|
Search All Wally's Sites Using
Keywords
| | | |
There's a Bank in Your Supermarket
But it's not making much money.
In the banking business, in-store and non-traditional (read "not bricks and
mortar") branches are proliferating at a rapid rate. The 7,800 non-traditional
branches in 1998 are more than double the 3,675 in 1995. In fact, non-traditional branches
now account for nearly 10% of all bank branches.
The most popular location is grocery stores. Over 90% of the large banks and 70% of the
small banks that have non-traditional branches have some of them in grocery stores.
If something is growing so fast, it must be a good idea, right?
Well, maybe not. The logical attraction for the in-store branch is that you get lots of
branches with less people needing to run them. Effectively less full-time equivalents
(FTE) than you would with a comparable number of traditional branches. Plus, you get to
reach people where it's really convenient for them.
So, what's the reality? The first reality is that while there are less people per square
foot working in the branches, they tend to be working longer hours because of the extended
times the supermarket branches need to be open. That can eat up labor savings. At the same
time, while the square footage is less the stores, the rent tends to be higher per square
foot and that cuts into the potential profitability as well.
Banks also see non-traditional branches as ways to improve customer service. Eighty-four
percent of those queried by Mentis and MarkeTech Systems state that as one of their
reasons for the grocery branch. Other reasons cited include, "remaining
competitive."
There are only a couple of flies in this logical ointment. The first is that bank products
are generally not the kind of impulse purchases that go well in a supermarket environment.
The second is that traffic counts do not correlate to increased bank revenues.
WALLY'S COMMENT ... In some ways you'd think banks would know this already. After all,
we're pretty much done with the rash of mall branches that have some of the same
characteristics as our supermarket branches. So what's going on?
Not just in banking, but in any business, keeping up with the latest fads and excitement
can tend to drive logic right out of the process. Once people get started down the road to
doing something, then, their vested interested is in proving that it works and that they
made a good decision. Very few organizations have an effective system for taking a look at
a process early on and killing it if it's not meeting expectations.
The other thing that's happening here is a kind of business version of keeping up with the
Jones'. Everybody else is doing it so I'd better do it or I'll be left behind. It's the
old competetive advantage argument.
That's testable too, though probably most banks aren't doing it in this case and most
businesses don't do it in similar cases.
You have to be constantly vigilant that your bright ideas do not chug down the track to
unprofitable projects simply because you're not watching what's going on. Build tests into
any major product early. Have clear criteria for whether the project will continue or not.
Then, be ruthless about what you eliminate and what you keep. Remember, the dollars that
you pull out of money-loosing ventures can be used to fund the things that are truly
successful and profitable.
Created/Revised/Reviewed: 12/31/00
Top of
page
If you enjoyed this article, you may want to use the search engine on this page to find other articles of interest. The search engine searches this site as well as Wally Bock's Monday Memo newsletter site and the site which describes Wally's speaking and consulting services.
Reprinting and Reposting This Article
You may reprint or repost this article providing that the following
conditions are met:
- The article remains essentially unaltered.
- Wally Bock is shown as the author.
- The notice Copyright 2003 by Wally Bock or similar appears on the article.
- Contact information for Wally is included with the article. You may refer readers to this Web site as a way to meet this requirement. Please link to http://www.bockinfo.com/
- Here is the wording we suggest when linking to this site. "The article you've just read can be found on Wally Bock's extensive Resource Web site along with many other articles and resources."
Any other reprinting or reposting requires specific permission which is almost always
granted. Click here to request permission if necessary.
Top of
page
