The discount chains are hustling to expand as big-box retailers race to slide smaller stores into dense city neighborhoods, putting them head-to-head against dollar stores and local markets already there. Retailers such as Best Buy Co. are also eying urban centers as drivers of growth.

"Retailers once opened a lot of stores in rural areas because that is where people were going," said Brian Sozzi, chief equities analyst at research firm NBG Productions in New York. "Now as people move back to the city for higher-paying jobs or lower commuting times, they are trying to get into cities."

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Keywords: retail supply chain, Walmart locates in urban areas, Target aims for urban shoppers