Diamond in the rough: Why convenience retail survived the ‘apocalypse’

There is no disputing the retail industry is changing, continuing a trend that has been two decades in the making. Shifting consumer behaviour due to technology, high speed and mobile internet, and, more recently, the fallout from COVID-19, have had profound impacts on the landscape.

For some bricks-and-mortar retail operators in certain locations, these impacts have proven insurmountable. Yet, despite prophecies of a ‘retail apocalypse’, it is clear a two-pronged sector has developed across the retail property sector over the past several years.

A clear divergence has emerged between retailers yet to adapt versus ‘smart retail’ – operators who have shifted with or benefitted from the evolving consumer landscape. This is why a walkthrough of some precincts may show various vacant shopfronts, while others show a bustling hub of trade.

‘Smart retail’ typically includes convenience retailers selling non-discretionary and essential goods, large format retailers selling goods that require on-site, specialised expertise prior to purchase, and major centres that have implemented experiential offerings (cinemas, arcades, exhibitions, installations) while scaling down the number of discretionary retailers.

In this article, we look at convenience retail, outlining how it survived the ‘retail apocalypse’, the sector’s appeal and why Trilogy Funds considers it a diamond in the rough.

Was there ever really a ‘retail apocalypse’?

In 2024, 9.8 million Australian households shopped online – a new record. A key driver of this 2.3% year-on-year increase was cost-of-living pressures, which sent more shoppers online in search of cheaper goods. The rise of online shopping has sparked the downfall of brand loyalty, with 62% of consumers indicating they switch brands to save money.

Brick-and-mortar retailers who have not adapted to these changing consumer preferences, digital disruption and economic pressures have fallen en masse. Thus, the mass closures of retailers across the world over the past 15 years has accelerated the phenomenon known as the ‘retail apocalypse’.

The term ‘retail apocalypse’ first appeared in print in the 1990s. It was mentioned in reference to a decline in service culture and an increase in staff apathy and fragmentation in a book titled ‘It’s Not My Department!’.

Amazon and eBay were both launched in the mid-nineties and went public later that decade as part of the dot com boom. Growth in the popularity of e-commerce led the mainstream media to appropriate the term ‘retail apocalypse’ to describe the potential impact of new competition to bricks-and-mortar retail.

Globally, the United States has been hit hardest by the modern incarnation of this trend, with 15,000 store closures forecast in 2025, more than doubling the 7,325 in 2024. Bed Bath & Beyond, Kmart (and its parent company Sears) and Toys “R” Us were all notable American chains unable to pivot away from a large physical presence, adapt supply chains and implement technology to cut costs.

Australia has not been spared, with data from the Australian Securities and Investments Commission showing that 768 retailers became insolvent in FY24, an increase on the 540 in FY23 and 319 in FY22. Notable closures in Australia over the last 12 months include Jeanswest, Ally Fashion and Mosaic Brands – the parent company for labels such as Rivers, Noni B, Rockmans and Katies.

Each of the above retailers have several characteristics in common:

1. They primarily sell discretionary goods – items consumers don’t ‘critically need’. While an argument can be made that we need bath towels or clothing, these are not items we need as critically as groceries or pharmaceuticals.
2. These stores sold relatively unsophisticated products. Generally, consumers wanting to purchase a toy for their children or a pair of jeans for the weekend have a reasonable idea of their needs, and how to meet them. This is in contrast to more complicated products like home DIY tools and materials, electronics, and camping equipment, with which consumers still typically depend on advice from retail staff.
3. Many of these companies depended on cross-selling or impulse buys. Retailers like Toys “R” Us are aware that once an individual is walking through the aisles looking for specific products, there is a good chance they will make an impulse purchase. This means one individual opting to buy a toy online instead of in-store, represents a lost sale on both the toy, as well as associated impulse buys.
4. These kinds of stores often choose large, enclosed shopping centres as a location. This historically delivered strong foot traffic, but as retailers closed or moved operations online, this advantage waned. Consumers are increasingly less likely to navigate carparks and large centres, instead opting to acquire a product online and having it delivered to their home instead.

The above begs two questions. First, has the rise of e-commerce and the COVID-19 pandemic presented significant challenges for the retail sector?

Of course.

But is ‘apocalypse’ an accurate blanket term to describe the retail sector?

Not at all.

The appeal of convenience retail

Tenant composition

Large centres aim to maximise foot traffic and keep consumers onsite for the longest amount of time, which means the tenant mix is typically as many retailers as possible, selling a broad range of products. Convenience retail adopts an opposing strategy – surrounding an anchor tenant with complementary tenants.

An example of an ideal anchor tenant would be a major supermarket chain such as Coles and Woolworths. Despite the rise in e-commerce, Australian supermarkets are still reporting record profits from physical retail sales. This is because they largely sell non-discretionary products. Put simply, everyone needs groceries.

In FY24, Coles Group (comprising the supermarket chain and Coles Liquor) recorded net profit after tax of $1.1 billion, a 1.8% increase on the prior year. This was driven largely by Coles supermarkets’ FY24 revenue of $39.0 billion, which was a 6.2% increase year-on-year.

Woolworths Group performed similarly over FY24, turning a $1.7 billion net profit that was driven by total sales of $50.2 billion (5.3% year-on-year increase) by the supermarket arm of the business.

Convenience retail centres typically have smaller tenants complementing the anchor. These can include fast food restaurants, pharmacies, hairdressers, gyms, bottle shops or tobacco stores – shopfronts which may or may not sell absolute essentials, but provide the shopper with a convenient solution while they’re already doing the weekly shop.

As the sale of discretionary goods continues to move online, consumers have less of an incentive to visit large, busy shopping malls. While non-discretionary goods can be purchased online, the uptake is a fraction of discretionary goods (19.8% of all ecommerce in Australia in 2024), as the emergence of convenience retail has provided shoppers with a quick, convenient way to do their regular shop.

Demand to outstrip supply

Australia’s population is currently 27.7 million. The population is expected to reach 29.9 million by 2030 and 32.0 million by 2035. In 2025 alone, Australia’s population is expected to increase by 530,000 people.

Research by Colliers indicates that, based on 2024 averages, this population growth is expected to translate to an additional $8.6 billion in retail spending in 2025. As Australia’s population continues to increase, there will likely be a correlated increase in demand for essential services and non-discretionary goods. In turn, this would likely increase consumption across the broader economy.

CBRE Research reports that for every one million additional Australians, 800,000 square metres (sqm) of retail space is required to service this population. While there is currently a healthy pipeline scheduled for completion over the coming three years (primarily large-format retail stock), it may be a challenge for developers to keep pace with Australia’s population growth over the medium to long term. Should this pan out accordingly, limited new stock coming online will likely increase competition for existing sites.

Convenience retail asset to seed new fund

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The property opportunity offering 7% yield

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A $13.65 million capital raise is underway to acquire Brighton Village in Western Australia, with the acquisition to seed Trilogy Funds’ newest unlisted property fund, the Trilogy Essential Retail Fund.

Brighton Village is a convenience retail centre located in Butler, 41 kilometres north of the Perth CBD. The centre is currently 100% leased and comprises seven tenancies, anchored by a Coles supermarket and also including a fitness operator, and quick-service food retailers.

Coles currently accounts for 78% of the asset’s income, with the retailer’s tenancy expiring in October 2033, with a further four ten-year options. Additionally, each specialty retailer is subject to fixed annual rental uplifts of between 3.5% and 4.0%. Brighton Village has a weighted average lease expiry of 7.2 years (as at 31 May 2025).

The centre benefits from more than 35,000 passing vehicles daily and is situated in a catchment forecast to add over 70,000¹ new households within the next 20 years.

The Brighton Village acquisition will be funded through a mix of equity raised from investors and debt, with the centre to be purchased for $25.3 million.

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