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Banking Over Coffee

I banked with ING Direct for years before I moved to DC (at which point I and had to switch banks, for reasons I won't get into here). I finally saw an ING Direct Cafe when I was in Philadelphia a few weekends ago.

(from DJOtaku on Flickr)

As far as coffee shops go, it wasn't bad. They served Peet's coffee and there was a decent amount of space inside to hang out. Aside from the ATM in the corner, it didn't look much at all like a bank, except of course, that it was basically one giant advertisement for ING Direct.

This type of concept brings up questions relating to cross-subsidization and retail diversity in a high density neighborhood. A coffee shop is a valuable amentity to a neighborhood. Coffee shops are also inherently difficult businesses to make money from, since overhead costs are high, they require a lot of labor, and the revenue generated per sale is very low.

Of course, it doesn't really matter if the ING Direct Cafe makes any money peddling cups of coffee, because it's owned by a giant bank that makes its money through banking products and services. Even if the ING Direct cafe is a loss-leader, if the advertising buzz it generates translates into new accounts, it has served its purpose.

In DC, some people get upset about the prospect of having their neighborhood "Adams Morganized" - which basically means that the storefronts will all turn into restaurants and bars, which are a lot more profitable than dry cleaners and pet stores and coffee shops.

One way neighborhoods try to prevent this from happening is to zone a lot from a very very specific use, like a dry-cleaner. But that seems particularly inefficient, since you are forcing a specific type of business into a particular lot. Another option is to artificially lower the rent for a dry-cleaner who wants to open a shop - or give the dry cleaner a cash subsidy. While this theoretically seems less fair, it also allows them to choose the storefront that makes the most sense for their business. The ING Direct Cafe in Philly is where it is today, at least in part, because maximizing profits at that store isn't one of it's driving goals.

At the end of the day, there are no easy solutions to these problems, at least none that seem overwhelmingly obvious to me.


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