The trend of putting branches of retail banks in grocery stores and supermarkets caught some real steam in the late 90s and early 00s. Since the beginning, expert sentiment has cycled positive and negative as to whether this was good business, for either or both the supermarket and the bank. Looks like we’re headed into another negative sentiment cycle.
Chevy Chase Bank this month gave up the ghost on all of its 54 branches in Giant Food stores. No doubt there are two very large “macro” issues at play - the recession (oops, the NBER hasn’t called it yet), and the overbranching of America (like the overpedicabbing of Central Park). Banks need to make some cost-efficiency decisions - supermarket branches are an easy target.
At its core though, this discussion is about channel strategy - where you distribute your goods or services, and how you market them. I believe the in-grocery banks are failing on both counts.
Distribution
Co-location is good if you understand your customers’ wants and needs around both products. Sometimes you can get away with the weak proposition of “convenience,“ such as a dry-cleaning drop-off or a coin-changing machine at the front of the grocery. But banking isn’t convenience-driven. I think bankers felt this wouldn’t be an issue, as most people make many visits per month to the grocery. However, the current economy has blown that hope out of the water.
Co-location is also good, by the way, if you can do it cost-effectively. An in-store branch requires high investment in both onsite staff and infrastructure (a problem the dry-clean drop-off and coin-changer don’t have). Not to mention the risk of the all-too-frequent Friday afternoon stick-up.
Marketing
“Just be there and they will come” doesn’t work as a channel strategy. You and your partner need to come up with relevant cross-promotions that generate “win-win” for each. Websites, circulars, in-store signage AND signage in the traditional bank branch must let customers know there is value in there somewhere.
The product mix needs work too. If all you are offering is the same thing I can get elsewhere, then we are back to the weak proposition of convenience.
Give the banks credit for this at least - they got it right when they stuck ATMs in the supermarkets.
=== ===
DATA YOU SHOULD KNOW…There are reportedly over 6000 people at a FIVE DAY Search Engine Strategies (SES) conference in California as we speak, and NOT ONE was able to do a search and find yesterday’s post.
