Branch design remains varied across the financial services industry. Some institutions are adopting smaller footprint branches while others embrace the financial superstore concept. However, across the United States certain trends are emerging as prevalent among new and remodeled branches.
The aging of America has created an unanticipated damaging byproduct for U.S. financial institutions. The increasing number of older Americans has fueled a corresponding increase in prescription drug sales, rendering the retail pharmacy more profitable than ever and allowing nationwide pharmacy chains such as CVS, Rite Aid, and Walgreens to offer excessive bids for prime corner outparcels. CUs and banks in any major metro can cite examples of prime branch locations falling to higher bidding pharmacy chains. In many situations, this has forced financial institutions to settle for secondary locations in new developments, a few parcels off of the prime corner.
Skyrocketing Land Costs
The average branch land cost now exceeds $1.2 million. Skyrocketing land costs in emerging suburbs and redeveloping urban areas have driven institutions to seek innovative solutions to finding branch locations. Often with the assistance of real estate brokers, many institutions are arranging co-located branches in which the credit union or bank combines multiple parcels for a larger building and then recruits another retailer to share the structure. This can yield a lower cost for both occupants and is often the only way to viably enter a high-cost market.
Such co-located branches are often smaller than traditional freestanding facilities, and follow a general trend toward use of more small footprint facilities. Although larger branches carry lower construction costs per square foot, financial institutions are adopting the smaller footprint models (some as small as 1,800 square feet) seeking reduced operating costs.
Within new branches, there is a continued de-emphasis of the traditional teller line. Seeking to foster sales over transactions, credit unions have been relocating teller lines to the back of the branch, or even eliminating teller lines entirely in favor of sit-down multi-purpose workstations. This "pod" approach to banking has been lauded as innovative in the trade press, spawning numerous imitators. But in an effort to replace the intimidating features of the traditional branch where the teller line formed a barrier between member and employee, some credit unions have created an environment so unfamiliar to the member as to be equally intimidating. Lacking any cues as to where to go for their need, some prospects may leave in frustration.
To allay this uncertainty, most new-concept branches contain a greeter stand at the front of the branch, at which a concierge directs prospects and members to the appropriate person. When executed properly, this concept improves service and fosters sales. However, if the greeter stand is not staffed every moment the branch is open, it can yield disastrous consequences. When unstaffed, the greeter stand imposes a barrier between the member and the MSRs and leaves the member uncertain, wondering whether to wait for a host to return or whether to walk past seeking someone to direct them to the required employee.
Increased attention to branch design and aesthetics has led many CUs to adopt aggressive in-branch merchandising programs. While promotional displays and posters can educate members and encourage sales inquiries, these displays must be continually updated to maximize their value. Credit unions should rotate the content or at least the placement of merchandising posters and stands at least monthly to maintain the impact of these displays.
On the outside of the branch, the land cost and small footprint trends are reflected mostly in one emerging concept. Many new branches feature "double stack" drive-ins, in which a drive-in lane contains two consecutive service bays (or a drive-up ATM followed by a service bay). Although on occasion the member in the rear bay may be delayed waiting for the front bay transactor to leave, such delays are infrequent and brief since the first-arriving member in the front bay will usually conclude first too. In addition to maximizing service throughput on small parcels, the 'double stack' approach can also circumvent local regulations governing the number of allowable drive-in lanes.
Steven Reider is the founder of Bancography, Birmingham, Ala. For info: www.bancography.com. (c) 2007 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved. http://www.cujournal.com http://www.sourcemedia.com