Though banks nationwide are vying for supermarket branches, a community bank that pioneered the concept in Texas seven years ago is giving up on the idea - at least for small banks in big cities.
"I was willing to set up supermarket branches all over Texas if it worked," said Robert Sewell, president of Equitable Bank, Dallas. In 1988, it was the first in the Dallas area to put branches in supermarkets.
"I think there will be a bank branch in every supermarket in the country one day," Mr. Sewell said, "but I'm sorry to say we will not be a part of it."
Mr. Sewell blamed the $180 million-asset bank's lack of marketing muscle and name recognition in the crowded Dallas banking market for the slow growth and lackluster profitability of its two supermarket branches. He said he now believes that supermarket branches can only succeed in small towns, where independent banks already have a name.
Equitable's first supermarket branch, in a Hypermart supermarket in South Arlington, Tex., was opened seven years ago this month. Since then, it has attracted only $2.7 million of deposits. It turned profitable only after three years and now makes just $5,000 a month, Mr. Sewell said.
Equitable is selling its Hypermart branch to NationsBank Corp. A second supermarket branch was equally unsuccessful and is being sold to an undisclosed buyer.
"I was convinced when we opened our first supermarket branch that we could turn it profitable within six months," Mr. Sewell said. "It looked at the time like an efficient way to open branches, get our name recognition up, and build relationships.
"What we found out eventually was that to conduct the kind of business we want we need a stand-alone facility, something with a permanent stature."
The supermarket concept also didn't fit with Equitable's tradition of "a president in every branch." Mr. Sewell said his bank has had vastly more success when its branch "presidents" go out, drum up business, and personally make sure customers are served well.
"You can't put a president in a supermarket branch," he said. "It just doesn't work that way."
But a leader in supermarket branching, National Commerce Bancorp., Memphis, which has 62 supermarket branches in the upper Southeast, said name recognition is not the operative factor in their success.
"Banking is becoming more commoditized for the typical retail customer," said John Presley, first vice president of National Commerce Bank Services Inc. This consulting arm of National Commerce has helped set up more than 500 supermarket branches for other U.S. banks.
"A lot of bankers go into supermarket branching thinking of it as a typical brick and mortar type of business," Mr. Presley said. "It's not a matter of name recognition. It's a matter of outlook and training your people to aggressively sell."