Tuesday, November 8, 2011 | Edited by Daniel Moores
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Credit Unions Welcome New Banking Customers Thousands of people flooded into credit unions and small banks over the weekend as part of "Bank Transfer Day," an effort to prod depositors to abandon giant banks. But at least some of the big banks won't mind losing those customers. On Saturday, the Boeing Employees' Credit Union in Seattle signed up a one-day record 659 new members. At the grand opening of a Randolph-Brooks Federal Credit Union branch in Pflugerville, Texas, the parking lot was so full that customers had to leave their cars across the street. Dozens of people opened an account at the Texas credit union as a local disc jockey gave away prizes. "They'll treat me like a good customer," said Charlie Estes, 33 years old, who pulled his life savings out of J.P. Morgan Chase & Co., the largest U.S. bank as measured in assets. J.P. Morgan declined to comment. It won't be clear for several weeks how many deposits moved to credit unions -- the member-owned cooperatives that can't sell stock and don't pay taxes -- on Bank Transfer Day. But the sprawling, loosely organized effort got lots of attention, partly because of controversial plans by Bank of America Corp. and other large banks to charge customers for using debit cards. The big banks retreated after widespread public furor. Executives at large banks have shown few signs of worry that depositors might walk out the door. One reason: People who gravitate to credit unions tend to be unprofitable for giant banks because of the small balances they keep on deposit, low number of products they buy and the relatively high account-maintenance expenses at big financial firms. Moebs Services Inc., a research firm in Lake Bluff, Ill., estimates that it costs the giant banks about $350 to $450 per year to maintain a checking account. In contrast, smaller banks incur costs of $175 to $250 a year per checking account. Banks try to recoup such costs by imposing overdraft fees and other charges. But new rules in the wake of the financial crisis limit some of those surcharges. The recent debit-card-charge mess was a failed attempt to close the gap. Many banks also have done away with free checking, unless customers maintain a minimum balance and meet other criteria. But with the average checking account containing $5,200, according to research firm Raddon Financial Group in Lombard, Ill., many customers can't avoid the monthly charges. More than three-fourths of credit unions offer no-strings-attached free checking, compared with 45% of banks, says Greg McBride, an analyst with Bankrate.com. Deposits at banks and credit unions are insured up to $250,000. Credit unions held just 8% of federally insured deposits as of June 30, compared with 70% for banks that have assets of more than $10 billion. Credit-union officials say those figures understate their actual reach in terms of customer numbers because most members at credit unions have small balances. Overall, U.S. credit unions have more that 91 million members, or nearly one in three Americans. David Small, a spokesman for the National Credit Union Administration trade group, said many of the nation's 7,200 credit unions "are in rural areas where there is no other banking option." Some bankers complain that credit unions have outgrown their status as a lender of last resort to poor and rural communities, and should be forced to pay taxes just like for-profit banks. "At a time when state and local governments are struggling with lower revenue, why should some of these credit unions be subsidized if they are not going to provide those services?" said David Locke, chief executive of McFarland State Bank in McFarland, Wis. The bank has about $500 million in assets but is having trouble competing with nearby credit unions, he added. Credit unions are lobbying Congress to let them make more business loans. The current limit is 12.5% of assets. Raising the cap would allow credit unions to diversify their loan portfolios and provide more capital to cash-strapped companies, Mr. Small said. Yet several large commercial credit unions, which invest money on behalf of their retail members, went bust after loading up on high-risk mortgages during the housing bubble. Some bank customers said they are unhappy -- but not enough to give up the conveniences provided by big banks. "I'd love to change," said Michael O'Donnell, a Bank of America customer in Boston. "But the services they offer would be hard to replace." (Source: The Wall Street Journal, 11/07/11) |
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U.S. Stores Shrink, Get Make-Overs to Boost Sales U.S. stores have an identity crisis. The big ones want to be smaller, the small ones are getting bigger and all of them want to sell more food. For years, U.S. retailers could simply build more stores, the larger the better, near new developments to spur sales growth. These days, as suburban communities have lost their luster and more people stay in or near cities, that formula needs a make-over. "It was just all about new store expansion and I think we've come to a tipping point," said Steve Caine, a partner in Bain & Company's global retail practice. At the same time, larger store floor plans are becoming less necessary at some chains, as shoppers buy everything from appliances to shoes online. Retailers whose main categories have not yet been overtaken by the likes of Amazon.com Inc want to avoid the fate of a Circuit City or Borders. "That is encouraging people to think smaller and then the need to get into the urban cores will bring, on average, most retailers' store sizes down," Caine said. Wal-Mart Stores Inc. and Target Corp. are among those slimming down to fit into cities such as Chicago. "A lot of these more mature companies that have thousands and thousands of stores have really kind of maxed out where their format can actually go," said Chris Donnelly, a senior executive in Accenture's retail practice. "In general, I think what you're seeing is more that retailers are desperately searching out that next area of growth than it is an attempt to be everything to everyone." Chains may wish to make a drastic overhaul, but existing leases and business plans make that unlikely. The various formats are expected to survive, albeit with some tinkering. "If they could wave a wand, a lot of them would completely reconfigure their stores," said Donnelly. "They'd probably close a lot of stores and the remaining stores would be smaller." Food has become more prominent at a variety of chains, as it brings shoppers in more frequently, driving sales gains. "When you're trying to steal share it's about doing what your competitors do, but better, or layering in new businesses," said Caine. "It's a little bit of a redefinition of what you are in the customer's mind." Haircut, anyone? Wal-Mart, founded when Sam Walton opened a discount store in 1962, did not get into the supercenter business until 1988. After years of selling lots of general merchandise, discounters such as Wal-Mart added groceries to bring in more shoppers, leading to the rise of the supercenter. Now, drugstores and dollar stores are adding more food to increase their sales, as Walmart and other chains go on a bit of a diet to figure out how to fit into tight spaces. Wal-Mart is testing urban and rural Walmart Express stores that are 10,000 to 15,000 square feet -- or less than one-tenth the size of a supercenter's historical average of about 185,000-square feet. New supercenters are being slimmed down to as small as 90,000-square feet. Target is expanding in cities by going from a typical 135,000-square foot store down to 60,000 to 100,000-square feet. It will open its first CityTarget store in downtown Chicago next July. Outposts in Los Angeles, San Francisco and Seattle are also set to open in 2012. Walgreen Co. is primping its stores with beauty tricks it learned from its 2010 acquisition of Duane Reade. A handful of shops now offer services such as eyebrow shaping -- also offered to shareholders for free at Walgreen's annual meeting -- along with upscale displays that mimic those in department store beauty departments. At the new Duane Reade on Wall Street, women can even get haircuts and manicures. Emphasizing food, which people buy frequently, can lead to more visits. Wal-Mart is building more Neighborhood Market grocery stores, Target is adding larger fresh food selections to several existing stores and drugstores such as Walgreen now sell everything from bananas to sushi. For some chains, adding food also adds square feet. Dollar General Corp. is opening and remodeling more of its Dollar General Market stores, which add fresh produce, meat and other refrigerated and frozen foods to an expanded lineup of low-cost merchandise. Still, it only has about 60 of those stores out of nearly 10,000 U.S. stores overall. The Market stores, typically 16,000 square feet compared with the usual 7,200 square feet for a regular Dollar General, are posting Dollar General's highest same-store sales increases this year, Chief Executive Rick Dreiling said in August. In early November, it will host grand openings for five new Dollar General Market stores in Las Vegas, the first new Market stores since 2007 and the chain's first stores in Nevada. Tweaking formats is not just a move for public companies looking to boost shareholder value. Meijer recently opened its first Meijer Marketplace store in Melrose Park, Illinois, which at 90,000-square feet is less than half the size of the private chain's traditional stores. The store, with a large grocery section and other goods, does not carry shoes, outdoor furniture or some other items that take up lots of space in large supercenters. "Our interest in trying to adapt the size of our store is coming more from a recognition that communities are going to grow inward, not outward," said JK Symancyk, Meijer's executive vice president of merchandising. "This, in the end, is less about a magic formula of square footage, it's more an exercise in localization." (Source: Reuters, 10/27/11) |
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Smartphones Now Reach 62% of Young Adults 25-to-34 Smartphone penetration in the U.S. has not reached that psychologically significant tipping point of 50% quite yet, but among young adults, the needle passed the midway mark long ago. Nielsen's latest quarterly report on the mobile landscape shows that 62% of U.S. cell phone owners ages 25 to 34 have a phone with an advanced operating system. Overall, smartphone penetration is at 43%, but a majority of people in the most desirable marketing demos now are running Android, iOS, BlackBerry or Windows OSes. In the college-age segment (18-24), 54% own smartphones, as do 53% of 35- to-44-year olds. This means that well over 50% of the 18-44 segment are now on smartphones and can be reached via apps or mobile Web. The dropoff in smartphone use after age 44 is sharp, however, with only 39% of the 45-54 segment on advanced devices -- almost on par with the 38% of teens (13-17). In terms of OS share, Google Android continues its dominance of sheer reach, with 43% of the smartphone market over 28% for Apple's iOS running on iPhone. Adding in other iOS devices like iPads and iPod Touch units would change that figure substantially, but when it comes to the most mobile device of all -- the phone -- Google's share is formidable. Research in Motion's historic decline continues from market share leadership only a few years ago to a mere 18% of the smartphone OS field now. Windows Mobile has only 7% of the market. But Microsoft's recent partnership with Nokia and a version upgrade that will be pushed in new phones coming to market may give the also-ran another shot at the market in the next quarter. Smartphone ownership remains the best predictor of mobile media use. Much as always-on broadband penetration reached a tipping point in the mid 2000s and sparked a sharp rise in online video use, social network membership and digital downloading, advanced phone technology invites new classes of mobile media interactivity. The dramatic increases in app downloading, mobile Web access, social network access, search activity and even ad inventory have paralleled the increased distribution of smart devices as owners seem eager to move many Web operations off their desktop and into their pockets. (Source: Online Media Daily, 11/03/11) |
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