Academic journal article ABA Banking Journal

What Makes a Supermarket Bank Branch Work?

Academic journal article ABA Banking Journal

What Makes a Supermarket Bank Branch Work?

Article excerpt

Put a bank branch in a new store of a large supermarket chain, and shoppers will come to the branch, say bankers who have tried it.

For one thing, the supermarket will have picked out a prosperous location. "If Kroger is spending $4.8 million to put a store in town, they've made sure this is a good spot," says William R. Reed, vice-chairman of $2.2 billion-assets National Commerce Bancorporation, Memphis, whose three banks have 39 branches in grocery stores.

"The minute you open, you have an audience waiting for you," says Francie Henry, regional manager at Fifth Third Bank, Cincinnati. The $10.2 billion-assets bank has 53 branches in stores in Ohio, Kentucky, and Indiana.

Not all banks have embraced this method of serving the shopping public by any means. At the end of 1992, 1,500 financial institution branches were in supermarkets--in other words, 2% of financial institution branches.

But that's seven times the number of supermarket branches that existed in 1985 and double the 921 banks had in 1990, according to International Banking Technologies (IBT), Norcross, Ga. The big three. The interest to date in supermarket branches to some degree results from the aggressive efforts of three currently or previously bank-connected vendors: Financial Supermarkets, Inc., a subsidiary of $130 million-assets Community Bank and Trust, Cornelia, Ga.; IBT, which was originally an offshoot of Heritage Bank of Atlanta, which has since been acquired by Bank South Corp., Atlanta; and National Commerce Bank Services, a subsidiary of National Commerce Bancorp.

Some banks, like Fifth Third, have taken to the idea on their own. The bank was approached by Kroger Co., Cincinnati, in 1986. Find the right store. Suppose you wanted to set up a branch in a supermarket. What would you need to do to make it run smoothly and profitably?

"Bankers need to spend time researching the supermarket chain before they decide whether they want to marry it," says J. Alton Wingate, president and CEO of Community Bank and Trust, which has six supermarket branches. The management must insist upon good customer service, cleanliness, and value, he says.

So far, the majority of bank super-market branches have been set up in units of large regional supermarket chains. This is because "larger chains usually are more willing to accept change and try new things," Wingate says. However, "the interest of independent supermarkets has increased in the last two years," he says.

Individual stores must be large and attract several thousand customers a week to provide enough traffic.

The best part of town to have a supermarket branch in is a fast-growing suburban area, according to William Reed at National Commerce. The newcomers to a burgeoning suburb tend to be young and ready for a new bank, he says. They are also heavy users of credit and fee products.

Yet any community with enough traffic will work, Reed says. "In a high-income community you will get expensive, high-balance deposit accounts and large loans. In a low-to-moderate income community you will get low-balance deposits and instalment loans." Low-income neighborhoods tend to generate more transactions and more fees than affluent ones. Run a tight ship. The supermarket bank vendors say they will only work with financially strong banks that have a retail emphasis. Wingate at Community Bankshares says the bank must put a senior executive in charge of the program to give it credibility. Here are some other management suggestions:

* Hire the right people. "I look for personality," says Francie Henry at Fifth Third. "You need people who want to sell in a nontraditional environment," she says.

"A great teller in a traditional branch might not be comfortable in this kind of branch," agrees B. Robert Purple, senior vice-president at $420 million Beneficial National Bank, Wilmington, Del. He says you need to get people who can handle a hectic atmosphere. …

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