Add ‘Banking’ to Shopping List

In addition to stocking the pantry, shoppers at five Ralphs grocery stores in San Diego County can now complete a full range of consumer banking transactions at in-store branches operated by Union Bank.

The San Francisco-based bank intends to eventually open branch offices in 50 grocery stores throughout California, Union Bank vice president Linda Odenath said Tuesday.

Union Bank’s supermarket branches, which open this morning at stores in Rancho Penasquitos, Rancho San Diego, Chula Vista, Mission Valley and North City West, were a response to “increased demands from consumers for more convenience,” Odenath said. The Union Bank branches, which will be open every day, will offer “everything but safety deposit boxes,” Odenath said.

Grocery store branches are typically less expensive and easier to build than traditional “brick and mortar” branches, according to John Garnett, vice president of International Banking Technologies, an Atlanta-based firm that has helped financial institutions open 300 grocery store branches.

Banks are finding that in-store branches present a cost-effective way to attract new customers. The banks and savings and loans that use International Banking Technologies typically convert 20% of a grocery store’s regular shoppers--including many who have no previous banking affiliation--into customers during the first year alone, Garnett said.

With their lower capital and operating costs, grocery store branches also turn a profit faster than traditional branches, according to John LeCave, marketing director at National Bank of Commerce in Memphis, Tenn., which operates 33 grocery store branches.

National Bank of Commerce’s in-store branches have generated 60,000 new accounts with $303 million in deposits and more than $100 million in loans, LeCave said.

Relatively few California financial institutions have opened branches in grocery stores. Security Pacific recently opened 12 branches in Safeway stores in Washington; California Savings & Loan has one location in a San Ramon grocery, and Great American Bank operates several branches in grocery stores in Tucson and Phoenix. Citicorp Savings opened four branches in Ralph’s stores in the San Fernando Valley.

Banks and savings and loans nationwide have opened 700 supermarket branches, up from just 100 in 1983, Garnett said.

National Bank of Commerce has created a separate company that has established 170 branches in supermarkets for other banks and savings and loans.

“Supermarkets are the No. 1 traffic location in America,” LeCave said. “We figured, if you could provide banking at the same place, you have the ultimate in terms of one-stop shopping.”

Grocery chains view the bank branches as one more way to bolster customer loyalty. “This is another service department . . . like the pharmacy, the floral shop or the bakery,” Garnett said.

Although financial institutions have operated branch offices in supermarkets for several decades, observers said some banks and S&Ls; backed away from the concept after First Nationwide made an ill-fated attempt to operate financial service centers in K mart, J.C. Penney and Sears stores.

“The First Nationwide idea wasn’t implemented in the right way,” Odenath said. “Consumers weren’t going to K mart enough to make it worthwhile. But every family makes an average of 2.3 trips to the grocery store each week.”

“Ninety percent of grocery store shoppers are not your customers, but 99% of the people who walk into your (bank) lobby are customers,” LeCave said. “Our lobby is now the entire cross section of people who walk into the grocery store.”