The Modern Retail Index Ease of Fulfillment Report: How top retailers’ fulfillment strategies stack up

Suddenly, retailers had to accommodate completely contactless transaction experiences in addition to standard delivery in the face of a surge in online orders, and this sudden complexity has only accelerated the expansion of their fulfillment playbooks. From buy-online-pick-up-in-store (BOPIS) and curbside pickup to demands around easy returns, a diverse array of fulfillment options have become table stakes for the modern retailer. As a result, consumer expectations of a retailer’s fulfillment ability have skyrocketed, and companies are scrambling to meet them. In a 2020 Kantar report, 10% of shoppers opted for one- to two-hour delivery at least once and 35% of shoppers signaled that they planned to continue using delivery services beyond the pandemic.

The pandemic also inflicted damage to supply chains, causing retailers to struggle to get products not only to customers’ doors, but to their own stores. To handle these new hurdles, retailers have started investing heavily in different fulfillment and distribution resources to overcome supply chain problems — from chartering ships to increase air cargo to setting up micro distribution centers. But this crisis has only shone a spotlight on a fundamental aspect of retail that will continue to be felt — if not seen — by consumers.

Companies like Walmart and Amazon have cashed in on the increasing importance of fulfillment. In August 2021, Amazon opened its first ever air hub in Cincinnati — housing up to 100 Amazon Air cargo planes — to increase its fulfillment logistics ability and reliability. In the same month, Walmart launched its Walmart GoLocal program, and by October it announced Home Depot as its first major retailer to join the program. Walmart’s new program utilizes its expansive delivery network and offers last-mile delivery for other retailers. This service allows other retailers to offer their consumers same-day delivery. Both retailers’ focus on shipping logistics signals the rising importance of fulfillment options for consumers. 

Amazon casts a long shadow in this dimension. The retail giant has influenced the way customers view fulfillment — put simply, instant gratification. Amazon’s Prime program changed customer behaviour by setting a new standard that customers could purchase any product and receive it one or two days later, and the retailer has only continued to increase their fulfillment options, pressuring their competitors to adapt or die.

With all of this in mind, Modern Retail has taken a deep look at the top retailers — from big-box stores to pharmacies to grocers — and analyzed the different ways retailers smoothed and diversified the fulfillment process for customers. 

When describing the benefits of faster shipping options, Ben Jones, CEO of Ohi, a micro-fulfillment provider that offers same-day and under-two-hour delivery, noted that customers favor faster delivery options; brands offering two-hour delivery saw up to 22% higher repeat purchase rates compared to brands only offering same-day delivery. He added, “With some of our brand cohorts, we’ve recently seen substantial lifts in lifetime value [due to same-day delivery].” 

With new fulfillment methods and technology, retailers have all started to invest and experiment with new strategies.

Here’s how…

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. 

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 focusing on a series of sub-dimensions to provide a better sense of the strengths and weaknesses. And contextualizing that beside the other cohorts — which include big-box, drugstore, grocery and dollar store/off-price — we analyze creates a fuller picture of how the largest retailers in the country approach fulfillment.

Within the ease of fulfillment dimension of our rubric, retailers are measured on five different sub-dimensions: Google Seller Ratings, Product Accessibility, Post Purchase, Returns and Payments:

• Google Seller Ratings measures the retailer’s ratings and reviews using Google’s Seller Ratings — Google’s crawling bot that aggregates reviews and ratings about the retailer across a number of platforms — as a tool.
• Fulfillment Options 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 & 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 — chosen by highest overall revenue — five immediate cohorts were identified: Big-box, Drugstore, 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 drugstore retailers; grocery and dollar store/off-price falling below average.

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The index defines big-box retailers 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. 

The cohort’s nationwide presence is a double-edged sword. A centralized online store allows for retailers to more easily serve shoppers regardless of location, but that also requires the retailers to have a robust shipping infrastructure to send products to their customers. And, thanks to Amazon’s massive presence, consumers increasingly expect one to two day shipping times to compete with Amazon Prime. Compared to other cohorts, big-box competes more directly with Amazon and, as a result, feels the Amazon effect more strongly than others.

As a result of pressure from these high expectations, many of the big-box retailers landed at the top of the index. The cohort scored the highest on product accessibility among the groups, performing 38% higher than the drugstore cohort and 68% higher than the grocery cohort. Every big-box retailer offered expedited shipping and free standard shipping options with an average free standard shipping threshold of $43. With increased expectations by consumers due to Amazon Prime’s influence on shipping, big-box retailers have continued to build out fulfillment capabilities to compete with Amazon. 

Big-box performed well in the payment sub-dimension as well. The cohort performed 46% above the index average. While not the top cohort for the index, big-box was the only cohort that experimented with “buy now, pay later” partnerships, a feature measured in the payment sub-dimension. Affirm was the most popular partnership option, seeing collaborations with Target and Walmart. Along with “buy now, pay later,” big-box also saw a high adoption rate of quick payment options, including Apple Pay, Google Pay and Paypal, with each retailer having at least one option available.

While buy now, pay later service providers are relatively still nascent, their services continue to grow in consumer usage. Bank of America has reported that the features will grow 10x-15x by 2025, and a Cardify.ai report cites that 44% of respondents ranked the service as a somewhat to very important factor in their holiday spend amount. The cohort has started trending towards using new payment methods faster than the other cohorts.

Big-box retailers compared

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As Amazon continues to disrupt old guard retailers with easy and fast shipping options and building out new fulfillment logistics capabilities like Amazon Air, as mentioned earlier, those retailers have raced toward expedited shipping options themselves. Target chose to acquire Shipt to provide shoppers free expedited shipping similar to Amazon’s Prime program. Walmart went a different route and created a proprietary program, Walmart+, offering perks similar to Amazon like free, no-minimum shipping and additional benefits including mobile scan-and-go and discounts on fuel for an annual fee. According to a Pipslay survey, Walmart has successfully created a program to compete with Amazon Prime: “45% of Walmart+ subscribers surveyed are also Amazon Prime members, and 14% have migrated away from Prime.” 

Big-box stores also invested more heavily in subscribe-and-save tactics, which is reflected in their performance within the payments sub-dimension. Best Buy, Lowes and Home Depot all had unique usages of the subscribe-and-save feature, which competes with Amazon’s own program of the same name. The three retailers focused their feature on lower-ticket items — like K-cup pods, water & air filters and pool supplies — and not the usual big-ticket items that customers know the retailers for. These lower-ticket items lent better to auto-replenishment programs and could help generate return customers and an additional revenue stream through products that would normally see less attention or shopper loyalty.

Despite this attention the broader cohort places on subscribe and save, Target stood as a black sheep in the group by discontinuing its subscribe-and-save feature in 2020, which first launched in 2014. When discussing the issues with Target’s approach, Greg Alvo, CEO of subscription solutions platform Ordergroove, said: “The biggest issue with Target’s take on subscribe and save was the execution… Most folks didn’t know about it, and they didn’t offer it via omnichannel where customers could use it in store or online.” 

As a cohort, big-box marginally underperformed against the index average for the returns sub-dimension, but two retailers stood out in the cohort as best in class examples: Best Buy and Lowes were index leaders, and this exemplary performance carried over to returns. The two retailers offer free returns and one-transaction exchanges, a rare feature only seen elsewhere in this index with Amazon.  

One-transaction exchanges — a service where a customer can exchange a purchased product online in one step instead of returning and repurchasing the product as two separate steps — reduce customer friction and make it easier for the customer to receive their final product. The feature also encourages customers to keep their money with the retailer, since two-transaction exchanges have a higher bounce rate. The two-transaction method requires the customer to file for a return and then repurchase the item separately, giving the customer the opportunity to shop elsewhere post return – as long as the return doesn’t only provide store credit. With Amazon as a leader in fulfillment, returns and the minutiae of customer retention grow more important as retailers try to keep up with and break away from the retail giant.

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Key Takeaways

• Industry Uniqueness: 
  • Consumers tend to be more nationwide.
  • Retailers require a robust shipping infrastructure due to their wider spread of consumers.
  • Disrupters like Amazon’s Prime program have set expectations for fast shipping from big-box counterparts as well.
• Findings:
  • Big-box scored the highest on product accessibility among the groups, performing 38% higher than the drugstore cohort and 68% higher than the grocery cohort.
  • Big-box performed 46% above the index average in payment sub-dimension and was the only cohort that experimented with “buy now, pay later” partnerships, a feature measured in the payment sub-dimension.
  • As Amazon continues to disrupt old guard retailers with easy and fast shipping options, big-box retailers continue to compete by upgrading their own shipping options, with expedited shipping partnerships for example.

The drugstore cohort is defined by its unique dual business model: pharmacy services versus non-prescription products and sales. While other retailers may also include a pharmaceutical branch, retailers in the drugstore cohort specialize in over-the-counter medication in their non-prescription models. The retailers in this cohort include: CVS, Rite Aid and Walgreens.

With this dual business model, drugstores were one of the most unique cases for retailers in an online environment. Their two businesses resulted in consumers having two different sets of fulfillment needs. Consumers looking to purchase prescription medication have more immediate needs and often require faster delivery times without restrictions. On the opposite side, for non-prescription products, consumers looking for quick in-and-out, last-minute necessity products (e.g. toothpaste, pain killers, toilet paper) may need faster delivery times, but have a wider delivery window than prescription needs.

With a need for quick delivery, two of the three drugstores indexed — Walgreens and CVS — list free express shipping, and all three retailers list free standard delivery for prescription medication. This shipping benefit reflects immediate consumer needs for their pharmaceutical products and also a response to increasing digital competition, like Amazon’s Pillpack and Capsule, but there was not as much consensus in the cohort’s approach to shipping for its standard, non-prescription products. Free express shipping was even less common for non-prescription products: only one of the three retailers, Walgreens, offers expedited shipping through its own platform for non-prescription products.

Compared to its performance in the e-commerce dimension, the drugstore cohort shined when it came to ease of fulfillment, with two of the three retailers ranked on par with or above a number of their big-box competitors. Particularly in the Payment sub-dimension, the drugstore cohort had the highest average score among the index. Reflective of the in-store experiences of quick in-and-out shopping, each retailer in the cohort had at least two quick payment options (Google Pay, Paypal or Apple Pay) integrated to speed up checkout times. 

Along with the payment sub-dimension, the cohort also scored above the index average in product accessibility. While not all of the retailers offered free express shipping, all of them did offer free standard shipping with the same threshold price: $35. For comparison, the big-box free standard shipping average threshold was $43, though, to be fair, big-box retailers’ product assortments include more big-ticket items compared to the majority of drugstore offerings. The lower threshold makes sense for drugstores, since non-prescription drugstore products have lower price tags.

Drugstore retailers compared

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In the ranking, Walgreens and CVS were neck-and-neck, both landing above a number of big-box competitors. Rite Aid lagged behind. Reflective of the index results, Google search volume for the pharmaceutical branches of the retailers has a similar pattern as the ranking: CVS and Walgreens at the top with Rite Aid earning a third-place finish.

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Walgreens led the cohort, differentiating itself from its closest competitor, CVS, through its wider delivery options. Walgreens was the only drugstore retailer to offer expedited shipping through its own system on both regular and prescription products. The drugstore also announced a same day delivery service for standard products in May 2021. This variety of shipping options set Walgreens apart from the pack in its cohort. 

Similar to Walgreens, CVS offered expedited delivery, but the website rerouted consumers to Instacart’s website to complete the order for non-prescription products; standard shipping keeps the consumer on CVS.com. While this offers CVS an expedited shipping solution, the split path and extra steps for expedited shipping and additional Instacart login can cause a higher bounce rate than if CVS’s own website could complete the checkout process. Notably, CVS does offer expedited shipping through their own portal for prescriptions only. This makes the difference in shipping options between the two business models an even odder choice, though it could be explained through a difference in product margins: non-prescription products have not reached the margins needed to justify adding carrier options for them. 

Last in the cohort came Rite Aid. Unlike the other two drugstores, Rite Aid did not offer expedited options for either non-prescription or prescription products. This gap cost the retailer a much higher potential placing in the index, as it performed on par in other sub-dimensions with its drugstore competitors. 

As drugstores begin settling on how to approach shipping for prescription versus non-prescription products, new prescription delivery services have begun disrupting the market. They include Capsule, which offer services like free same day delivery. As these online prescription services like Capsule and new entries such as Amazon Pharmacy continue to proliferate, legacy drugstores are suddenly seeing similar pressure to the big-box cohort to offer more expansive delivery services for both prescription and non-prescription items. 

And it’s crucial to remember that the prescription services drugstores provide are more complicated than most other online purchases, due to the sensitivity of ingredients and how the prescriptions must be validated, stored, and transferred. There are certainly critics of the old guard’s current approach, but Arielle Trzcinski, senior analyst at Forrester covering digital health, has noted the improvements old guard drugstores have made: “[Older pharmacies] have done a better job in recent years of allowing customers to more easily do all of the steps of ordering medication online that previously had to be done in-person or over the phone: adding the ability to chat with a pharmacist online, scheduling express pickup or deliveries and scheduling refills.”

Further evolution will likely be necessary as the new entrants continue to threaten legacy drugstores’ dominance. To combat this new wave of digital players in the pharmaceutical fulfillment space, the two drugstore cohort leaders, Walgreens and CVS, have recently launched new medication fulfillment programs. 

Walgreens leaned into its existing shipping abilities by announcing the expansion of its same-day delivery for prescriptions to match their same-day delivery for non-prescription products. CVS took a different path; rather than focus on speed, the retailer announced a multi-dose packing service at no extra cost to add an extra layer of service. The service focuses on simplifying customers’ medication plans by packaging different daily medications together for convenience. With new competition entering the market, the drugstore cohort is getting more creative with their fulfillment options.

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Key Takeaways

• Industry Uniqueness: 
  • Drugstores have two business models – standard shopping and prescriptions/pharmaceuticals.
  • Consumers have more immediate need for prescriptions/pharmaceuticals than standard products.
  • Consumers in standard shopping look for quick in-and-out, last-minute necessity products (I.e. toothpaste, toilet paper, etc.).
• Findings:
  • The drugstore cohort had the highest average payments score among all cohorts, with each retailer having at least two quick payment options.
  • Shipping options differed amongst the cohort, with some providing expedited shipping and others relying on third parties or forgoing the option altogether.
  • The entry of new pharmaceutical fulfillment providers into the market like Capsule and Amazon Pharmacy has pressured old guard drugstores to innovate their prescription fulfillment options to remain competitive.

The grocery cohort had the clearest definition among all cohorts: 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 primary 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. 

Grocery as a cohort performed below average for ease of fulfillment due to barriers unique to the cohort. The cohort’s biggest hurdle is the precariousness of shipping fresh produce. As a result, grocery stores typically focused on local fulfillment options, such as curbside pickup or local delivery limited to a predetermined radius of distance. This focus also reflects the cohort’s customer preferences. 

Traditionally, grocery has focused on in-store fulfillment, but the pandemic heavily shifted the way consumers grocery shop, and grocers have built out alternative Covid-safe fulfillment methods. While consumers still shopped at their local grocery store throughout the pandemic, the door was opened to new options to acquire groceries from their local stores. 

One of these bright spots for the cohort was that every grocery retailer offered an order-online and pick-up-in-store option, which denoted the group’s focus on utilizing brick-and-mortar stores for customer fulfillment while providing more convenience. Only four of nine grocery retailers offered an option for expedited shipping, a tactic rendered fairly moot by the local or regional approach of the grocery business and the availability of same-day pick up in store. Customers can usually pick up their groceries quicker than couriers would be able to deliver.

The cohort’s pick-up features also had more robust configuration options, particularly when it came to pick-up times. Other cohorts that offered in-store pick ups did not as consistently allow consumers to select the most convenient time slot, indicating the difference in in-store traffic volume and local consumers for groceries versus other cohorts. The time slot selection feature also indicates the perishable nature of the products — particularly frozen and refrigerated foods — that require refrigeration until the last possible moment.  

On another front, the grocery cohort’s own delivery services were lacking, but the majority of grocery retailers had a partnership with a third-party grocery delivery service (e.g. Peapod and Instacart) to cover home delivery. Many grocers evidently found it more cost effective to partner with existing options to fill that gap instead of building their own delivery network. Among those that did have their own in-house delivery or shipping fulfillment, only three out of the nine indexed grocery retailers offered free standard shipping, with the free standard shipping thresholds ranging from $30 to $75. As a portion of consumers remain in-store oriented, many grocers have not deemed the online consumer base large enough to invest in their own delivery network.

Other industries have faced similar challenges. Many restaurants, for example, had to choose between building their own delivery networks, acquiring a fulfillment provider, or partnering with delivery services, like Grubhub or Instacart, and largely chose the latter. Grubhub and Instacart both saw the benefits of the collaborations, as Grubhub announced a 52% year-over-year revenue increase in the first quarter of 2021 and Instacart posted a record revenue of $1.5 billion in 2020. 

While other cohorts explored different options, like Target acquiring Shipt to fulfill expedited delivery instead of building out that delivery feature itself. The cost to build and maintain that sort of infrastructure usually outweighs the cost of a partnership with a delivery provider when high margins aren’t there to support it. And for grocery, delivery margins have remained low.

Grocery retailers compared

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Within the grocery cohort, the divide between the leaders and laggards came through in their performances in the product accessibility sub-dimension. Kroger and Albertsons had the highest product accessibility score in the cohort, landing in the top three for the group. Kroger in particular has a robust delivery network available to e-commerce consumers, offering curbside pick up, local delivery and nationwide shipping depending on the product type. Kroger attained the flexibility to create these different fulfillment options when it signed a deal with Ocada, a grocery fulfillment platform, in 2018 to build out fulfillment warehouses to better handle digital orders. This was one of the cohort’s few in-house delivery systems, allowing Kroger more flexibility in fulfillment options and the ability to reach customers outside of their local area. 

Albertsons, on the other hand, seemed more focused on the optimization of their shipping network. It was one of four grocery retailers (along with H.E.Butt Grocery, Costco, and Wakefern/Shoprite) that used their stores as distribution centers. The tactic allowed Albertsons to have a wider range of shipping options for customers, also offering free shipping, albeit at the steeper price of $75. Both Albertsons and Kroger benefited from their decisions to make their fulfillment more flexible for consumers, standing out in an otherwise underperforming cohort. 

While not at the top of the cohort, Ahold Delhaize, a Dutch grocery conglomerate that owns Stop & Shop and PeaPod, had an interesting approach to grocery’s delivery barriers. After acquiring Peapod, an online gorcery delivery service, Ahold then acquired FreshDirect in 2020, another online grocery delivery service, to make up for gaps in PeaPod’s coverage. The company’s decisions bore fruit in early 2021: In its Q2 2021 results press release, the company stated, “Online sales in the [US] were up 61.0% in constant currency, driven by continued expansion of click-and-collect facilities and the FreshDirect acquisition. Excluding the FreshDirect acquisition, U.S. online sales grew 29.0% in constant currency.” And based on Modern Retail’s analysis of Ahold’s Q2 2021 results, online sales made up 6.77% of all sales in the U.S., a small but growing portion of a business so dependent on brick-and-mortar. 

Ahold Delhaize, like many others in the grocery cohort, sees online as a growing piece of the industry, but faces the challenges of navigating the nascency of online grocery shopping. While retailers like Kroger have built out their own online delivery networj by working with Ocado, and other grocers, like Aldi, partnered with third-party retailers such as Instacart, Ahold has chosen to take the route of outright acquiring existing platforms. Unlike other cohorts, grocery is still testing the waters to determine the best fulfillment strategy to commit to. 

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Key Takeaways

• Industry Uniqueness: 
  • Shipping is difficult for fresh produce.
  • Consumers are more locally based.
  • Traditionally in-store focused, but Covid heavily shifted the way consumers grocery shop and grocers have built out alternative Covid-safe fulfillment methods.
• Findings:
  • Every grocery retailer offered an order-online and pick-up-in-store option, which denoted the grocery cohort’s focus on utilizing their brick-and-mortar stores for customer fulfillment.
  • Majority of grocery retailers also had partnerships with online grocery delivery platforms such as Instacart, PeaPod, and FreshDirect.
  • Unlike other cohorts, grocery is still testing the waters to determine the best fulfillment strategy for online grocery.

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Dollar and off-price stores are 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. 

The cohort’s fulfillment performance is heavily influenced by its e-commerce performance and a lower overall investment in digital; the group has simply not focused heavily on online fulfillment. Dollar and off-price retailers have not figured out what e-commerce means to them yet, and only a few have visibly tested online platforms. A more in-depth analysis of the cohort’s e-commerce performance and barriers to entry can be found in part one of the Modern Retail Index. 

As a result, the cohort’s fulfillment scores fluctuated, with TJ Maxx in the middle of the index and Ross taking last place. While TJ Maxx has an established e-commerce presence, Ross has forgone all e-commerce shopping, relying exclusively on in-store shopping to fulfill orders. TJ Maxx performed on index average for its investments in the product accessibility sub-dimension. Notably, the retailer has the highest free shipping threshold out of the index at $89. Since the retailer has an inconsistent assortment of other brands’ liquidated products, to cover for varying profit margins per product, it has set a high free shipping threshold to increase average order value. 

In between the two off-price retailers, Dollar General and Dollar Tree fell below average in the index. With dollar stores’ unique position due to their low prices and correspondingly low product margins, they have the lowest incentive to invest in a delivery network where shipping can easily outweigh revenue obtained from each product sold.

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Key Takeaways

• Industry Uniqueness: 
  • Retailers invested less in e-commerce and Ross even forgoed all e-commerce shopping abilities which affects the role of online fulfillment.
  • Dollar stores have a unique structure due to their product margins, with low priced products at a dollar.
• Findings:
  • The cohort is in flux. As a cohort, this group has not figured out what e-commerce means to them yet.
  • Investments in e-commerce influences the investments in online fulfillment abilities.

While Amazon has made numerous innovations to fulfillment methods, such as Amazon Prime, Locker (a self-service nationwide kiosk and secure locker system that allows customers to order and return items in person) and Key (a solution that connects smart garage doors with delivery services to allow couriers to drop off packages safely), Amazon ranked below a handful of big-box retailers. The ranking reflects the index methodology and priority, which measures retailers’ ability to create an easy fulfillment experience and assesses the diversity of their fulfillment partnerships. With Amazon’s focus on creating its own proprietary tools and fulfillment pipeline, it fall behind in scores that measure partnerships, particularly in the payments sub-dimension. But despite not utilizing partnerships, the retail giant still reached above-average performance in the index. 

While Amazon did not rank first on all sub-dimensions, Amazon excelled in a number of areas in terms of ease of fulfillment. For example, Amazon had one of the highest return scores. Similar to its one-click check out, Amazon is one of the few retailers that offers a one-transaction exchange. The majority of the retailers in the index require a customer to fill out a return form and then repurchase the item(s) again in a separate order — only two other retailers, Lowes and Best Buy, had the one-transaction exchange feature. As discussed in the big-box cohort, one-transaction exchanges reduce customer friction and make it easier for the customer to receive their final product. 

Amazon also stood out in the product accessibility sub-dimension. Its flagship Prime program bolsters the retailer’s score with its expedited shipping option. But as Amazon continues to dominate the digital space, the retailer has also grown its brick-and-mortar locations while other cohorts have focused on growing e-commerce. The rollout of these brick-and-mortar Amazon stores and Amazon Lockers network allowed the retailer to add new order-online and pick-up-in-person capabilities that compete with legacy retailers. With e-commerce as Amazon’s established forté, the online juggernaut’s entry into more physical locations could signal new vertical growth – and new pressures for big-box and beyond.

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Key Takeaways

• Industry Uniqueness: 
  • Third-party marketplace where sellers can handle their own shipping or allow Amazon to fulfill shipping.
  • Amazon has created a fast and robust shipping system through their Amazon Prime program.
• Findings:
  • Amazon has one of the highest return scores in the index driven by its one-transaction exchange function. One-transaction exchanges reduce customer friction and make it easier for the customer to receive their final product.
  • In contrast to other retailer cohorts, Amazon has grown its brick-and-mortar locations while other cohorts have focused on e-commerce.
  • With e-commerce as Amazon’s forté, the online juggernaut’s entry into more physical locations could signal new vertical growth for them.

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. However, different retailers respond to — or ignore — those expectations in ways rooted in their core strengths and purposes. Each cohort is home to unique consumer behaviors and product assortments that shape the specific way they shape their fulfillment strategies.

Big-box has the most tools at its 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. 

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.