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PCBB Banc Investment Daily December 23, 2014
Banc Investment Daily
December 23, 2014

Heading To The Mall

Some of you may be heading out of the office early today to do a little last minute holiday shopping for friends and family. How you go about that shopping is probably quite different from even 5Ys ago when people primarily shopped in person and usually went to the shopping mall if they were looking for a variety of items. In the 1950s, the rise of America's car culture spawned the suburb and subsequently shopping malls, which sprang up everywhere to serve the needs of suburban people. Some 1,500 malls were built between 1956 and 2005, but barely 1,000 indoor malls remain today (not one new mall has been built since 2006). Where and how customers shop impacts not only retail centers, as the popularity of online shopping soars, but where and how they do business. A prime example is the shift to banking online. Let us consider this comparable evolution a little further.
An earlier tectonic shift in US shopping preferences was the move from large downtown department stores to suburban malls. The malls generally had large department stores as well, but many smaller specialty shops took up the bulk of the space. Many of those malls are now empty. Some have been repurposed as storage facilities or even bowling alleys, while others have tumbleweeds rolling through their parking lots. More recent times have seen further transition of how people live and shop, as young professionals are leaving the suburbs in droves and moving back into urban centers. They may work in the center of town, or they may telecommute. They may shop and bank in the city center where they live or do it online. Or most likely, they do all of the above. Chances are that young urban professionals use all of the available access points to go about their daily business.
Banks can trace the history of their branch distribution and it is likely to follow a similar path as shopping. Sixty years ago, banks had colossal downtown buildings with most personnel in one location. They opened smaller branches in the suburbs to serve the needs of the people who had moved there. Most banks still have branches located in or around malls and we wonder if their reduction in size and importance has kept up with the decline of malls over the last 8 or 10Ys. Perhaps the shift in banking that we are attributing to technology actually began long before online and mobile banking became the norm, and banks have simply been lagging behind trends in customer preference. Chances are a huge downtown building with granite pillars is not the answer now, but centralization may make sense if your customers prefer a centralized location. Make sure your bank is following customer trends by placing branches of appropriate size and scope where those customers live and work.
If you are leaving early to do a little last minute shopping today, there is a good chance that you'll scurry home to your personal computer since the bank's computers have all the shopping sites like Amazon blocked. We suggest that you consider patronizing your local businesses instead. Turn your shopping excursion into a sales call, go visit existing bank customers and pay a visit to a potential new customer or two. Remind them that small businesses all need to support each other and that community banks are small businesses too. If they bank at a larger bank, it's the same thing as if you went to a large retailer instead of supporting a local business.