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.

By MSN Money Partner Jul 30, 2014 3:12PM
Walmart plastic shopping bags in shopping cart
© ParryGrab/AlamyBy Ashley Lutz, Business Insider

The heyday of big-box discount retailers is over. 

Consumers are becoming less interested in retailers like Wal-Mart (WMT) and Target (TGT), according to a recent note by Goldman Sachs. 

Instead, "consumers appear more focused on some combination of value and convenience," the analysts write. 

The advent of online retailers like (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 (FDOputs the retailers in a position to negotiate with suppliers for even lower prices. 

Meanwhile, drugstores like CVS (CVS) and Walgreens (WAG) have spent years expanding their assortments to include groceries, high-end cosmetics, clothing, and accessories. 

Costco's (COSTstrategy of very low mark-ups and quality over quantity also appeals to consumers today. 

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

More from Business Insider

Jul 30, 2014 4:23PM
You're telling us these two businesses sales are down. Is the reason the poor economy, or did the customers go somewhere else?  You believe they went somewhere else, but provide no data indicating an increase in sales at other businesses.  

Their business is down because the economy sucks, not because customers went somewhere else.  
Jul 30, 2014 3:42PM

                ...... Is Wal-Mart and Target Over......

                  "Is Welfare and Food Stamps Over"

Jul 30, 2014 4:20PM
is THE USA "over"?  YES...  It died a long time ago... no opportunities here anymore, we are nothing more than a shopping mall for the third world millionaires.
Jul 30, 2014 3:36PM
The problem I see is many retailers have little or no stock inside the stores.  When I am looking for something specific i usually go on the internet & order it as it seems it is available immediately & many places offer free shipping.  Why waste time & gas to go to the store only to be disappointed & if you ask an associate they for the most part are clueless or give the standard answer "if it is not on the shelf we don't have it".
Jul 30, 2014 5:35PM
After Sam Walton passed,and the corporate mantra became profit, profit,profit,Walmart went to hell in a handbasket.What was at one time a good store became a POS,import from China or where ever we can get it cheapest,hire people then treat them like slaves,let the stores stay dirty.The super store here isonly about 6 or 7 years old already starting to look dated.The ghost of Sam W.must spinning in his grave
Jul 30, 2014 4:11PM
Maybe just maybe this economy sucks?  When will you mainstreamers give up the BS and lies and realize your agenda does not work or fool anybody???
Jul 30, 2014 6:48PM
I live in a relatively small town.  We have a big Wal-Mart and no Target.  We also have a Home Depot and an Office Depot.  The mom and pop stores have gone so there isn't much choice about where to shop unless you want to drive an hour each way to a larger city.  If I need something right away I will use the big boxes.  Otherwise I buy online or plan a trip to the "big city" for a day of shopping at stores I like.  I'm a senior and hate the big stores.  Too much walking and it is sometimes is hard to find what I want.  I miss the personalized touches of a smaller, more intimate store where I know the sales staff and can easily find or be directed to what I want.  I realize "that's life" but I still can miss it can't I? 
Jul 30, 2014 4:50PM

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!!!!

Jul 30, 2014 4:12PM
i have been saying it for over 15 years,wal mart is destroying american jobs and buisnesses
Jul 30, 2014 4:23PM
Drug Stores may be mandated on every major intersection but they are higher than hell.
Jul 30, 2014 4:37PM
Interesting.  They just opened a Super Walmart near my house and it's packed everyday.  I think they'll somehow survive despite msn's "sky is falling" claims.
Jul 30, 2014 4:34PM
The article misses one point that definitely is making a big difference in Walmart decline. First Walmart brand merchandise used to be good enough but their greed fro profit left these product no more than trash. Second: you walk into the walmart store and you see like a Filth market.. They are driven only for a certain type of consumers who generally go Dollar store instead go to Walmart.  They are dirty stores and their quality has gotten to lowest of any store. Go try it .. but gallon of milk .. try to carry in careless way and the bag will break. The cheapest bags, most broken carts .. dirtiest store. No wonder they are declining. Looking at how Walmart become a department store of corporate which is constantly declining .. and Late Mr. Walt's soul must be screaming at the Executives of Walmart.
Jul 30, 2014 7:35PM
I shop at walmart as little as possible because their checkout lines suck, they treat their employees like cattle, their shelves are empty half the time, and they kill local mom and pop businesses.  Walmart is here to stay, but they don't have my support.
Jul 30, 2014 4:11PM
There's another "expert" I won't be trusting with my money.
Jul 30, 2014 3:47PM

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.

Jul 30, 2014 3:51PM

Both don't exist in my purchasing world.

Jul 31, 2014 1:01PM
What always confused me about Wal-Mart is why they have 30 checkout lanes but only three are staffed.
Jul 30, 2014 5:13PM
I own stock in Wal-Mart but refuse to shop at their Super-stores because of very poor customer service. It takes you longer to check out than to find what you wanted to buy. They may have 30 check out isle but you are lucky if they have more than 3 to 6 of them open with long lines. There Front end mangers could care less about speedy service and open more registers. I only force myself to go shopping there when I run low on their band cat litter and then buy several bags at a time. It is less expensive than the national brand but they do keep raising the price I guess to make up for lowering prices on other items.

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.

Jul 31, 2014 11:41AM
When you have an economy that is creating part time and low paying jobs what do you expect.
Jul 30, 2014 8:29PM
Probably, since due to offshoring of jobs and the Mexican foreign invasion the middle class is OVER.
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