In a recent Retail Delivery Insights newsletter from BAI, Gary D. Stein stressed the importance of attention to details in selecting sites for new branch locations. Not a surprise, but important nonetheless.
“Stein recommended that banks conduct a thorough analysis of the specific site and surrounding trade area. He advised banks to consider market potential, population demographics, financial product usage and demand, population density and the competitive landscape.”
And while these elements certainly go above and beyond simply relying on intuition, I’d also add the importance of psychographic data and an in-person assessment of the proposed site location to the list. Drilling down to this level of detail is necessary in today’s increasingly competitive landscape – especially as institutions adopt more specific target markets and the average new branch is likely to require a multi-million dollar investment.
An article from July 5th’s Chicago Tribune discusses the approach that allowed Starbucks to identify successful locations: “In evaluating locations, Starbucks looked past commonly used community demographic information to analyze nitty-gritty specifics, like the education level in various neighborhoods. It also studied traffic flow on both sides of the street, to make sure drives could make an easy right turn for their java fix on their way to the office.”
The commonly used community demographic information is a good starting point, but doesn’t provide the specifics relative to consumer behaviors, access or local draw which could dramatically impact the success of a new branch location. Starbucks strayed from the more scientific and detail-focused approach in recent years - which resulted in its recently announced decision to close underperforming locations.
Stein echos a point we've heard before: "branch placement may accounting for as much as 65% of its success." With so much hinging on location, you'd think the same attention to detail would be a part of any institution’s expansion efforts.
Jul 21, 2008
Site Selection: “The devil is in the details”
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This is the kind of blog post I do not like to see. Why? Because my competition may see it and start to learn how to select a new site the right way. All kidding aside, my only comment is, amen. The devil is in the details as they say but sometimes you are stuck with what "pad" is available in a marketplace. If you want to be in a market your research indicates will be successful but the only "pad" is located in a less than perfect location you need to have the conviction that your pro forma properly reflects your less than optimal site location. In prior jobs I have seen many smart people not make the adjustment.
@dmgerbino
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