Always Low Rates

Always Low Rates

BANKING by Jean Gruss | Editor/Lee-Collier

What if Wal-Mart became your bank?

The very thought frightens many community bankers who worry their business might go the way of the neighborhood hardware store if that happens.

But Riverside Bank recently opened two new branches in Wal-Mart Supercenters in Naples and Bradenton. By all accounts, the branches have been successful attracting new deposits and generating loans, illustrating that small community banks and the huge retailer can live together.

As an industry, however, community banks recently opposed Wal-Mart's application for an industrial bank in Utah for fear it might open the door to full-fledged banking. Wal-Mart says it applied for the bank charter to process credit cards and electronic checks more efficiently, not encroach into community banking.

Regardless of the ongoing debate, the reality is that more than 300 independent banks have branches in 1,150 Wal-Mart stores today. What's more, Wal-Mart officials say their goal is to lease space to independent banks in all Wal-Mart Supercenters.

Riverside Bank President and CEO John Moran, doesn't dwell on the larger debate. He says establishing Wal-Mart branches lets him get his bank's name in front of thousands of potential new customers every day.

"Just about everybody shops at Wal-Mart," he says. The Naples Wal-Mart branch won first place for demand-deposit growth for a Riverside branch under three years old at a recent company awards ceremony. That branch has gathered about $6 million in deposits in just two years.

What's more, Moran says, the Wal-Mart branches are complementary to the Cape Coral-based bank's main strategy of opening mostly stand-alone branches. Riverside operates 13 branches from Bradenton to Naples and plans to grow 40 to 55 branches along the Gulf Coast in the next decade or so.

Getting into Wal-Mart

Moran initially wasn't a fan of banking inside supermarkets. The branches didn't stand out enough to attract new customers, and employees hassled customers in the aisles. "I don't like it when that happens to me," Moran says of the high-pressure sales tactics.

Then, about three years ago, Moran was attending a bank trade show where a Georgia-based company called IBT Enterprises had set up a replica of a branch inside a store. The brightly lit store "popped out" at him, he says, and he decided to stop and talk to IBT officials there.

It turned out that IBT's specialty is helping community banks locate branches inside stores such as Wal-Mart. IBT provides site selection, construction and training, while the banks only have to recruit employees. This soup-to-nuts approach appeals to smaller financial institutions because they don't have to hire staff to do the legwork.

"What got my attention was having our team work with Wal-Mart and show them who we are," Moran says. IBT provided the entree into the Wal-Mart labyrinth and Moran didn't have to go to Wal-Mart headquarters in Bentonville, Ark. for a show and tell.

Once he agreed to hire IBT to build the Wal-Mart branches, Moran says he was handed a list of upcoming supercenter openings in Southwest Florida and picked the two he wanted in Naples and Bradenton. IBT then built the branches. "All we had to focus on was finding great people," he says.

Moran declines to say how much the Wal-Mart branches cost to establish, but says: "We're beyond break-even after two years."

A different kind of branch

The first thing customers notice is that Riverside's Wal-Mart branch is much smaller than the bank's traditional stand-alone branches. The Wal-Mart branch measures 1,000 square feet, versus 3,500 square feet for most other branches.

But Moran says he considers the whole Wal-Mart store to be the bank's lobby. "The way we look at it is we have a 120,000-square-foot branch," Moran says. "You can get access to 30,000 people a week and you have the opportunity to brand with those people."

For example, the Naples branch is located directly in front of the checkout aisles, between the customer-service center and a nail salon. Big posters touting Riverside's services hang behind the tellers and a kiosk with a computer in the shape of a house beckons potential customers to apply for a mortgage online.

What's more, the Wal-Mart branches are open until 7 p.m., later than the traditional branches. They're open longer on Saturdays too, from 10 a.m. until 4 p.m. Not surprisingly, the branch's busiest times are on Fridays and Saturdays.

Moran is quick to say that branching in Wal-Mart is not a shift in the company's strategy to continue building traditional stand-alone branches. He says the Wal-Mart branches increase the bank's visibility and steer customers who don't want to do their banking inside Wal-Mart to other Riverside branches nearby. He expects each Wal-Mart branch to gather $10 million in deposits versus $50 million for typical stand-alone branches.

Riverside's blue and red logo is so similar to Wal-Mart's that customers sometimes mistake the bank for the customer service desk nearby. That's OK, says Moran, because it's an opportunity to introduce the bank's services. For example, if a customer asks a teller where they can find toothpaste, the teller will walk with the customer to the toothpaste aisle to show her where it is. On the way, the teller will explain that she works for Riverside Bank and casually mention the branch's services.

Moran says bank employees are careful not to pressure Wal-Mart customers. When Moran first told his wife that he planned branches inside Wal-Mart stores, he recalls her turning to him and saying: "Don't tell me you're going to push product in the aisles."

He promised her he wouldn't. Instead, he instructs employees to take a softer approach and inform customers that the bank is there for their convenience.

For one hour every day, each branch employee is required to don a Riverside Bank apron that looks like the Wal-Mart smock to walk the aisles of the store and assist customers.

On one occasion at the Naples Wal-Mart branch, a customer was unhappy about a vacuum cleaner she had purchased and wanted to test a new one. A Riverside Bank employee happened to be strolling down the aisle and offered to help. They walked over to the Riverside branch's office and spread whole-puncher confetti on the floor to test the vacuum and the woman was so delighted she opened a bank account.

What's good for customers is also good for the Wal-Mart employees it calls "associates." Many of the 600 associates in each store became Riverside customers because the bank is conveniently located where they work. In addition, Riverside pays them $10 each for opening an account and gives them a free box of checks. But perhaps the best thing about the account is that Riverside immediately releases the money that Wal-Mart sends a day early for payday.

Retailers staff the bank

At the urging of IBT, Moran staffed the Wal-Mart branches with people with retail backgrounds rather than bankers. Toby Buerger, who runs the Naples branch, is a former sales manager for department store Burdines. She grew up in her parents' clothing stores in New Jersey, where as a child she was paid a penny for every pin or piece of string she could pick up off the floor. "Retailing is in my blood," she says.

Buerger felt she wasn't promoted fast enough at Burdines and decided to change her career to banking a few years ago. When she applied to be manager of a Riverside Bank branch and learned that it would be inside a Wal-Mart, she says it was the perfect match. But for Buerger, who had never balanced her own checkbook, it was a steep learning curve. She went to teller school and learned Riverside's banking systems over several weeks.

To help her make the transition, Riverside hired a banker from Fifth Third Bank to be the branch's assistant manager. But what Buerger lacked in banking experience, she more than made up in retail experience.

For starters, it took only an hour for Buerger to learn where all the merchandise was located inside the cavernous store, from the pet food to the detergent. That's essential if you're going to lead customers around the store to find what they need. She estimates the bank generates about 25% of its business from walking the aisles. "What I sell in the aisle is my service," she says.

She also knew to keep the merchandise looking fresh by mixing things up. At a clothing store, you have to change the racks and build new displays to keep customers coming back. So one day she might advertise exceptional rates on certificates of deposit on a white board that faces the checkout lines. On another day, she might advertise competitive mortgage rates. She'll decorate the branch with balloons one day and hand out lollipops to children on another day. She says customers have grown to expect something new every day.

Just as she kept track of her better customers at Burdines, Buerger does the same at Riverside Bank. Once a month, she calls her top 30 customers to say hello. She also calls on customers on their one-year anniversary with the bank to make sure they're happy with the service they're getting.

To recruit more customers, one of the most successful strategies has been a drawing for a $50 gift card to Wal-Mart. All prospective customers have to do is fill out a short entry form and consent to being called upon by a Riverside Bank employee. Of the 200 or so entries, Buerger says about half are good leads.

At company meetings, Buerger gets good-natured ribbing from her colleagues in traditional stand-alone branches. "Do they sell tomatoes in your bank lobby?" they ask. Buerger says the friendly rivalry is a good challenge and she intends to get the last word; her branch already has proved itself with several company awards, including best deposit-demand growth and second place for customer service last year.

Tips to making it

inside Wal-Mart

What does it take to run a successful bank branch inside a Wal-Mart Supercenter? Toby Buerger, sales and service manager for Riverside Bank's Wal-Mart branch in Naples, offers this advice:

• Make friends with the management and staff of the Wal-Mart store. "This is their store and I'm a tenant," Buerger says. For one thing, you'll be using their intercom to tout your bank specials. Many Wal-Mart employees will also be your customers.

• Provide non-bank services. Need a roll of quarters or a book of stamps? No problem. Help every Wal-Mart customer, even if his request has nothing to do with banking. Looking for pet food? Walk with the customer to the correct aisle.

• Be friendly and outgoing. Employees must be able to speak with thousands of customers who visit Wal-Mart every day and strike up conversations in the aisles.

• Mix up the merchandise and display it attractively. Customers visit the store several time a week; it's important to offer something new, so they don't become blind to your branch.

The Wal-Mart branches are open until 7 p.m., later

than the traditional branches. They're open longer on Saturdays too, from 10 a.m. until 4 p.m. Not surprisingly, the branch's busiest times are on Fridays and Saturdays.