7 minutes
In-store branching was big for many years. What happened to the hype? Are in-store branches still valuable delivery channels for credit unions? How has technology changed their performance potential? And what is currently the best use of this alternative to large branches?
Over the past 30 years, we have considered in-store branches in the development of numerous strategic plans, and designed branches in markets where they would be productive. They were used to open new markets by gaining access to high levels of repetitive consumer shopping at large grocery stores and used long term because of their retail positioning. The objectives were to deliver a high volume of transactions while increasing loans and share of wallet. Compared to larger full-service branches, in-store branches often fell short on the latter goal.
In-store branches today are being re-imagined with new technologies and new consumer and credit union expectations for what the member experience should be like. Reducing branch cost while increasing productivity is the goal at all branch locations no matter the size. The in-store branch model may be the ultimate in minimizing staff while maximizing high-value engagement using technology.
But this is turning out to be different for every credit union.
How can you tell if in-store branching still makes sense for your CU? To further illuminate, I interviewed Vince Santilli, former first vice president/retail and business banking at People’s United Bank, Bridgeport, Conn., where he was responsible for sales and growth of 150 stop and shop branches in Connecticut and New York. Following is the interview:
Seibert: Many banks and credit unions have tried in-store branching. What are the primary reasons so many are unsuccessful?
Santilli: Many banks [and credit unions] have not invested a significant amount on the staff training necessary to be successful in an in-store environment. They have often offered limited service and employees who are less credentialed than their traditional branch counterparts. Additionally, they have not found ways to un-intrusively engage the thousands of shoppers who are entering their stores each and every week. Success in the in-store environment is all about engagement and if that is not being correctly executed, there is no way that prospects will wander up to these branches just because they have been plopped in the middle of the supermarket.
Seibert: How do the winning financial institutions create success?
Santilli: Financial institutions that have been successful have leveraged grocery store accessibility and seven-day convenience with a full suite of products and services. By engaging shoppers, creating awareness, surfacing needs and then being able to educate and address those needs, credit unions can win in this environment.
It is an awakening for the consumer when it is demonstrated that (in-store branch) employees can originate a mortgage or home equity loan and provide other high-value products and services. When the shopper recognizes all this can be done at 6:30 p.m. on a weekday evening or at 2:30 p.m. on a Sunday afternoon, a light goes off, and they realize that all of their financial needs can be met while they do their food shopping—they do not need another bank. Significant deposits and revenues can then be generated at a fraction of what it costs to build and operate larger and more heavily staffed traditional branches.
Seibert: How do in-store branches fit within a bank's branching network? What are the options?
Santilli: I have seen three different variations. One is a separately managed in-store network, the second is the hub-and-spoke model and the third one is to have the in-store branches operate within a regional territory as an equivalent distribution point.
In a separately managed network, the in-stores and their employees can get branded as "a cheaper cut of meat" due to the perception of them having less expertise than their traditional branch counterparts. Also, the risk is run that the consistency of the brand can get imperiled because separate policies and procedures will be enforced as compared to traditional branches. Thus, the same client can go to neighboring branches on consecutive days with the exact same transaction and have them handled completely differently.
In the hub-and-spoke model, a number of in-store branches are geographically and (sometimes) hierarchically positioned around a "lead" traditional branch, the "mother ship." These can work well, although the consumer often can have the perception that many products and services are not available in the in-store branches and can only be accessed in the hub branches.
In my experience, the operation and management of the in-stores as equivalent outlets has been most successful. A consistent customer experience is provided and in-store shoppers enjoy the convenience of access to all of the same products and services on a seven-day, extended-hours basis.
Seibert: You have been very successful creating high-performance branches. What was the strategy?
Santilli: The strategy was to make the necessary investments in the training and development of our in-store employees. By doing this, they were well-prepared to educate, engage and display their expertise to the shoppers. Merchandising was also heavily emphasized, as signage and other materials were placed in key locations within the supermarket to create awareness of our brand, product suite and capabilities. In-store employees had methods of outreach and accompanying tools, many of which were created by myself and my former colleagues, which enabled them to comfortably approach and engage shoppers.
Seibert: Are there branding issues within a store? If yes, how are these overcome?
Santilli: It is a huge advantage to have an exclusive partnership with a leading supermarket chain, but whether or not that is the case a bank needs to be the exclusive financial services provider in a store. This must be aggressively guarded, as other banks, credit unions, mortgage and insurance companies will often test this and attempt to do everything from setting up tables, putting ads on shopping carts, etc. I have approached my supermarket partnership as one in which the bank needs to work closely with the store and its management. If the focus is on making the supermarket more successful, the bank within the store will also enjoy more traffic and success.
Seibert: What is your definition of the perfect in-store branch?
Santilli: The perfect in-store branch is one that is very visible within the store footprint, typically near the store entrance or between the entrances if there are multiple ones. In addition, it has merchandising that is attractive and well-positioned to catch the eyes of and create awareness within the store's shopper (and employee) base.
The branch staff is well-trained and has expertise in the business, residential lending, insurance and investment areas, in addition to the bank's deposit and lending product set. The branch employees need to be adept at engaging and educating their prospects and work in close partnership with the supermarket's management and staff (as mentioned earlier).
In addition, the store has a heavy and consistent flow of incoming traffic. Although being located in demographically attractive markets helps, I have found that in-store branches can be very successful in suburban, rural or urban markets if they execute well.
Seibert: What are the cultural shifts needed to staff a highly successful branch?
Santilli: This was a much bigger challenge 20 years ago when my experience with in-store banking began, as it was initially a challenge to attract staff members who were willing to work a seven-day schedule. However, the world is a different place in 2015, and employees seem much more comfortable working any five of the seven days in a week. I have found that candidates who are coming from retail backgrounds and are comfortable with approaching and engaging shoppers very successfully transition into the in-store environment.
In all, Santilli is very upbeat about in-store branches, while many bankers and credit union executives see them as limited in terms of product and service delivery—difficult environments in which to project a strong singular brand experience. But as we continue to see traditional branch transactions dropping at 5-10 percent per year, new branch concepts that build on the in-store model are starting to be explored.
For example, the in-store branch coupled with remote delivery technologies, such as video conferencing, can help mine micro markets that were previously unviable. Today, a small market with 1,500 target households could be productive with a 250-square-foot location staffed by two universal associates, remote cash delivery and a stable of high-value services providers available online.
It might be time to rethink how in-store branch models could enhance your network’s performance in today’s ever-changing market opportunities.
Paul Seibert, CMC, is principal/financial and retail design for CUES Supplier member EHS, a NELSON Company, Seattle.
