Peoples United Bank to phase out supermarket branches
Some customers decry loss of convenience
BRIDGEPORT — People’s United Bank customers soon may have to add another stop to their list of errands.
For more than two decades, People’s United Bank has maintained branches in Stop & Shop supermarkets, but that is about to change.
Officials at the Bridgeport-based financial institution announced late Thursday in a press release and a letter to customers that People’s United will not to renew its existing in-store branch contracts with Stop & Shop supermarkets in New York and Connecticut.
Sara Longobardi, senior executive president in charge of retail banking at People’s United, said there will be now immediate impact to supermarket branch employees because the bank won’t begin pulling out of the Stop & Shop locations until 2022.
“(This will) occur over several years using a phased approach,” Longobardi said in a statement. “This multi-year approach will ensure a smooth transition over time for Stop & Shop employees to a nearby traditional branch, or in some cases to other roles within the company that maximize their skill-sets. We feel confident that there will be minimal job impact as a result of closing the in-store branches over the long-term.”
She said the bank “has strong track record of providing continued employment for branch staff as demonstrated through previous branch closures, divestitures, and bank acquisitions and that will
continue to be the case here.”
While the bank initially said all supermarket branches would be closed, Longobardi said later Friday that bank officials are still discussing with Stop & Shop executives the possibility of “a modest number of in-store branches” remaining open in strategic locations. She described the ongoing negotiations with Stop & Shop as “ongoing and positive.”
“As these decisions are finalized, we will communicate details well in advance,” Longobardi said.
Stop & Shop officials said Friday in a statement that they recognize that the banking landscape and customer preferences have changed over the past 26 years, which is how long the two companies have had a business relationship. Executives at the supermarket used language similar to the bank’s press release when responding to inquiries from Hearst Connecticut Media
“There will be no immediate impact to Stop & Shop customers who bank with People’s United as the transition will be phased over time,” Stop & Shop’s statement said in part. Officials with the Massachusettsbased grocer said it has not been determined whether Stop & Shop will seek to reach a partnership with any other banks or how it will use the bank’s space in stores when the branches are closed.
“It’s early in the process, and that has not yet been finalized,” the statement said.
Consumer reaction to the supermarket branch closing announcement was swift — and mostly negative.
“Pretty much the only reason we stayed,” Sam Smith said in response to a post from Hearst Connecticut Media on the Cheshire Community Facebook page. “Moving on now.”
Lisa Kim Kelchner of Cheshire, when asked whether she would find a new bank because of the supermarket banking decision, said, “Hell yes!”
“That’s why I went to People’s,” Klechner said. “They were so convenient and they had decent hours.”
Other consumers were more philosophical about the bank’s decision.
“Haven't been inside an actual bank in years,” Eric Grenier said on social media. “All of the advancements in the app have negated the need.”
The lack of clarity from the two companies could be a negotiating tactics on the part of both companies, said John Carusone, president of the Bank Analysis Center, a Hartford-based industry consulting firm.
“I don’t think there are other banks waiting in the wings to take over these spaces,” Carusone said.
According to Jack Barnes, the bank’s chairman and chief executive officer, the decision was made because “recent acquisitions have allowed us to optimize our branch footprint and as a result, our Stop & Shop branch distribution closely mirrors that of our traditional branches.”
“Customers will maintain nearly the same access to a nearby traditional branch, augmented by our digital banking channels where they can conduct many of the same transactions as they would in a branch 24 hours a day,” Barnes said in a statement. “Our focus remains on personalized relationships and balancing the needs of our customers,. That will not change.”
People’s United officials said there will be no immediate impact on customers because the exit from the supermarket locations will not begin right away. The pullout from the grocery store branches is anticipated to occur over several years using a phased approach, the letter to customers said.
“We will provide a minimum of 90 days’ notice prior to the branch closure. Once the exit is complete, we will further evaluate our presence in those regions where access to a near-by branch may be impacted,” the letter to customers said.
Barnes called the relationship between the two companies “successful and beneficial.” But according to bank officials, customer banking preferences and retail shopping behaviors have evolved, and use of online and mobile banking platforms have increased year-over-year among business and retail customers.
People United intends to use the savings it gets from not renewing the contracts for Stop & Shop locations to boost its investments in digital capabilities, including its mobile app and online banking, according to the statement.
Carusone called the People’s United announcement “hugely significant.”
“They were one of the pioneers of supermarket banking in the industry,” Carusone said. “Supermarket branches represent 50 percent of the total branches People’s United has in Connecticut, so this is enormously significant.”
The average amount of deposits yielded from People’s supermarket branches in Connecticut was $54 million as of June 2020, according to the Federal Deposit Insurance Corp., he said.
“That’s one-third of what the average deposit level from all of the bank’s branches,” Carusone said. “Those supermarket branches are underperforming and they are anxious to improve their return on investment.”
The idea of opening supermarket branches initially was viewed as what Carusone termed a “defensive measure.” By making banking more convenient, something consumers could do while grocery shopping, financial institutions that opened supermarket branches did so as a way to protect themselves from rivals trying to steal their customers, he said.
In the more than two decades since then, online and mobile banking has evolved and become the method of choice for consumers. And that has made the cost of doing business in supermarkets one that People’s United executives felt they needed to address, according to Carusone.
“Having space in a supermarket easily costs $30 to $45 per square foot,” he said. “The typical bank branch in a supermarket has three people working in it, so you’ve got their salaries and benefits. those are very expensive branches to operate.”
Having customers do their business online is more cost-effective for the banks, according to Carusone.
All banks continually audit the individual performance of each of their branches, he said.
The typical bank branch at a supermarket operates “as a transaction service center: People making deposits, getting questions answered about a problem with their monthly statement,” Carusone said. “People don’t go there to get a loan or talk about investment vehicles.”
Nearly 80 percent of in-store Stop & Shop branches are located less than five miles from a current traditional branch location, according to the bank’s statement. People’s United has 140 Stop & Shop branch locations, 84 in Connecticut and 56 in New York.