Retail is both a mirror and a motor of the global economy. Not only does it rapidly reflect shifts in macroeconomic conditions and shopper priorities, but it also propels economic growth around the world. In markets such as the US, where the industry supports more than one in four jobs and contributes more than $5 trillion to annual GDP, retailers trigger powerful chain reactions. When they grow, they create positive economic momentum for the entire country. When they contract, the impact ripples across consumer confidence, unemployment rates, GDP growth, and more.

The history of retail is also a cautionary tale of how fragile success can be for any company. There’s no safety in scale alone. Scale certainly creates the potential for substantial benefits, but without strategic fit to hold a company together and guide its adaptation in times of change, even the largest companies can lose momentum. The 10 US-based retailers with the highest revenues in 1990 were Walmart, Kmart (not to be confused with Australia and New Zealand’s Kmart Group), Sears, American Stores, Kroger, JCPenney, Safeway, Dayton Hudson (now Target), A&P, and May Department Stores. Today, only three of those companies remain in the top 10. Some have vanished completely or been swallowed by other retailers. As retailers often say, “Today’s peacock, tomorrow’s feather duster.” In retail, as in any industry, adapting effectively can be a matter of life and death.

Learning from the largest retailers

This article examines the current state of strategy in the US retail industry, highlighting how the largest retailers are responding to macroeconomic shifts and identifying areas that need further strategic improvement. The primary focus is on the 10 largest retailers by 2024 US revenue—Walmart, Amazon, Costco, Kroger, The Home Depot, CVS Health, Target, Walgreens Boots Alliance, Lowe’s, and Albertsons. It is based on a comprehensive review of public reports and company filings, supplemented by interviews with executives to validate our findings and by quantitative analysis to identify patterns and links.

To guide the research and synthesize its findings, we applied the strategic fit framework, as described in our recent Harvard Business Review cover story (see the article “The Power of Strategic Fit,” HBR, March–April 2025). Strategic fit is what makes a company greater than the sum of its parts, and it depends on the successful alignment of the seven factors below:

• Mental models: How a company’s employees perceive and interpret reality—guiding what the organization believes, notices, overlooks, and prioritizes with its strategy.
• Purpose and ambitions: Why the company exists, what it promises to do for others, and what it seeks to achieve for itself—financially, operationally, and strategically.
• Stakeholder value creation: How the company unleashes and rewards the potential of parties that impact and are impacted by its strategy—such as customers, employees, suppliers and strategic partners, communities, and investors.
• Markets and products: Where the company chooses to compete—and how it reassesses its choices in a world of constant change.
• Competitive advantages: The unique strengths that enable the company to outperform rivals in its chosen markets and products.
• Macro forces: How the company responds to demographic trends, political and legal factors, technological developments, environmental issues, and global trade dynamics, among other forces.
• Operating model: The organizational engine that turns strategy into results, spanning governance, leadership, culture, talent and performance management, and business processes (including the technology and data that support them).

After analyzing these strategic factors for the 10 largest US retailers today, we scored each retailer’s performance on all factors using a scale of 0 (low) to 10 (high). The process gauged not only the standalone strength of every strategic element but also how each one reinforced—or conflicted with—the others. We then conducted more detailed analyses, such as overlaying three-year total shareholder return (TSR), to explore links between strategic coherence and financial performance.

Our research has so far revealed three key insights about today’s largest US retailers. The first is that they are bracing for increasing uncertainty. The second is that seemingly small strategic differences can create large variations in total shareholder return. The third is that stakeholder value creation is the next frontier of retail strategy. These insights, detailed in the three sections below, hold valuable lessons for companies across many industries.

1. The largest retailers are bracing for increasing uncertainty

Retailers are navigating a landscape marked by exceptionally chaotic conditions, including cost volatility and inflation risks, labor market constraints, unprecedented tariff changes and supply chain disruptions, and shifting stakeholder behaviors. Add to that scenario political polarization, regulatory unpredictability, and changing technological forces, and it’s obvious that this is no ordinary market cycle. While it’s tempting to believe that more detailed analyses can create more accurate predictions, the largest retailers achieving the highest strategic fit scores and delivering the highest TSR are embracing a hard truth: Perfect predictions are impossible in complex systems with such high levels of irreducible uncertainty. What matters more is greater agility and resilience.

Retailers today face a profound dilemma: They’re under constant pressure to protect and grow earnings, yet doing so sustainably requires investing in capabilities that may not pay off immediately—like supply chain redundancy, technology and data infrastructures, scenario planning, and employee resilience. In a low-margin, high-volatility environment, every dollar spent on buffers, backups, and flexibility competes with the demands of short-term profitability. Leaders must decide whether to carry excess inventory to hedge against disruptions or minimize working capital to meet quarterly expectations; whether to invest in cross-training staff for agility or reduce headcount for efficiency; whether to diversify suppliers for resilience or double down on scale for cost savings. These aren’t theoretical trade-offs—they are real, high-stakes decisions that can determine whether a company merely survives the next disruption or emerges stronger because of it. The challenge is not just financial, it’s strategic: how to invest in uncertainty without compromising credibility with investors, customers, or employees.

The choices retailers make under pressure often reveal deeply held—but rarely explicit—organizational values. Take hiring policies, for example: Some companies avoid overhiring, not just for financial prudence but because they see layoffs as costly to morale, culture, and long-term trust. Others willingly overhire in pursuit of growth, viewing any future workforce reductions as manageable trade-offs in a high-velocity strategy. Neither approach is inherently right or wrong; rather, each reflects a different set of beliefs about people, risk, and time. What matters most is strategic coherence—that these choices align with the company’s mental models, purpose, competitive advantages, and operating model. When tough calls are made in harmony with the broader system, they improve strategic fit. When they aren’t, even well-intentioned moves can create friction, confusion, or contradiction within the business.

Our research shows that the largest retailers are reengineering their strategies to manage these tensions in carefully balanced ways. Most have adopted more cautious tones in their forward-looking financial guidance without backing off their longer-term strategic ambitions. The best are aggressively cutting wasteful spending while trying to protect the “good costs” that safeguard future cash flows. They are expanding into new markets, products, and services even as they defend the core. Their message is clear: “We’ll be cautious, but we won’t stand still.”

One example of market expansion that is gaining traction is what Bain calls “beyond trade” expansion—growth outside traditional merchandising and store formats. Leaders like Amazon, Walmart, Costco, and The Home Depot are pushing into retail media, logistics, advertising, financial services, marketplaces, and more. Bain’s research shows that these ventures now account for 15% of sales and 25% of annual profit—having risen from just 10% in both categories (see Figure 1). Amazon is growing with AWS and its ad business; Walmart is expanding its Walmart Connect retail media arm and its fintech services; Costco monetizes member relationships through financial and data services; The Home Depot is offering more pro-level services and support to contractors and business owners. These moves expand margin pools and embed retailers more deeply into customer ecosystems, offering a new path to growth as AI and automation compress margins in traditional areas like merchandising, pricing, and supply chain.

Still, these moves aren’t risk-free. Expanding into unfamiliar business lines exposes retailers to regulatory complexity, operational distraction, and brand dilution. Leadership focus can splinter. Brand identity may blur. Channel conflicts can arise with partners and suppliers. Investments in data, infrastructure, and M&A often require years before delivering returns. And if customers sense that the business is drifting away from its core purpose, trust may erode. In an era already defined by macro uncertainty and geopolitical fragmentation, pursuing these adjacent profit pools demands strategic-fit discipline, stakeholder sensitivity, and a tight grip on long-term purpose.

2. Seemingly small strategic differences can lead to large variations in total shareholder return

Our analysis of the largest US retailers reveals two striking insights. First, even modest differences in strategic fit can lead to outsize differences in shareholder returns. Second, momentum matters: The market places a premium on companies that are strengthening their strategy—even from a modest base—while penalizing those whose strategic fit is slipping. In short, investors don’t just reward where a company is; they reward where it’s heading and how quickly it’s improving or declining.

Let’s start with the impact of strategic fit on shareholder returns. Our scoring system—which combines the average strength of each strategic element with the degree of synergies among them—found overall strategic fit scores ranging from a high of 8.3 (Costco) to a low of 3.7. While this may look like a modest spread among top-tier companies, the associated performance gap is anything but small (see Figure 2).

Consider these facts: Costco’s 8.3 strategic fit score corresponds with a three-year total shareholder return of 97%, while the retailer with a 3.7 score delivered a return of negative 59%. On average, companies scoring in the top half for strategic fit generated a three-year TSR of 89%. Those in the bottom half averaged negative 14%. Regression analysis testing the correlation between strategic fit scores and three-year TSR shows an R-squared of 75% and a Significance F of 0.001—indicating that 75% of the difference in shareholder returns is explained by strategic fit, with more than 99% confidence that strategic fit has a statistically significant impact on three-year shareholder returns.

Costco stands out as one of the most strategically aligned and consistently high-performing retailers in the industry. It scores strongly across all elements of strategy, with particularly high marks for mental models, competitive advantages, and synergies. At the heart of its success is a clear and deeply embedded belief: Deliver exceptional value to members and trust that loyalty, repeat purchases, and renewals will follow. This belief system shapes every aspect of Costco’s operations, from its pricing discipline and supply chain design to employee compensation and customer service. The result is a self-reinforcing business model that builds trust, drives efficiency, and compounds performance improvements over time.

Costco’s mental model isn’t a public relations ploy. It’s a deeply held conviction about how the business and the real world work best together. The logic is simple but powerful: Sell a narrow assortment of high-quality products and services at razor-thin margins, generate profits from membership fees rather than markups, and reinvest the savings into lower prices and above-market wages. The synergy between purpose, cost structure, brand promise, and operating model is unusually tight. By limiting SKUs, centralizing buying, and developing ultraefficient logistics, Costco lowers costs without compromising quality. These savings are reinvested in lower prices and above-market wages, reinforcing member value and employee engagement. Warehouse managers and frontline employees are empowered to act on this model every day. In Costco’s system, strategic fit isn’t a slogan—it’s just how things work.

The second insight—that strategic momentum matters, and markets value not only how a company performs today but also where it’s heading—is, for now, more qualitative than quantitative. But it’s convincing enough that we plan to extend our analysis over the past 5 to 10 years and quantify the changes in every score for each company. It’s a substantial undertaking. Nevertheless, it may help strong performers to avoid complacency and underperformers to see that progress will be rewarded on their path to full potential.

Walmart provides a compelling example of strategic momentum. While its current overall score slightly trails Costco’s and Amazon’s, it has delivered the highest three-year TSR (142%) of all the largest US retailers. Why? Because it has made significant improvements in strategic fit. Walmart has sharpened what it calls its “flywheel strategy.” It is investing to increase synergies among elements such as everyday low prices; omnichannel retail; automation, data, and technology; retail media and services; and customer insights, value, and experience. Walmart’s flywheel helps it compete on cost, convenience, and capability simultaneously. Its performance for competitive advantages and operating model seems to be rising and working in tighter alignment. And investors have rewarded Walmart’s pace of progress, believing it will continue to improve and unlock new value pools.

Of course, strategic momentum can also shift in the wrong direction. Consider one large retailer we’ll call RetailCo. For years, its mental model, purpose, stakeholder commitments, competitive advantages, and operating model worked in concert to drive strong performance. However, the multiplier effect of what was once a tightly integrated business system has eroded recently, undermining returns. The loss of momentum reflects execution missteps and deteriorating alignment across key elements of strategic fit. For instance, its purpose and stakeholder strategies, though sincere, lost the clarity and discipline needed to make hard trade-offs when stakeholder interests conflict.

The lesson is clear: Strategic fit is a powerful multiplier—but only if it’s built to evolve. It offers a snapshot of how well a company’s strategic elements align, but in dynamic markets, investors reward momentum in addition to maturity. When a company tightens coherence, closes critical performance gaps, or activates new synergies, it resets expectations, and valuations tend to follow. Conversely, even high-scoring companies can see total shareholder return decline when strategic alignment frays or progress stalls. Ultimately, value creation hinges not just on strength but on surprising or strategically significant change. The encouraging news? Even the strongest retailers have meaningful room to improve—and for those that do, the upside in resilience, relevance, and returns can be substantial.

3. Stakeholder value creation is the next frontier

In 2019, Business Roundtable—a coalition of leading US CEOs—redefined the purpose of a corporation to prioritize value creation for all stakeholders, not just shareholders. Leading retail executives were among the first to endorse this shift, recognizing that employee well-being, community trust, and ecosystem responsibilities are not peripheral ideals—they are core to brand strength, operational resilience, and customer loyalty. In today’s world of heightened transparency and real-time accountability, stakeholder value creation is no longer a matter of moral do-gooderism; it’s a strategic imperative. And as scrutiny intensifies, so does the cost of getting it wrong.

But turning that imperative into action and results is far more challenging than endorsing it. Among all elements of strategic fit, stakeholder value creation has the lowest average scores and shows wide variation among the largest retailers (see Figure 3). Retailers operate in a hypercompetitive, low-margin industry where trade-offs are constant and unforgiving. Raising wages or supporting sustainability can enhance brand reputation—but also strain operating costs and provoke backlash from politically divided stakeholders. Conflicts arise when the needs of one group (e.g., employees seeking predictable schedules) clash with those of another (e.g., investors seeking efficiency). Moreover, short-term earnings pressures can discourage the kinds of long-term investments that stakeholder strategies often require. Even well-intentioned retailers struggle to define metrics that balance financial returns with stakeholder needs, leaving their commitments vulnerable to drift or inconsistency.

To do better, retailers must embed stakeholder value creation into the core of their business systems—not as a standalone initiative but as a lens for decision making across all functions. That means establishing clear, measurable objectives for each stakeholder group and holding leaders accountable for performance on those dimensions alongside financial metrics. It means investing in listening systems—employee feedback loops, community advisory boards, customer insight platforms—that ensure decisions are informed by those they affect. And it requires scenario planning and governance structures that anticipate tension points, such as cultural flash points or regulatory shifts, so that the organization can respond with speed, clarity, and consistency. Retailers that operationalize stakeholder value, rather than just advocating for it, will be the ones most capable of sustaining trust, navigating uncertainty, and driving long-term growth.

Retailers such as Costco, Amazon, and The Home Depot are leading the way.

Costco’s cofounder and former CEO, Jim Sinegal, refused to make shareholders the overwhelming priority of the business at the expense of customers and employees. He memorably gave the following explanation to The Motley Fool: “We’ve got essentially four things to do in our business: We have to obey the law, we’ve got to take care of our customers, take care of our people, and respect our suppliers. We think if we do those four things, pretty much in that order, that we’re going to do what we have to do in the long term, which is to reward our shareholders. We think it’s possible to reward them without paying attention to those four things in the short term, but if you don’t pay attention to them in the long term, we think you stub your toe somewhere along the line.” That prioritization is explicitly spelled out on Costco’s website to this day.

The Home Depot is likewise taking a deliberate and multifaceted approach to stakeholder value creation. For customers, it continues to improve convenience, pricing, and service by expanding same-day delivery, investing in digital tools, and integrating its in-store and online experiences into a seamless omnichannel model—which it calls “interconnected retail.” Employees have a real opportunity to thrive. More than 90% of store leaders started in hourly roles, and the company in 2023 committed to spending approximately $1 billion more per year on frontline wages, training, tuition reimbursement, and career advancement. Non-frontline corporate employees are now required to spend time working in stores each quarter, deepening bonds across the organization.

For suppliers, The Home Depot fosters long-term partnerships, codevelops product innovations, and provides access to retail media and merchandising analytics to grow shared value. In the community, the company’s foundation has pledged to increase its investment in veterans’ causes to $750 million by 2030 and is also active in skilled trades training and disaster response. And for investors, The Home Depot maintains a disciplined capital allocation model to achieve strong returns on invested capital. These integrated efforts reflect a stakeholder strategy that is not only values-driven but also tightly aligned with The Home Depot’s competitive strengths and long-term growth priorities.

It is essential to anticipate systemwide impacts before implementing major decisions. When considering new products, new organizational structures, or automation programs, leaders should conduct systemwide impact assessments to determine who wins, who loses, and whether new value is being created. In the past, we helped companies do this with simple grid-based assessments, mapping potential decisions against affected elements of the system, then grading them as positive, neutral, or negative for each stakeholder segment. But those static tools now feel primitive. Today, we work with companies to develop AI-driven synthetic stakeholders—digital agents that continuously monitor stakeholder sentiment across social media, proprietary feedback systems, investor reports, and other data streams.

These AI agents segment stakeholders, detect early dissatisfaction signals, and allow companies to address concerns before they escalate into crises. But their power goes beyond early warnings. Our synthetic stakeholders actively participate in decision making: simulating the impact of strategic changes across multiple stakeholders in real time, expressing concerns and feedback about proposed changes before they take effect, and mediating disputes using negotiation algorithms and historical data to propose balanced solutions.

Imperatives for today’s uncertainty

Retailers have always operated on the front lines of disruption. They don’t have the luxury of waiting for perfect clarity. They must move quickly, test strategies under pressure, and adapt in real time. That’s what makes them more than bellwethers for the economy; it makes them living laboratories for how companies can lead during uncertainty.

This analysis reveals a retail sector in the midst of a profound strategic reckoning. In an era defined by volatility, the imperative is clear: Tighten strategic fit, transform stakeholder commitments from aspiration into execution, and build the agility to adapt at scale and speed. The stakes for retailers are high—but the implications extend far beyond retail. In today’s climate, any company that hopes to endure and excel would do well to study the lessons retail is learning.