A Retailer's Lament: Influx of Bank Branches

Today's Wall Street Journal (online access to paid registrants only) has an article on the front page of the Marketplace secion on the growth of bank branches and the impact on pedestrian traffic in traditional shopping districts.

"3 years ago, Kent Oliven and his wife, Kelly, opened the Melting Point, a make-your-own candle studio and gift shop on a street lined with boutiques and restaurants in Chicago's Lincoln Park neighborhood. The setting seemed promising. Without a big advertising budget, the shop could rely in part on foot traffic to and from nearby retail establishments... Then came the banks. "

Since the opening of the candle store 4 new bank branches opened, joining 6 others within one half mile, often in prime locations that had held other retail specialty stores. As a result, fewer patrons for the Melting Point 'Less and less of our business is coming from walk-in traffic... I don't know if all of it is attributable to banks, but I bet a lot of it is.'

For awhile, banks were cutting branches. Now they are growing. Commerce Bank, based in New Jersey, is aggressively expanding on the East Coast. The founder made his money as a fast food restaurant franchiser (he still owns them), so he understands the importance of real estate, location, and long hours. The bank is known for long hours, like at this branch in Manhattan.

94TH & BROADWAY
2521 BroadwayNew York, NY 10025(917) 493-5682
Lobby Hours

Monday - Thursday 7:30 - 8
Friday 7:30 - Midnight
Saturday 7:30 - 6
Sunday 11:00 - 4
Branch Manager: Brian Thomas.

Fast Company magazine's story on Commerce Bank had this to say:

The key to Commerce's business strategy is its branches, which Hill often refers to as "stores." Other banks try to steer customers away from their branch offices by offering incentives to use ATMs or by limiting the number of teller visits allowed per month.

Commerce does just the opposite. While it still gives customers the option of banking through its ATMs and its award-winning Web site (used by 29% of Commerce customers), Hill and his staff are trying to lure more customers into the store. Commerce distinguishes itself with its commitment to friendly and attentive service, he says. That's where customer relationships are built -- relationships that start with checking accounts and eventually lead to mortgages. The extended hours, gifts for opening new accounts, floor-to-ceiling glass windows, and historic murals on display are intended to attract visitors.

At some branches, tellers take turns greeting customers inside the front door, just as Wal-Mart greeters do. "People will always choose to bank in person," says Hill. "But banks keep pushing them to use ATMs and online banking, because those are lower-cost transactions. Everyone else has given up on branches."

(There's a lot to learn from this article for Main Streeters...)

It's possible that such hours are less damaging to pedestrian shopping districts. OTOH, at the same time, they treat their branches like stores, and like other chains, they want to build cookie cutter designs, this doesn't help those of us in traditional commercial districts that want to retain the pedestrian-orientation and urban design of our districts. And of course they bid up prime locations, making it harder for independent retailers to compete because rents rise as a result.

This is a problem in Georgetown DC right now and in other communities like Brooklyn it has been written about in the New York Press. Commerce Bank intends to locate 10-15 branches in DC. One will be going in at Connecticut Avenue and S Street NW on Dupont Circle. This space has long been controversial because it was purchased by Starwood Real Estate, which pushed out the independent retailers, and the space has been empty for a few years, while Starwood has searched for national tenants willing to pay the high rents they've been demanding.

Chicago and other communities are proposing special exception zoning approvals and other regulations, in order to preserve the retail character (and sales tax revenues) and in fear of eventual (once again) consolidation of banks which will lead to empty spaces once again. Still and all, there are plenty of bank spaces that are now restaurants and clubs... but today's bank branches aren't usually the majestic buildings of old.