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Insights

High street banking is dying. What can retailers learn from Santander’s clever Work Café?

Banks are withdrawing from the high street at a drastic rate, driven by ever-lower demand for in-branch services. Will Santander's Work Café make physical banking relevant to a new, technologically empowered generation?

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High street banking is dying. What can retailers learn from Santander’s clever Work Café?

Retail closures continue to make headlines, but another industry is withdrawing from high streets at an alarming rate – and its disappearance is getting a lot less coverage.

Banks – former cornerstones of town and city centres up and down the country – are gradually closing their doors for good. According to the most recent figures from the Office for National Statistics, there are now half the number of banks in the UK compared to 1986, and there’s been a 17% drop in branches over the last six years alone. It means that nationally, just 1.7 banks serve every 10,000 people.

The worst-hit areas for closures are often the most deprived. According to a recent study by Pockit, banks are closing branches in poorer areas of England four times faster than in wealthy communities. That’s not to say better-off regions aren’t suffering; small, affluent communities like Canford Cliffs and Spilsby are the latest on a long list of areas campaigning to keep their one remaining bank.

This phenomenon is largely due to the internet – a factor that’s crushed countless retailers over the last decade. Online banking has resulted in many financial institutions surrendering often-large, prime-location real estate to match dwindling demand for walk-in services.

Of course, there are plenty of other issues at play. The UK continues its steady transition into a more cashless society; customers are better clued-up about banking than ever before, often setting up accounts online using comparison sites; some banks, like Monzo and Starling, are entirely digital.

Yet for all these changes in the way people manage their money, many financial institutions haven’t responded to the evolution in consumer habits, effectively orchestrating their own obsoletion. Small branches often only consist of cashiers, machines and leaflet racks; larger banks may add to this by offering advisors and business services. Save for the quality of technology in these locations, little has changed since banking’s mid-80s heyday.

Santander has decided to change that. Here in Leeds, just a stone’s throw from SHIFT’s HQ, the Spanish bank closed the doors of its Park Row unit on June 28th, 2018, only to reopen them just over one year later with its imported Work Café concept, which could match the demands of future consumers.

Not only could the plan make physical banks more relevant than ever, but it also showcases a brand experience not offered by any of its rivals.

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Santander’s cut and run

Leeds is a big city, and Park Row is the centre of its physical banking. It spans from the train station to the Headrow, one of Leeds’ most famous shopping streets, and hosts the flagship branches of HSBC, NatWest and RBS.

Abbey National, then Santander, had its own prime location on the street. While it continues to operate another branch in Leeds city centre, Santander Park Row’s 17,000 customers were moved on in 2018, when the bank let the unit’s lease expire.

In its Branch Closure Impact Assessment, it cited predictable reasons for why it made its decision:

  • “95% of customers transacting at Park Row branch already use a variety of ways to complete their banking”;
  • “More and more people are banking with [Santander] by phone, online, on tablets and smartphones as well as at cash machines and Post Offices”.

The vacant unit didn’t shift; it sat empty for a few months. Every other unit was taken as soon as it became available, but Santander’s former home was ignored. It’s just as well; Santander bought it again, importing its clever “Work Café” concept for a UK debut.

What Santander’s Work Café offers

At its heart, Santander’s Work Café is a community-centric project that fits the profile of its day-to-day customers, though remains open to anyone, whoever they bank with. The idea was developed in Chile, after Santander realised how crowded banks were becoming as they provided fresh coffee to patrons. Including this UK venture, Work Café now operates in six countries worldwide – and Leeds’ branch may be the first of many.

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All visitors to Work Café can access the following:

  • Digital banking facilities, allowing people to access their accounts and information from a large tablet, with phones also available;
  • Santander employees on hand, who can answer any questions on banking or business support – plus the opportunity to book an appointment with one online;
  • A coworking space, which can be used on a first-come, first-served basis;
  • A café bar that provides “sustainably sourced barista coffee” from London’s Taylor St Coffee alongside snacks, with 30% off for Santander card-holders;
  • Three free, bookable meeting rooms, offering ClickShare display screens, conference phones and chalk boards;
  • Regular events, hosted by Google and other local businesses;
  • Free fibre-optic Wi-Fi throughout the building;
  • A “card share” wall allowing local businesses to display their business cards;
  • A digital brochure-requesting service, where users can select the information they’re interested in before having this data sent to their email account;
  • A free-to-use jukebox with a range of largely ambient music.

Above all, the focus is on engineering a great, professional experience under the Santander banner. The company’s departure from traditional banking services – and the opportunity to sell huge, cost-driven products to customers – is so great that it’s easy to assume that as a standalone venture judged solely on its takings within the Park Row unit, it’s losing money.

But even if it did, it’s a loss-leader at worst. At best, Santander’s Work Café has the potential to be the very best bank experience the UK has to offer today – and it could set the minimum accepted bar for everyone else in the industry.

Why is the Work Café’s approach so important?

The Work Café’s ultimate success can only be measured in the longer term, yet the concept showcases a carefully curated idea that’s both tailored to the customer of the future and enhances its offering as a bank.

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Building a brand for a new generation of customers

For years, and even now, banks have been perceived as dull, stuffy places: buildings you need to visit to do important things relating to money and nothing else. Younger people in particular – empowered by technology, flexible working hours and an often-greater financial knowledge – see these branches as boring and rigid, and rightly so. No amount of redecoration can change that core emotional indifference.

By providing a useful and technologically equipped space, and at a time when free, dedicated working spaces are still at a premium, Santander is giving people an opportunity to connect with the brand on their own terms, with no pressure, but in a way they’ve never seen other banks act.

All the clever adverts in the world can’t beat a tactile, modern experience that complements the working lifestyle in the way Work Café does: one in which aspiring businesspeople of all ages and backgrounds can connect with others and forge new relationships. Speaking to the staff, we discovered that large, hyper-local businesses have already used the meeting rooms due to a lack of space in their own buildings – including two other banks.

Leveraging a booming, and complementary, market

While there’s always a concern that the UK coffee market is becoming saturated, cafés continue to boom; in late 2018, Statista revealed that 49% of consumers bought a coffee on a daily basis; market leader Costa Coffee more than doubled its locations in the eight years to the end of 2016 (2,121 stores).

In Leeds, the independent coffee scene is huge – three overwhelmingly popular local shops are in spitting distance of Work Café, yet provide a much more informal setting. Wi-Fi may be free, but their furniture and fittings are often more fashionable than functional.

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With its well-established professional MO, Santander’s Work Café hasn’t partnered with a market leader like Costa, Caffè Nero or Starbucks; instead, it partners with a London-based supplier, occupying a unique position between the corporate Santander brand and a much-desired sole trader-style approach.

While it’s never going to be a true independent, it delivers the best of both worlds. What’s more, the sheer knowledge offered by the staff about the coffee they sold us was as deep as I’ve heard anywhere else in the city.

An additional source of income

There’s a reason why banks and restaurants are the only businesses on Park Row, save for a tiny, longstanding Caffè Nero at the far corner: the rents are huge. As such, coffee and snacks aren’t ever going to pay for the spacious, well-staffed Work Café unit. However, it’ll certainly help.

The profit margins on coffee are vast: even for high-end coffee, mark-up can be over 90% on a single cup. Providing that people will always visit and use the facilities, coffee is the perfect way to cover the running cost of the café itself. Business diversification can always deliver success, so long as it works in tandem with core services.

A loss-leading approach to banking

Without the (admittedly understated) Santander branding, Work Café wouldn’t feel like a bank at all. However, it does have digital banking points and experts on hand, alongside its ability to book appointments.

This relaxed, hassle-free and unpressured style of business may not see anything close to the number of deals being made as its standard branch around five minutes’ walk away, but in terms of developing the brand’s personality – at a time when its competitors are just so boring – it’s another feather in its cap. After a visit, it had us considering switching allegiances.

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Local expertise through local partnerships – and more

Enhancing its credentials as a bank that’s in touch with its customers on a local level, Santander is hosting events run by the city’s businesses, for the city’s businesses. It’s certainly the first time that a bank has done this with an open-door policy, under its own roof, in Leeds. As a means of developing its reputation as a company in touch with people on a regional level, it’s quite a coup.

On top of this, Work Café has also hosted representatives of Google, underlining its clout as an international bank. Events have been sparingly booked over the first three weeks, but it will most likely continue to fill its calendar over the coming months.

A future-proofed, social use for the high street

At SHIFT, we don’t believe the high street is dead, but we certainly think it needs to change if it’s going to survive. We think the high street will always remain a place that people go to hang out, socialise and, of course, shop – but the businesses that survive must adapt to this ever-more important emphasis on the blurring of retail, business and entertainment.

The future of Work Café – and the British high street

This clever use of high-street spaces is an important way to maintain the economic future of Britain’s towns and cities, and for Santander to respond to its own customer demand, as well as wider cultural changes in non-banking demographics, is incredibly clever: it’s actively encouraging people to make the most of their careers and feed into the economy in another way.

Diversification like this is key to retail and banking’s success. While this move doesn’t stray too far from Santander’s product range and business model, other companies can and should attempt to go further from theirs to test the water and see how consumers respond. Any combination of services can be successful so long as they’re useful.

Santander must stay committed to the Work Café to prove it works, otherwise future efforts across all industries could be doomed to failure. With plans to open in New York – and possibly London – the future’s bright.

So long as the internet can help people engage and spend money with businesses – whether they’re banks or retailers – physical locations must be seen as the primary means to build a brand. With this concept, Santander is way ahead of the crowd.

Insights

Greggs’ “adapt or die” mantra is the blueprint all businesses must follow

Greggs’ decision to reconsider its high-street presence in favour of motorway services, drive-throughs and industrial parks has helped it top £1 billion in sales for the first time. It’s time for every retailer to learn from the company’s success and seriously consider their physical strategy.

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Greggs’ “adapt or die” mantra is the blueprint all businesses must follow

It’s not often that you go to a major trade event and walk away with only one particularly overriding thought.

Such was the case after visiting Retail Week Live at London’s InterContinental O2 hotel, where we took in as much as possible from the two-day gathering.

Many of the opinions showcased at RWL were those we fundamentally believed in ourselves. Various talking heads spoke of how the high street wasn’t dead, nor would it be with the correct approach; that local DNA is intrinsic to a physical store’s success; and that people must have convenience, certainty and choice to justify their trip to the shops, however long they’re there for.

However, it was Greggs’ keynote speech, which explained its recent overwhelming success, that stuck firmly in the memory. Not only did the business play on the three factors listed above, but it combined them with a strongly adaptive culture across its physical locations that went much further than simply creating footfall from vegan sausage rolls, even if it was an incredible, money-spinning PR coup.

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Greggs has proved to every high-street company, whatever its sector, that the traditional approach to growth – one that saw Greggs itself aggressively expand in the 90s – is no longer fit for purpose. Now, it’s more important than ever to build a store strategy around a customer’s basic needs. For these reasons, Greggs itself is no longer expanding on the high street: it’s actively withdrawing from it, yet profits are greater than ever.

From market saturation to outright stagnation

I grew up in Greggs’ north-east heartland, and saw plenty of smaller bakeries consumed by the Newcastle brand – Bakers Oven in particular, which immediately handed the chain no fewer than three outlets in my local shopping centre during the mid-to-late 90s. At the time, bakeries were still hugely popular, even though smaller outfits could no longer compete in an increasingly competitive fast-food marketplace, supercharged by American imports like McDonald’s and KFC.

While rough around the edges, Greggs continued to thrive well into the new millennium. When I moved here to Leeds in 2008, it was clear the city was built on sausage rolls: there was at least a dozen in the city centre alone. However, they were usually unchanged from when they were first fitted: white, tiled floors reflected the warm, orange glow of the stores’ wood veneer trims, and of course the pastries themselves.

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Over time, it seemed to take its toll on both Greggs’ street cred and presence. Its fortunes appeared to change; as Leeds redeveloped, the bakery’s outlets gradually began to close. Those left behind were rebranded and remodelled, albeit subtly.

However, this was all part of Greggs’ strategic roadmap pioneered in 2013: something shared in great detail at Retail Week Live by charismatic Greggs CEO Roger Whiteside, who received his OBE for services to women and equality this year. During his tenure, he’s taken Greggs from 1,671 shops with a regional structure to just short of 2,000 by the end of 2018. This year, they’re taking it over that number.

In short, it’s because of Whiteside’s bottom line: putting change at the heart of matters. For him, it’s adapt or die.

Using data, not instinct

Whiteside, who made a name for himself at both Marks & Spencer and Ocado, was quick off the mark with his core belief for any business. “If you’re not changing, you’re going backwards,” he opened. “I was looking for a reason to change. Initially, I didn’t have one, but by 2013, people were losing faith in the brand.”

This stagnation at Greggs was his main concern, but knowing where to start was the most difficult issue. He did, however, know that he couldn’t rely on people at the top as a first point of contact, adding: “You never find out how a business works from head office – you must go in store.”

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From there, he visited various outlets across the UK with his team, knowing that to deliver change properly, his group needed to “row in sync, or you’ll capsize”. He adopted the most open-minded approach, putting his faith entirely in people at all levels. “I told the team they had my full support,” Whiteside explained. “Abandon theories if you need to.”

Instinct was discarded from the start; he needed to see raw data of sales, and that’s what led to the initial strategy – one that’s still in place five years later.

Developing the one-page plan

While Greggs was stagnant, Whiteside’s approach still put an initial emphasis on maintaining the good things that Greggs was still popular for, notably “traditional favourites” (pasties, slices and sandwiches), “great value”, “loyal, hardworking staff” and its position as Britain’s number-four coffee destination and number-two choice for breakfast.

Built onto these foundations were several core tenets developed by Whiteside and co. This included:

  • “Food for all” – the ability to cater to all tastes and dietary requirements;
  • “On the go” – the opportunity to get something fast and easily;
  • “Customer experience” – friendly faces behind the counter, quick service and great communication; and
  • “Building ahead” – an eye on the future, building capacity for many more stores than are in operation (Greggs currently has capacity for 2,500 stores, despite having around 2,000).

This looped back to observing and listening to customers in store and through data. Only then could they advance past simply redecorating their stores, or changing menus.

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Listening to the customer – but learning when to say no

“Customers don’t change their minds quickly” was one of Whiteside’s more surprising points, but certainly accurate, especially for the FMCGs behind the curved glass windows in Greggs. More shocking than that was his honest admission that “no-one goes out for a Greggs”: something that further underpinned his approach of listening to the customer’s demands, analysing data and underlining his passion for Greggs to remain fast and friendly.

One big change meant departing from Greggs’ initial modus operandi entirely. Bakers, of course, are generally associated with bread. Nowadays, you’d be hard-pressed to find any on sale in Greggs, simply because customers don’t buy it like they used to – data proved that.

“We’re just not that type of business anymore,” he told the audience, without a trace of lament. He also pointed out that large cakes, and cakes in general, are also on the decline; lower sales are tied to a surge in demand for healthier options. This, too, led to the boom in its “balanced choices” range.

“You have you learn when to say no to customers,” he explained, adding that while some complained about the lack of freshly-baked bread, the brand was no longer associated with that with modern, younger consumers, who would simply go to supermarkets or independents instead.

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The same can be said for regional specialities, such as stotties, egg custard tarts and Tottenham cake. In each of these cases, Greggs has kowtowed to regional demand until it’s not there anymore. While Newcastle still makes stottie sandwiches, Greggs refused to back down on other complainants, particularly during one notably fraught moment in 2013 involving Eccles cakes in Eccles on Eccles Cake Week.

But don’t forget those vegan sausage rolls

While Whiteside “never expected Piers Morgan” in the vegan sausage roll debate, he already knew the business was onto a winner with them. Greggs’ textbook cheeky advertising aside, it wasn’t developed with vegans solely in mind – quite the opposite. From data trends, Whiteside and his team had identified a real demand for non-meat options from meat eaters, too.

Combining the quintessential Greggs staple with a wholly new recipe saw people from all walks of life trying it out. While it was never going to be a real sausage roll, it wasn’t trying to be. Just matching demand but maintaining Greggs’ brand values represented a double-whammy combo that proved impossible to resist – and in early May, the company announced that shares had jumped by over 13%, making it the best performer on the FTSE 100.

Locations meet vocations

The biggest change in Greggs’ direction came with the store’s units themselves – not their design so much as their placement. While repointing existing units proved to be a quick success, it didn’t cover the issue of its stores truly meeting customers on their terms.

Since 2013, Whiteside closed 300 of Greggs’ high-street stores. Many, including me, would’ve argued there were too many in the first place – in some instances, you could stand at the doorway of one and see another, like 7-Elevens in Hong Kong – but others would’ve seen this as a sign of failure. Whiteside proved this was not the case.

In their place, Greggs has opened 600 outlets away from the high street. These new locations matched its one-page plan perfectly, delivering fast, friendly service in places where speed, convenience and value were required, and people knew Greggs delivered it. As Whiteside explained, “no-one goes out just for a Greggs” – they’re just there when you really need them.

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As such, Whiteside swapped town centres for travel hubs. Units in motorway services and airports in particular were snapped up. Some of these were more expensive to operate, but comparing the slightly raised price of an already-cheap steak bake at a services versus a £7+ meal deal at a Burger King proved immediately impactful.

Areas such as industrial parks close to builders’ merchants also proved incredibly popular. Aside from your classic burger vans, Whiteside found there was rarely any competition outside of a Wickes or Selco, and yet the demand for cheap and easy lunches “on the go” were greater than ever.

Of course, Greggs didn’t abandon the high street altogether; just that Whiteside and his team want to work to his “fewer, better” mantra. “We believe the high street will always be visited by people who want to be entertained away from home,” he said. Why miss out on this captive audience?

It’s no longer about improving – it’s time for real innovation

Those who fear that Greggs’ strategy is null and void because they’re a fast food retailer – and not, say, a fashion brand or a stationer – blind themselves to the incredible possibilities that could be gained from learning from even the smallest elements of its modern strategy.

Greggs isn’t the most glamorous brand in the world, but those who dare to look down their noses at the value-first bakery chain are foolish. Whiteside and his team, from board level to behind the counter, know exactly what they represent as a brand, and they’re proud of it.

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And why shouldn’t they be? Greggs has listened to customers and abandoned instinct in favour of hard data, and its reward is a business model that’s effectively future-proofed. Profits are constantly reinvested into growth, branding, communications and new offerings, updating its physical stores – and the experience that comes with it – in the same way developers constantly deploy miniscule changes to a website or app, matching evolving demands and tastes.

George Blankenship, a former executive at bleeding-edge businesses including Tesla Motors and Apple, describes the current conundrum on the high street better than anyone when he says that “we try to rationalise why innovations from other sectors don’t apply to us, rather than focusing on why they do.”

As such, a corporate strategy of just being slightly better than direct competitors – instead of learning from those outside of the sector – means that only one upstart company is needed to provide something so positively disruptive that everyone else is blown out of the water. Isn’t it time every company strived to learn from hard facts and respond, just like Greggs has?