RETAIL (????) Banking ... you must be joking!

I was at a conference yesterday where a leading economist talked about the global economic forecasts and specifically about the UK.

When he got to the UK, he started talking about which sectors were expanding and succeeding the most, citing the telecommunication, transport and logistics areas as those with the greatest opportunity.

In other words, people doing business on the internet and ordering stuff for delivery to the home or office.

It certainly seems to be true when you look at the stats.  For example, the online retail markets are growing rapidly, with 12%+ growth forecast for the next year (double-click chart for larger image).

Source: Verdict Research 

But this belies another story, which is that internet retailing is now maturing, as year-on-year growth accelerates at a decelerating rate .

Source: Verdict Research 

And, as the internet matures, the old retail space withers and dies.

This has been illustrated well by the demise of  our oldest music retailer (HMV), camera retailer (Jessops), electronics retailer (Comet) and entertainment retailer (Blockbuster) …

All of these bankruptcies were announced in just the past month.  Meanwhile, Amazon and iTunes march onwards and upwards.

This change in high street to home has been inevitable and obvious for years, with many predicting the demise of anything that can be electronified. 

This is why travel agents, book shops and more have disappeared en masse for the past decade in most economies (just look at Borders and Tower Records).

That’s why my High Street stores are empty, shut down, closing, dead …

It just makes me wonder why the leaders of these retailers didn't get it earlier and switch their business models from high street to home, from instore to online?

They must have been mad.

And if you accept everything I’ve written above, then why the hell are retail banks still operating and even expanding their retail store footprint?

Source: This is money

Comments

[Greg Grimer]

It is difficult to switch. Huge inertia, huge learning curve for senior managers who have lived comfortable lives for a couple of decades and know their bricks and mortar business and feel comfortable about their role in them. Lots of those types of people would have no useful job in a dot com equivalent as some of their knowledge and experience is now obsolete. You like tech and make an effort to master it and experiment, but think of your peer group of your age? Are they using and experimenting with blogs, twitter, social networks, syndicated media?

A senior chap from JP Morgan told me the other day that he never got any value from his LinkedIn profile and wondered why he bothered having a profile there. Where do you begin with that statement. Such a person cannot see the world changing around them. They cannot see obvious ways to leverage that database from a career perspective or just a market intelligence op

Recently a question came up at a not for profit members organisation as to whether they should allow their meetings to be shown on line to encourage higher attendance. The objection of "if you allow people to attend the meeting online they won't attend in the physical world", was raised at least twice.

My answer is that the meeting is for the members not the members for the meeting. If they prefer an online meeting then deliver it like that.

As Generation Y grow and age into more positions of influence, you will see more bank branches closing.

[David Steed]

The branches are closing because people are using them less and banking online, mobile, ATM in Post offices etc. What does the MOS want - banks to keep unprofitable low use branches open and post losses? Who is that helping?

[Steve]

The irony here is that even before the internet Banks were closing branches.

Back in the late '80s the bank I worked for closed some 90 branches out of a 200 branch network as they merged south west & south east regions moving jobs out of branches centralising operations and removing much of the point of a branch (other than cash transactions) as the authority of the "Manager" became non-existant. The branches of today are no more than retail shops: if you're a business or need specialist advice, you can't get that from a branch - an appointment will be made with said specialist, thus rendering the branch pointless.

Further demise of cheques & cash is coming as the industry attempts to standardise a trusted means of handling small transactions (think along the scale of mobile in Africa). Once that is complete (in a few years) the bank branch network will resembe the Post Office [i.e. a counter in another retail shop] or may be HMV...

If the bank wants branches to continue, it'll need customers (from both business & retail/personal sectors) that want to visit them to obtain products & services they need - does that make any synergies with the business model of a Dentist? :) Let's not forget that the readers of MOS represent the audience that is, IMHO, slow at changing to 'e' delivery, yet they too have their own financial advisers that they don't visit at the local bank branch.

It is the changing face of financial services that is the biggest threat to branches, which is not exclusively the internet effect.

[Steven Lim]

All business should ask themselves

Why does anyone want to conduct business/transaction face to face? i.e. at a branch or high street store or even the corner side street store.

Its mainly all about trust and whether you can get the business done. (immediate action and effect). It also allows the opportunity for negotiation of price. Convenience is secondary.

With present day British retail banking practices, the front office have lost most, if not all, authority or clearance to action any transaction at the bank. This has all been transferred to the back-office. Front office is mostly about form filling & paper pushing.

The new generation may have embraced the Internet for convenience, but does not allow one to negotiate a price. Perhaps they have lost the critical art of negotiation and conducting business face to face.

And from the business-side, embracing internet increasingly means getting into a price-war as there's less way to differentiate. This erodes margins. Perhaps this is why auction sites are still popular.