The heyday of big box discount retailers is over.
Consumers are becoming less interested in retailers like Wal-Mart and Target, 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 Amazon 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 shake-ups at the executive level.
Target’s CEO left earlier this year amid disappointing sales results and a data breach affecting millions of customers.
Several sectors are benefiting from widespread disinterest 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 acquisition of Family Dollar puts the retailers in a position to negotiate with suppliers for even lower prices.
Meanwhile, drugstores like CVS and Walgreen have spent years expanding their assortments to include groceries, high-end cosmetics, clothing, and accessories.
Costco’s strategy 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.
In order to improve business, these retail behemoths need to adapt to accommodate changing consumer habits, according to Goldman.
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