Member Exclusive   //   December 22, 2021

The Modern Retail Index: An overview of how top retailers’ business models stack up

By Li Lu

Read the newest installment of the Modern Retail Index published in 2024 that assessed retailers’ e-commerce experience strategies.

This report is the third and final piece to come out of our 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

Click here to read about the Modern Retail Index’s ease of fulfillment ranking


In 2020, the coronavirus pandemic changed the retail landscape. With 8,960 store closures in 2020 according to Coresight Research’s latest data, white-knuckled retailers watched as their brick and mortar sales dropped. But this bleak period brought forth an (almost) equal and opposite reaction: U.S. e-commerce sales grew from $160.3 billion in the first quarter of 2020 to $222.5 billion in the second quarter 2021, according to the U.S. Department of Commerce. Meanwhile, companies reacted to other Covid-induced changes in shopping behaviors: Retailers implemented new digitally-led policies and services, such as curbside pick up, local courier partnerships and timed delivery.

More broadly, retailers are rethinking their business models for a post-coronavirus world. Best Buy has started to “upskill and reskill” store employees to help more with specialized online customer services and reformat their store layouts to better fit new consumer behaviors and expectations. On the other hand, Target has invested billions of dollars into an expansion to more urban areas. These new, smaller stores will function as distribution centers and pick up locations to better support online fulfillment.

In the face of a new retail landscape with new demands and dynamics, the Modern Retail Index aims to provide an in-depth look at how these businesses have evolved their digital strategies to handle uncertain times. This research product functions to show the maturity and breadth of a retailer’s digital strategy, not the retailer’s performance across all business aspects. As such, the scored dimensions have a focus on digital capabilities: E-commerce Experience, Ease of Fulfillment and Financial Momentum.

Across the board, one thing is clear: The industry has adapted to almost two years of upheaval. Here’s an overview of our complete  findings as well as an overall ranking of retailer performance across dimensions. For more detail, check out the other reports in this series.


The Modern Retail Index (MRI) collects data from a list of retailers, buckets and scores the data into dimensions and creates 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. 

The index uses three main dimensions that are further broken down into sub-dimensions to measure a retailer’s performance. They are presented here in the order in which they impact our model, from most to least heavily weighted:

  • The E-commerce Dimension deep dives into sub-dimensions of the online shopping experience to create a better sense for which retailers have made forward-looking investments and how they ladder back to their unique retail sectors and business models. The dimension’s subdimensions include: site speed, virtual product, checkout, reviews, customer service, customer benefits, app and social commerce presence.
  • The Ease of Fulfillment Dimension focuses the retailer’s ability to get the end product into the consumer’s hands when purchases are made through its e-commerce platform. The dimension’s subdimensions include: google seller ratings, fulfillment options, post purchase, returns and payments.
  • The Financial Momentum Dimension gives a picture of the retailer’s performance and the rate at which revenue has increased or decreased within a 6-month period of time. Absolute revenue is also measured to take into account older retailers that make up a large portion of market share but do not grow as quickly as new retailers. The dimension measures profit and operating margins to better understand the efficiency at which the retailer runs. Please note that the index does not separate financial momentum into digital versus brick and mortar. The dimension’s subdimensions include: total revenue, revenue change, profit, profit margin and operating income.

Within the indexed retailers — chosen by highest overall revenue — five immediate cohorts were identified: Big-box, Drug Store, Grocery and Dollar Store/Off-Price. The index includes Amazon in its own cohort due to its unique positioning in the market. Top performers were a mix of Big-box, Amazon and Drug Store retailers with Grocery and Dollar Store/Off-Price falling below average.

  • Big-box: Defined by their large traditional brick-and-mortar store format. The retailers in this cohort sell across multi-brand and multi-product categories. Most notably for big box stores, they follow a chain store approach with a nationwide operating model as opposed to a regional model as seen in other cohorts. The retailers in this cohort included: Best Buy, Ace Hardware, Macy’s, Walmart, Lowes, Target, Kohl’s and Home Depot. 
  • Drugstore: Defined by its unique dual business model: pharmaceutical versus non-prescription products. While other retailers may also include a pharmaceutical branch, retailers in the drugstore cohort specialize in over-the-counter medication in their non-prescription model. The retailers in this cohort include: CVS, Rite Aid and Walgreens.
  • Grocery: Defined as large-scale retailers that specialize in selling produce and other food products. While other big box retailers, like Walmart and Target, can also sell food products, it is not their focus. The grocery cohort included H.E. Butt Grocery (H.E.B.), Wakefern (Shoprite), Kroger, Albertsons, Costco, Aldi, Meijer, Ahold Delhaize USA (Stop and Shop) and Publix. 
  • Dollar and Off-Price Stores: Defined in the Index as retailers that purchased off-season, discontinued or liquidated products at a discounted rate and sold to consumers at a lower-than-retail price. The cohorts included: TJX companies, Dollar General, Dollar Tree and Ross Stores.
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Findings Summary: E-Commerce Experience

Customers have a growing number of universal expectations for e-commerce experiences: fast delivery, smooth site experience and a low number of clicks to checkout, among others. However, different retailers respond to – or ignore – those expectations in ways rooted in their core strengths and purpose. Each cohort is home to unique consumer behaviors and product assortments that shape the specific way they shape their online platform. 

Big-box is the most aligned with the standard e-commerce expectations. Customers expect big-box retailers to ship nationwide and have high quality online touchpoints similar to Amazon, their biggest disruptor in the space. This is a good cohort to watch to see where consumer e-commerce expectations are headed and how larger retailers are reacting to meet them.

Drugstore retailers balance a dual business model: non-prescription and prescription. Their non-prescription e-commerce playbook adheres to many big-box tactics, but the needs of their prescription business to create synergies has prioritized different online tools for them. With disruption from new DTC competitors into the pharmaceutical industry, drug stores have shifted much more focus into creating an internal ecosystem, seen through the cohort’s app development focusing on medication delivery and Q&A. The drug store cohort will likely continue to evolve the e-commerce aspect of their prescription business as more competitors, like Amazon, enter the market.

Grocery store customers have traditionally not held the cohort to e-commerce expectations – until the pandemic shifted behaviors from in-store to online. With customers growing accustomed to online grocery shopping and perishable products that require specialized shipping methods – grocery retailers are between a rock and a hard place. As grocers build out their online infrastructure, they have had to make the decision to either build the infrastructure in-house or partner with third-parties to fill in the gaps. Cost and margins will play the key role in determining future e-commerce investments.

Dollar and off-price stores have the most uncertain path ahead in their e-commerce journeys. With retailers like TJX with a healthy online presence and Ross doubling down as an in-store-only experience, as a cohort, this group has not implemented a cohort-wide e-commerce strategy. The future for e-commerce for this segment remains to be seen – and some low-margin retailers may choose not to move online at all.

Read our full report on the E-commerce Experience Dimension here.

Findings Summary: Ease of Fulfillment

Getting the end product to the customers is one of — if not the — most important part of the customer’s purchase journey. And as the digital shopping experience continues to evolve, customers expect fulfillment of their orders to become easier as well. Among all dimensions, Covid has impacted fulfillment the most and, as a result, retailers have shifted their fulfillment strategies to stay afloat during the pandemic.

Big-box has the most tools at their disposal to create and launch new fulfillment options. With Amazon as the biggest disruptor in their space, big box retailers are feeling more pressure than other cohorts to keep up with fulfillment speed. This cohort tends to have the highest proportion of first movers and best showcases how large retailers are responding to shifts in fulfillment expectations, trends and competitor strategies: such as having online one-transaction exchange and expedited delivery options.

Drugstores have faced increasing competition from new entrants and have started to experiment with creative fulfillment methods, rather than focus solely on speed. Unlike larger retailers, the cohort does not have as large or prolific of a fulfillment network. Instead the cohort has focused on creative ways to differentiate their fulfillment, such as through same-day door delivery using the store pharmacies as local centers or multi-dose packaging for prescriptions. The drugstore cohort gives strong examples of how to use your product assortment and positioning to compete in the fulfillment space instead of just expanding the company’s delivery network. 

Grocery has seen a permanent shift in fulfillment methods due to the pandemic, where consumers are growing slightly more accustomed to ordering online instead of shopping in-store. But perishable products require specialized shipping methods that grocers often cannot support. As the cohort builds out their shipping infrastructure, they have to decide between building out their own network, partnering with third-party delivery services, or acquiring a service provider. The cost and margins of each option will play the key role in determining future investments. 

Dollar and off-price stores have the most uncertain path ahead in e-commerce fulfillment. With retailers like Ross doubling down as an in-store-only experience and others not investing as heavily in digital, as a cohort, this group has not figured out what e-commerce fulfillment means to them yet. The future for fulfilling online orders for this segment remains to be seen – and some low-margin retailers may choose not to move online at all.

Read our full report on the Ease of Fulfillment Dimension here. 

Findings Summary: Financial Momentum

As industries recover and regain their footing from the throws of the pandemic, indexed retailers saw an average revenue increase of 23% quarter-over-quarter. All cohorts also saw an increase in revenue in the measured time period of the index, a signal that the retail industry has started to recover after vaccine rollouts began in 2021. 

Along with strong revenue performance, retailers also saw strong operation optimizations during the time period, with the index averaging 7.2% operating income percent and 29.1% profit margin. Notably during the measured time period, many companies cut costs in the form of store closures, as seen in the aforementioned 8,960 store closures, and, as a result, a reduction in staff. Despite the seismic shifts in consumer trends and expectations for e-commerce experience and fulfillment, many retailers managed to remain profitable during changing times. 

Amazon saw revenue and profit skyrocket during the pandemic

Unsurprisingly, Amazon led the financial momentum dimension with one of the highest total revenue and profit margins in the index, as the company saw an influx of orders driven by pandemic conditions. The retail giant also has shown no signs of slowing as it continues to invest in new technology and fulfillment options. 

Big-box prepares for the shift online through digital investments 

While big-box showed strong performance, retailers from other cohorts, like drugstore retailer CVS, broke into the top portion of the financial momentum dimension. As a cohort, big-box performed high in both e-commerce experience and ease of fulfillment, but that didn’t always translate into strong financial momentum. 

Best Buy exemplified this trend: The overall index leader fell in the middle of pack for the financial momentum dimension. But while the retailer does not produce the same revenue results as some of its competitors, Best Buy has focused heavily on digital investments to improve its future performance in that space.

Off-price retailers are recovering with the return to in-store shopping

On the opposite end of Best Buy’s performance, Ross, the index’s lowest ranking retailer overall, placed fifth in the financial momentum. Its fellow off-price retailer, TJ Maxx, also ranked high in this dimension at seventh. Unlike big-box, despite low performance in both e-commerce experience and ease of fulfillment, off-price retailers’ focus on the shopping in-store experience saw an enormous increase in percent-revenue change — both Ross and TJX saw an over 100% increase in their revenues — beginning after the introduction of the Covid vaccine. In the other dimensions, dollar stores were grouped with off-price retailers, but dollar stores did not see the same uplift in sales as off-price retailers after the release of the vaccine.

Drug stores benefit from expanding fulfillment options

Drug stores saw a win in the financial dimension with CVS placing sixth. Of the indexed drug stores, CVS had one of the clearest wins financially within the cohort’s, racing past its drugstore competitors – and many retailers in other cohorts – to nab the third highest total revenue in the measured time period — falling only behind Amazon and Walmart. With the increase of attention towards health from the pandemic, CVS saw revenue wins with its unique fulfillment options like multi-dose prescription packaging and its top ranking in e-commerce experience amongst its cohort, much of which focused more on speed of fulfillment. 

Grocery has to play catchup to match other cohorts’ performance

Not all grocery retailers are publicly traded, so financial information was not available for the entire cohort. But for companies with available data, they landed lower in the ranking for this dimension, with two of them, Albertsons and Ahold Delhaize, seeing slight dips in their revenue numbers quarter-over-quarter. Grocery’s low position in financial momentum could also be attributed to its low performance in other dimensions. Amongst the cohorts, grocery has had the most ground to make up as the pandemic shifted the way consumers interact with grocery e-commerce and fulfillment methods. 

Grocery’s shining star in the financial dimension was Costco, which saw a 19% increase YoY in revenue and a total revenue that rivaled many of the big box retailers. But while Costco saw strong revenue growth, the retailer had lower profit margins and operating income compared to retailers in other cohorts due to the cost of its warehouses.