Why Necessity Retail Survived E-Commerce: The Case for Grocery- and Service-Anchored Centers

Between roughly 2010 and 2020, e-commerce was supposed to kill the shopping center. It killed some, the enclosed mall's department-store model has been in visible liquidation for a decade, and commodity categories from books to electronics to office supplies saw their physical footprints collapse. But one retail format came through the entire period, including a pandemic that force-fed the country online shopping, with occupancy and rents intact: the neighborhood center anchored by a grocery store or daily-needs tenants and filled with service businesses.

That wasn't luck. The survivors share structural properties that make their revenue hard to move onto the internet. This piece lays out those mechanics, the actual reasons necessity retail resisted the channel shift, and what they imply for owning the asset class. It is an argument about structure, not a promise about any property; weak centers exist in every format.

The sorting: what e-commerce actually killed

E-commerce did not compete with "retail." It competed with specific retail functions, and it won wherever its cost structure was superior for the function.

Online won at commodity distribution: standardized, shelf-stable, high-value-per-pound goods where the buyer needs no inspection and can wait a day. Books, small electronics, toys, basic apparel, office supplies. For those categories a warehouse plus a parcel network beats a store on cost, selection, and often convenience, so the stores built on them (and the malls built on those stores) lost their reason to exist.

Online lost, or fought to a stalemate, wherever one of three frictions applied:

1. The margin friction. Groceries run net margins of roughly 1-3%. Delivering a $120 basket, picked by a human, kept cold, driven to a doorstep, costs more than the margin on the basket. There is no efficiency curve that repeals this; food is heavy, cheap per pound, and perishable. The result: after a pandemic-era spike, online's share of grocery plateaued at a modest fraction of the market, and much of that "online" share is curbside pickup at the store, a channel that requires the physical center, its parking field, and its location. E-commerce did not replace the supermarket; it added a service window to it.

2. The immediacy friction. A meaningful share of daily-needs trips are same-hour needs: the prescription, the sick-kid supplies, the forgotten dinner ingredient, the dry cleaning before a morning flight. Two-day shipping is irrelevant to a two-hour problem, and even same-day delivery arrives as an expensive, minimum-order compromise. Proximity is the product, and proximity is precisely what a well-located neighborhood center sells.

3. The physical-presence friction. You cannot ship a haircut. Or a dental cleaning, an oil change, a workout, a manicure, a veterinary exam, an urgent-care visit, or a meal eaten with other people. Service tenants' revenue is generated on the premises, on the customer's body or property, there is no logistics innovation that disintermediates them. The internet's effect on these businesses was to become their marketing channel (bookings, reviews) while the fulfillment stayed exactly where it was: in a 1,400-square-foot suite with parking out front.

The post-sorting shopping center is therefore a different animal from the pre-sorting one. What remains in a grocery- and service-anchored center is, increasingly by construction, the set of tenants e-commerce structurally cannot serve.

The center as a system: anchor traffic plus service capture

The format's durability is not just tenant-by-tenant; it is architectural. The anchor, grocer, pharmacy, discount store, generates thousands of high-frequency, habitual visits per week. (The mechanics of that relationship, co-tenancy clauses included, are covered in what a grocery-anchored center investment is.) The inline service tenants convert that traffic: the salon, the QSR, the dentist, the insurance agent are all businesses whose customers substantially overlap with people already making a weekly food trip.

This creates a demand loop that online retail cannot enter at any point. The anchor's category resists delivery on margin; the trip itself resists substitution on immediacy; the inline services resist it on physics. Each tenant's e-commerce resistance reinforces the others', because the shared traffic is what makes each suite's economics work.

The system has one keystone, and honesty requires naming it: the anchor itself. Necessity centers are resistant to e-commerce, not to competition. A grocer can still lose its trade area to a better grocer, close in a chain consolidation, or shrink its format. When an anchor goes dark, co-tenancy clauses let inline tenants cut rent or leave, and the traffic loop breaks, the failure mode has nothing to do with the internet and everything to do with store-level competitive position. Underwriting the asset class means underwriting the anchor's health first, last, and always.

The demand profile: recession behavior

The same non-discretionary character that resists channel shift also dampens cycle risk. Food, medicine, haircuts, car repair, and tax preparation do not track consumer confidence the way apparel and furniture do; several of the format's typical tenants, discount grocers, dollar stores, value QSR, resale, historically hold or gain sales in downturns as households trade down. A center leased to that tenancy owns a claim on the most stable tranche of household spending.

The caveat worth stating: "stable demand" describes the tenants' revenue, not automatically the landlord's. Weak operators fail in strong categories; a franchised QSR with a thin operator can close in a boom. Tenant-level diligence, unit sales where obtainable, operator track record, health ratios of rent to revenue, is still the job.

What this implies for the asset class

For an investor, the necessity-retail thesis cashes out in a few specific, checkable properties of the real estate:

Re-leasing depth. Service and daily-needs suites, typically 1,200 to 3,000 square feet with standard configurations, draw from a deep local tenant pool: franchisees, medical groups, regional operators. Vacancy in a well-located center is a marketing exercise, not a redevelopment problem, which is what a 30,000-square-foot dark junior box next door becomes.

Rent durability and structure. Tenants whose customer base is the surrounding three miles cannot relocate without losing the business; renewal probability is structurally high. That stickiness is also what makes renewal the natural moment to modernize lease structure, the gross-to-NNN conversion that moves expense risk to the tenant and is one of the format's core value-add levers.

Pricing inheritance. Capital markets spent years pricing all retail through the mall's obituary. The repricing since has been partial and uneven, especially for smaller centers in secondary markets, which is why disciplined buyers can still find necessity-anchored centers at in-place cap rates well above what the demand durability, examined on its own, would seem to justify. That gap between operational reality and inherited pricing is the investment case in one sentence, and it is the segment Stoneforge's strategy is built around: anchored, necessity-based, multi-tenant centers where the income is in place and the skepticism is in the price.

The discipline the thesis does not excuse. E-commerce resistance is a property of categories, not of addresses. A necessity center with a weakening anchor, a shrinking trade area, or deferred maintenance is a bad investment in a good format. The thesis tells you where to hunt; it does not tell you what to pay, and it never substitutes for reading the leases, the reconciliations, and the anchor's store-level numbers.

Retail did not survive e-commerce. A specific kind of retail did, the kind whose product is nearby, immediate, perishable, or performed in person. Centers assembled from those tenants, bought on their current income, remain one of the more structurally defensible claims on American consumer spending available to private investors.