Are Target and Wal-Mart past their prime?
The glory days are over for big-box retailers as consumers search for more convenience, Goldman Sachs analysts say.
Instead, "consumers appear more focused on some combination of value and convenience," the analysts write.
The advent of online retailers like Amazon.com (AMZN) has also contributed to the problems at Wal-Mart and Target, according to the note. Consumers are less likely to make a trip to the stores when they could get free delivery online.
Wal-Mart's sales have declined for five straight quarters, leading to shakeups at the executive level.
Target's CEO left earlier this year amid disappointing sales results and a data breach that affected millions of customers.
Several sectors are benefiting from widespread lack of interest in Wal-Mart and Target, according to Goldman.
Dollar stores, drug stores, and warehouse clubs "are taking share from broad-assortment retailers," the analysts write.
While dollar stores have struggled recently, they have been a threat to Wal-Mart since the recession. Dollar Tree's (DLTR) acquisition of Family Dollar (FDO) puts the retailers in a position to negotiate with suppliers for even lower prices.
Huge Wal-Mart and Target stores lack the convenience of smaller dollar chains and drugstores. They also can't offer the deep discounting of warehouse clubs like Costco. The bank downgraded Wal-Mart's shares to "neutral" from "buy." Target remains a "buy" -- but analysts still have reservations about the chain's tepid sales and steepening losses in Canada.
Goldman is concerned with Wal-Mart's current strategy, which involves international growth and investment rather than the quality core customers' experiences.
In the past year, Wal-Mart customers have complained about empty shelves in stores. The company has implemented a strategy to fix the problem.
To improve business, Goldman says, these retail behemoths need to adapt to accommodate changing consumer habits.
That includes investing in e-commerce and smaller stores, such as Wal-Mart's Neighborhood Market concept.
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I recently moved into an area that is fairly "new" in development (started expanding in the 90's)- yes, it is suburban sprawl, and I where I moved from was older, smaller, more urban. The area is a mix of mid-income and luxury homes.
There is NOTHING around here but super-sized retail crap/grocery stores to shop at!! A huge Wal-Mart, a super size Winco with a parking lot the size of a football field, Target, an over-sized Safeway trying to compete with the other behemoths etc. My point is- I am sick and tired of hiking through these stores on steroids when all I want to do is buy a few groceries! Yes, these kinds of places should be over, and I think that others have to be sick of this too.
Bigger is not always better- I yearn for a simple grocery store (like I had in my previous neighborhood), with a normal-sized parking lot, where it was not a trek through aisles of cheap clothes and plastic crap to get a loaf of bread and some milk. I have to believe others feel this way too. Death to WalMart!! Bring back the common grocery store!!!!
A logistics system that could not keep up with its customer demand is the main reason for Walmart's sales slipping. While Walmart knows exactly how much revenue each store generated, they will never know what those numbers could have been if so many shelves had not been empty. If they have put a fix in for their logistics problem, it sure is not noticeable yet.
I have never had the waiting long times in line at Target. Target just seems to be a cleaner more customer friendly atmosphere than Wal-Mart.
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