East West Bancorp, whose banks cater to the Asian American community, plans to announce a partnership this week with 99 Ranch Market to offer supermarket banking.
Buena Park-based 99 Ranch Market, which also caters to the Asian American community, has 20 California stores, a Seattle store and affiliates in Hawaii, Nevada, Georgia and Arizona. East West, based in San Marino, has $2.7 billion in assets and 30 branches, most of which are in Southern California.
Specific terms of the 10-year agreement have not been disclosed. However, Dominic Ng, chairman, president and chief executive of East West, said Friday the agreement would go far beyond the traditional landlord-tenant arrangement that most banks have established with retailers.
"We will both invest in supermarket stores. We will conduct joint promotions and share marketing costs," Ng said.
The bank also will roll out incentive and promotional programs before in-store openings to encourage the bank's customers to shop in 99 Ranch Market stores, according to East West.
Meanwhile, 99 Ranch Market purchased about $8 million in newly issued East West shares to "further align the interests of both parties," according to a statement by the company.
The move comes at a time when bank branches in retail locations are getting mixed reviews. The trend toward supermarket banking started in the early '90s, when San Francisco-based Wells Fargo started opening small branches in Ralphs and Vons supermarkets. The San Francisco-based bank has found the supermarket branches so successful that they now account for more than a quarter of the bank's branch locations.
Since then, dozens of banks and savings and loans have opened offices in a variety of retail stores, including Gelson's, Wal-Mart and Kinko's. There are about 8,000 in-store bank branches today, according to International Banking Technologies, a company that helps create in-store banks.
The retail branches have two major selling points: They cost about a fifth as much as traditional branches to open, and many bankers believe that retail locations give the bank an edge when trying to cross-sell an array of financial products to a wide swath of consumers.
However, some banks have pulled out of supermarket banking recently, complaining that the locations don't always produce the traffic and profit they expected. Part of the problem, one banker has said, was that the typical bank employee isn't trained to sell financial products and services in a retail setting.
Meanwhile, a respected bank research firm recently issued a report questioning whether retail banks would ever offer more than simple transactional banking--making deposits and delivering cash.
East West believes that its partnership will exceed expectations largely because the bank and 99 Ranch Market concentrate on the same Asian American clientele. That boosts the chances that the grocery chain's customers will bank with East West and the bank's customers will shop at 99 Ranch Market stores, Ng said.
East West plans to open its first supermarket branches early next year. Over time, the bank will have locations in every 99 Ranch Market store, Ng said.