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In an earnings report from Target, it was mentioned that the huge discounter was looking for urban locations to bring in a smaller store prototype.  In a similar report, there were recent suggestions that Walmart would also be pursing a similar strategy. 

This speculation has led to discussions that Walmart would be interested in buying Rite Aid, which does have urban outlets, many of which are in need of serious refurbishing.  This speculation is supported by demographic trends. 

First, big-box stores in the suburbs have reached a saturation level.  In the 4^th qtr, Target’s same store sales were up six-tenths of one percent, while Walmart’s were down 1.6 percent.  Some of the blame was based on deflationary food trends.  The problem is that middle class incomes have dropped and unemployment is high. 

Deflationary trends in real estate in cities are also pronounced.  Since Nordstrom will enter New York City on May 11^th with its discount Rack chain, it is expected that other retailers will enter the market as well.  New York has far too many higher-end stores that are underperforming.  Many vacancies are now cutting into real estate profits and some are willing to take far less than they would have two years ago. 

If Target and Walmart entered Manhattan, the smaller stores would more than likely have beauty items.  Perhaps, that is why CVS and Duane Reade were going upscale in their beauty presentations.  In that sense, Walmart and Target could prosper on financially-strapped New Yorkers looking for bargains in apparel, household products and personal care items.  Drug chains are expensive in New York.