In many respects, retail remains central to the credit union business model. And yet, in the past several years trends in technology, convenience, and delivery systems have altered not just credit union branches but brick-and-mortar locations for retailers worldwide.
Things are already changing. At the credit union level, executives have seen the need to decrease branch size — if not branch locations. For example, last week, as my colleague Aaron Pugh and I were onsite at Greater Nevada Credit Union ($515.6M, Carson City, NV), we discussed the institution’s branch located in a Wal-Mart in Elko, NV. This was a branch located in a high-volume area that simply didn’t require 10,000 square feet of land and building investment. It may very well be the new normal in branch footprint, but retail is more complex than size.
On Monday, Chris Gayomali of Fast Company wrote about shopping trends in 2020. That's a short five years away, but the differences may be stark. Here are four ways shopping will change and the implications of each on both consumers and producers.
No. 4: The Rise Of The Pop-Up Store
Later this year in San Francisco Westfield Labs, an entity “focused on innovating the retail ecosystem,” according to its website, will open a concept called Bespoke in Westfield San Francisco Centre. It's pop-up space that tech and fashion retailers can temporarily rent to demonstrate and showcase products in ways they wouldn’t be able to online. This benefits both consumers who can interact with companies they otherwise couldn’t and online retailers who spend little on rent.
Credit unions such as Greater Nevada who are opening smaller — even sublet — branches are able to save on rent costs and reinvest that money in other areas of the institution. Banks such as PNC, Wells Fargo, and SunTrust have opened pop-up branches in the past. PNC opened its most recent in Chicago in May 2014.
“This pop-up branch is not a replacement for traditional branches. It is an opportunity to expose people and introduce who PNC is to more customers than we would have with our Chicago branch footprint,” Todd Barnhart, executive vice president of branch banking at PNC, told American Banker.
No. 3: From ‘Brick And Mortar’ To ‘Brick And Marketing’
There are advantages to operating physical locations. Consumers and members can interact with employees and test products. There’s a personal interaction between employee and member that differentiates in-store and online, even as many retailers try to create a uniform experience across all touch points.
But in 2020?
“The store of tomorrow is less about being transactional and more about the experience and ability to use the store as a media platform,” says Ethan Song, cofounder and CEO of Frank & Oak, an online men’s clothier considering using brick and mortar stores in the future.
“More important than the transactions we make is the idea of creating a sense of place and a feeling of community when a consumer steps into our stores," Song says. "Incorporating things like social gatherings and coffee shops in our stores underlines our commitment to building not just a store, but a place where people want to be.”
In October 2013, GECU ($2.1B, El Paso, TX) opened a two-story branch in its hometown. The branch is tech-savvy and smaller than than the institution’s other locations and houses Kinley’s Coffee House & Teas, popular with UTEP students. The partnership was a way for Kinley’s to expand with minimal rent and for GECU to benefit from proximity to a popular university hangout. The tea house branch opened 100 new checking and savings accounts for students in the first month after opening.
No. 2: You Don’t Sell Products, You Create Experiences
Study after study, survey after survey has shown that people value experiences over products. For retailers, the opportunity is clear. Design or retro-fit a branch to create a member experience.
Eataly, an Italian food market and mall chain that comprises a number of restaurants, food and beverage stations, bakeries, and other retail items, was designed to mimic the feel of an Italian town where one could visit the local butcher, baker, fishmonger, etc. Fundamentally, it’s a place to buy perishable groceries. However, it’s designed to replicate an authentic Italian experience. Can’t make it to Italy? No problem. Come find authentic Italy in New York City.
To some degree, credit unions already follow this model. In addition to products and services, institutions develop and sell a member experience. Members are not simply customers, they are owners, decision-makers even, and are treated thusly. It’s this experience that already differentiates credit unions and banks.
No. 1: The Consumer Need For Instant Gratification
As our pace of life increases, free time and available interest wanes. Convenience will be king and retail companies that specialize in same-day deliveries of goods and services will be mainstream. So believes Instacart, a delivery startup founded in San Francisco that operates a team of independent contractors who deliver groceries from stores such as Costco and Whole Foods.
At credit unions and other retailers the shift toward instant gratification has transformed the selling model. Automated loan decisioning has grown and institutions have focused more on shortening turnaround times on applications of any kind. But new regulations, specifically TILA/ RESPA, will lengthen the time it takes to go from applying to funding.
Instead, the way credit unions can satisfy members looking for instant gratification is online and on mobile. Creating virtual platforms that allow members to apply for loans on digital devices is just the beginning.
The future is nigh. Will you be ready?