Laura Alber believes a balance is necessary. “You see people who have enormous stores, but they really don’t invest much in e-commerce. And we know that the multichannel shopper shops more, and it’s the experience they’re looking for so they can research online and go sit on the sofa in the store,” Alber said. 

Ethan Allen and RH focus on a more exclusive white glove in-store shopping and delivery experience for their shoppers — at an added cost. In-home delivery at Ethan Allen for large products starts at $99 if within 50 miles of a service center. The price increases the farther a customer is from a service center. Ethan Allen does offer a membership program to provide member-only savings and benefits like free-shipping and in-home delivery, at an annual fee of $100.  

Ethan Allen is reinventing itself as the “interior design destination.” The retailer has opened multiple “Design Centers” and “Design Studios” to bring customers and interior designers together. “We have made major investments in technology in all areas, most recently empowering our interior designers to work with clients by combining personal service and technology,” said president and CEO Farooq Kathwari. 

Furniture delivery at RH is pricier than at Ethan Allen — at least $299 if within 50 miles of an RH Gallery. And, similar to Ethan Allen, as the customer’s distance from the store increases, RH’s delivery price increases as well. RH is also attempting to reposition itself as a premier retailer and a growing player in the luxury restaurant and lodging business — expanding its high-end lifestyle brand. 

RH is focused on expanding its physical footprint globally, before expanding its digital offerings. In 2023, RH opened its first store outside of North America called RH England, The Gallery. More RH galleries are expected to roll out in Milan, Paris, Madrid, Brussels, Düsseldorf and Sydney over the next two to three years.

Specialty retail is suited for omnichannel experience

This year specialty retailers were added to the Modern Retail Index. Four of the six specialty retailers that were added placed among the top 10 of the ranking, displacing big-box stores like Kohl’s and Nordstrom. This can largely be attributed to the fact that specialty retailers make it easy for customers to try out products and return them online, as well as the speedy delivery options available for online orders through expanded distribution centers and in-store fulfillment capabilities through third-party delivery services. 

These retailers offer various free options for returning online orders, including in-store and prepaid shipping labels. For instance, Sephora offers returns for new or gently-used products, even for items bought on third-party sites like DoorDash or paid through services like PayPal, Klarna or Afterpay. Customers can shop knowing that if they don’t like a new product they decided to test or if they chose the wrong makeup shade from available product images, they’ll be able to return it. 

Specialty retailers scored on average slightly lower, or on par with, the big-box, drugstores and Amazon cohorts. However, in the case of returns, specialty retailers scored higher than other cohorts, except Amazon. Beauty products, books, sporting apparel/gear and pet products are easier to display for online shopping than larger merchandise like furniture, with less risk of product confusion from bad imagery and fewer returns. However, as mentioned in the big-box section, these retailers are taking a risk by allowing a heavy intake of returns, which can be expensive for a retailer. 

Along with simple and free returns, specialty retailers also offer various speedy delivery options to get online orders to consumers as fast as possible. All six specialty retailers offer free shipping, with online order value minimums as low as $35, and one-day expedited shipping available at all of them. PetSmart has the highest minimum threshold at $75 for free shipping. Four of the six specialty retailers, excluding Barnes & Noble and Chewy, offer same-day delivery options through delivery services like DoorDash and Instacart. And five out of six have buy online, pick-up in store options. 

To increase Ulta’s capacity for online orders, it partnered with Target to build more shop-in-shop locations and merge supply chain operations — a benefit for Ulta to take advantage of Target’s extensive supply chain network and store footprint. Target also gets to expand its beauty business and attract more shoppers like Ulta’s Ultimate Rewards members, which is reported to have had 42.2 million members by the end of 2023. 

In Ulta’s second-quarter earnings call, CEO Dave Kimbell emphasized the retailer’s commitment to strengthening their e-commerce fulfillment operations. Its distribution centers are filling more e-commerce orders than ever before, resulting in an expansion into faster fulfillment centers dedicated only to e-commerce orders and ship-to-store capabilities. As of January 2022, only 115 Ulta stores had ship-to-store operations — by August 2022, this number had jumped to 276. 

PetSmart has also invested in larger distribution facilities and outside partnerships. At the end of 2023, PetSmart announced plans to expand its distribution facility in Ottawa, Illinois to fulfill online orders quicker and handle a larger volume of orders. PetSmart also added same-day delivery through InstaCart in 2023, on top of its established partnerships with DoorDash and Shipt. Through PetSmart’s large physical presence through its retail locations and these third-party partnerships, they’ve been able to use their stores to fulfill more online orders and move inventory quicker off shelves. 

Online only pet supplier, Chewy doesn’t offer as many delivery options resulting in the lowest e-commerce fulfillment score among the specialty cohort, scoring especially low for product accessibility and payment options. Chewy is aware that its supply chain needs strengthening, so the company has been investing in automated warehouses since 2019 to save money and increase capacity. Thanks to increased productivity and an ongoing shift into automated facilities, Chewy said that its system-wide variable fulfillment cost for every order declined 13% year-over-year. Chewy’s autoship program also helps the retailer predict inventory needs for warehouses and builds loyalty among Chewy’s customer base. Forty-four percent of Chewy customers have joined the retailer’s autoship program, receiving automated replenishment of their pet supplies, according to market research firm Consumer Intelligence Research Partners.

Amazon continues push for speedier delivery and Prime subscription add-ons

Amazon ranks as the No. 1 retailer in the Modern Retail Index, a position it has held since the index debuted in 2021. Amazon has maintained its spot at the top of the index because it continues to innovate its fulfillment offerings. Since its genesis, Amazon has built a powerful supply chain network to support its massive e-commerce business. As one of the first retailers to move on automated warehouse technology, Amazon has set the standard for quick delivery and customer service expectations. In Modern Retail’s index, Amazon scored a perfect 1.0 for post purchase and returns. It also scored a nearly perfect 0.9 for product accessibility, however this only came down to one attribute. 

Other retailers use third-party expedited shipping integrations to deliver online orders the same day but Amazon has the capability to run its expedited shipping integrations in-house. The index doesn’t score Amazon for this attribute, therefore it loses some points; however the reality is Amazon has removed the need for third-party integrations. Amazon continues to deliver online orders faster, beating its own records. According to a study by NielsenIQ, Amazon’s click-to-door speed for online orders in the U.S. has steadily decreased since December 2019. By June 2023, Amazon purchases took 1.5 days to arrive. Other retailers take an average of 5.2 days to deliver. 

Amazon also continues to find innovative ways to speed up delivery times via the skies. In 2019, Amazon broke ground on the Amazon Air Hub, an 800,000-square-foot facility to support its in-house air cargo network, located at the Cincinnati/Northern Kentucky International Airport. Since then, Amazon Air’s flight activity has significantly increased. A report by DePaul University found a 6% increase in flight activity between September 2022 and March 2023. Amazon Air now operates 205 flights per day, up from 85 three years ago. Additionally, in October 2023, Amazon announced that drone deliveries of medications were available for Amazon Pharmacy customers in College Station, Texas. The drone deliveries are free and shoppers can expect to receive medications in under 60 minutes. 

Amazon was also one of the first retailers to unlock the benefits of a loyal subscriber base with its Amazon Prime membership. In 2020, Amazon opened its Amazon Pharmacy to give Prime members an option for filling prescriptions through the e-commerce giant, purportedly at faster speeds. Now Amazon has introduced RxPass, a program that allows Prime members to ship medications to their homes for a monthly $5 subscription. A grocery subscription program is also on Amazon’s radar this year. The company is piloting a $9.99 per month subscription for unlimited grocery deliveries from Amazon Fresh and Whole Foods in Denver, Sacramento, California, and Columbus, Ohio.

Key takeaways

Big-box stores revisit their distribution and re-imagine the shopping experience

  • Best Buy has developed higher-quality distribution strategies for quicker fulfillment and easy online returns of digital orders and is re-evaluating its current store formats.
  • Target and Walmart have expanded their stores’ local fulfillment capabilities by building more micro-fulfillment centers and large-format stores that act as fulfillment hubs for online orders, including drive-up and same-day local deliveries.
  • Department stores struggle to fulfill online orders as efficiently as specialty retail and drugstores, but they have partnered with DoorDash and Instacart for quicker deliveries and they have built new store formats that allow for more convenient shopping and curated browsing.

Drugstores turn to AI and retail stores for quicker fulfillment

  • Drugstores have strengthened their same-day local delivery networks and checkout processes by partnering with third-party delivery services like DoorDash and Instacart and offering more quick-pay options.
  • Drugstore chains have cut down on costs across their supply chains by increasing warehouse efficiency and shortening distance of delivery miles by storing goods in locations closer to consumers — their neighborhood drugstores.
  • Aside from building up localized fulfillment solutions in physical stores, drugstores have also automated fulfillment by building more AI-backed fulfillment centers to support their pharmacy businesses.

Discount retailers continue to focus on physical retail stores, proving not all stores belong online

  • Although most retailers try to keep up with the omnichannel strategies of online giants like Amazon, off-price retailers have learned their businesses thrive offline, and their customer base values the in-person “treasure hunt” shopping experience.
  • Dollar stores have experienced a boom in social media interest and bargain shoppers. To keep up with demand, they’ve turned to same-day delivery through DoorDash and Instacart to revitalize sales and quick-pay options to speed up online checkouts. 

Home goods develop larger distribution facilities

  • Home improvement stores have found ways to trim supply chain costs by investing more heavily in automation and mechanical technology to build high-tech warehouses and distribution facilities.
  • Lowe’s has taken the unique approach of assigning specialized roles to its fulfillment centers, such as storing seasonal items and outdoor living items.
  • Homeware retailers that cater to budget-conscious shoppers are adapting to changing consumer spending habits by experimenting with new store formats and improving their digital experiences.
  • High-end home furnishings retailers have scaled their online operations slowly, turning to design-centered showrooms and white glove delivery service for a more exclusive luxury shopping experience.

Specialty retail is suited for omnichannel experience

  • Specialty retailers make it easy for customers to try out products and return them online by offering various free options for returning online orders, including in-store and prepaid shipping labels.
  • Investment into larger distribution facilities dedicated to fulfilling online orders is also on the rise among specialty retailers to increase capacity for digital orders.
  • Specialty retailers also offer various speedy delivery options to get online orders to consumers as fast as possible through third-party delivery services and expanded distribution networks with big box partnerships. 

Amazon continues push for speedier delivery and Prime subscription add-ons

  • As one of the first retailers to move on automated warehouse technology, Amazon has built a powerful supply chain network to support its massive e-commerce business and set the standard for quick delivery and customer service expectations.
  • Amazon also continues to find innovative ways to speed up delivery times by expanding its fleet of cargo airplanes and developing drone delivery services.
  • Amazon was also one of the first retailers to unlock the benefits of a loyal subscriber base with its Amazon Prime membership — a program that has expanded into prescription and grocery memberships.