What Banks Should Learn From the Demise of Retail Store Fronts

The narrative of the struggling retail industry should be watched carefully by banks. The banking industry and the retail industry have several parallels: both depend on customer satisfaction to survive, both are industries that have business practices involving expensive physical stores, and both have been impacted by evolving shopping habits and aggressive competition from start-ups that use technology that offer low-cost services. 

 Gas prices are low, GDP has been growing for years, unemployment rates are under 5 percent, and wage growth has dramatically improved in the last eighteen months. Despite this, there have already been multiple retail bankruptcies and store closures in 2017. Payless, Sports Authority, RadioShack, J.C. Penney, Sears and Macy’s, are all victims to the extinction event of retail store fronts. Several trends and factors have contributed to the sudden change of shopping habits:

                                                                                                                                                (The Atlantic, 2017)

 E-commerce is the simplest explanation for the demise of brick-and-mortar stores.

  • Amazon sales in North America increased from $16 billion to $18 billion

  • Half of American households are subscribers to Amazon Prime

  • Improved return policy has made online shopping easy

 Mobile shopping has increase in recent years.

  • People used to make trips to the store, and would also make small purchases in the process

  • This changed when people were given the opportunity to do shopping prep online

 America built too many malls.

  • There are about 1,200 malls

  • According to Cowen and Company’s analysts, between 1970 and 2015, malls grew twice as fast as the population

  • After the Great Recession, mall visited declined between 2010 and 2013 by 50 percent, and it continues to decrease

 Banks need to focus on digital relationships with customers before attempting to expand their physical branches. Banks face similar threats with the retail industry when it comes to technology. Banks need to use their existing data as leverage on customers and adapt to changing consumer needs and demands, while also learning more about them. Using customer data to implement targeted advertising will be a key strategy. Building close digital relationships with customers, and allowing new data to shape the business is crucial for banks to avoid the current retail demise. Using omni-channel marketing, or the use of a variety of marketing channels available, provides different ways to reach customers. For example, there is an increasing number of customers who have shown that they are more comfortable making decisions over the phone. This means that banks need be consistent in their over-the-phone customer service.

 Banks must prioritize forming intimate digital relationships with their customers, and using fintech is a smart investment. Fintech companies collect customer data, while also providing frictionless decision-making for customers, allowing them an easier way to manage their finances. Zikher is helping banks stay relevant by allowing customers and banks to store data and manage it properly in order to approve loans.


Author: Yvonne Kwan



 Cowen (2017). Ecommerce disruption. [image] Available at: http://www.cowen.com/reports/ecommerce-disruption-its-just-getting-started/ [Accessed 30 May 2017].

 Haslett, K. (2017). What banks can learn from retail | S&P Global Market. [online] Marketintelligence.spglobal.com. Available at: http://marketintelligence.spglobal.com/our-thinking/news/what-banks-can-learn-from-retail [Accessed 30 May 2017].

 The Atlantic (2017). Cowen Mobile Shopping Graph. [image] Available at: https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/ [Accessed 30 May 2017].

 Thompson, D. (2017). What in the World Is Causing the Retail Meltdown of 2017?. [online] The Atlantic. Available at: https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/ [Accessed 30 May 2017].

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