- Retail banking-the low hanging fruit:- Retail banking has retail in its name-what more similarity can you want! Essentially, learnings like location, merchandising, targeted advertising
- Focus from branches to Points of Sale:-FMCG industry always harps on its points of sale(POS) instead of stores, and banks are slowly moving to non branch models like business correspondents, full fledged ATMs, multiple touch points etc too.
- From 'commodity focus' to 'experience focus':-The greatest of retailers be they Sam Walton or Kishore Biyani know that even though low price/wide selection is necessary, what is more important is to design the store with an inviting ambience for its target customer, and to have customer friendly policies in return/payment(something Nordstrom is famous for).
- Loyalty programs:-This is something missing in the retail segment(except for maybe high end customers) but which corporate bankers implicitly do in their relationship banking. Agreed that bank pricing cannot be made so transparent to allow loyalty programs, but the bank should strongly communicate that it values customers who maintain long banking relationships with them. Also, tieups with other industry is prevalent in the credit card segment, maybe banks can do this for tieups with preferred service providers like auditors, valuers, chartered engineers, insurers etc, provided the respective regulators/professional bodies do not see red
- Talent Management/Non monetary motivators:-In retail, the salaries are not the best especially at the store level, resulting in attrition yet the management does their best to keep staff motivated. As the banking regulators clamp down on high pay, banks must increasingly learn how to keep their personnel motivated even without that promise of a $MM payday.
- Pricing to explictly recognize loss leaders/market penetration/activity based costing:-Retailers have done this kind of pricing for decades, but bank pricing models are nowhere near this level yet, with some arbitary model adjustments done for 'relationship' reasons.
- Selling outside brands as well as private labels:- Banks focus on their proprietary products aka 'private labels' but they are slowly realizing that they need to offer third party products as well to ensure better infrastructure utilization and better customer service. While the tussle for 'shelf space'/'sales force attention' will always be there, there is no reason both cannot coexist.
Tuesday, February 28, 2012
What banks can learn from the retail industry
I Googled this title and related phrases and while I found quite a few good articles and research reports, not many covered all the points I wished to, and so this blog post. The stimulus of this blog post was an interview answer I gave recently, where I said that banks should learn from best practices in other sectors such as talent management in the ITES industry, supply chain management from FMCG and a lot from retail. The main learnings in my view are below