Hoping for Perks, Wells Brews Plan With Starbucks

In the latest experiment to blend financial services with retailing, Wells Fargo & Co. and Starbucks Coffee Co. are joining forces to offer banking, lattes, dry-cleaning and other services under one roof.

The plan, to be announced today, will initially see Seattle-based Starbucks open in seven of Wells’ California branches early next year. Some of those branches will also house a dry-cleaner, a sandwich shop and copy center operated by separate companies.

If these prove to be successful, Wells and Starbucks say they will take the concept to many more of the San Francisco-based bank’s 500 traditional branches in California.

“We do believe it’s going to be very powerful,” said Joe Stiglich, vice chairman and head of Wells Fargo’s branch network. Neither company would disclose the cost of the project or other financial arrangements.

Certainly the partnership brings together two well-known brands, although Wells Fargo’s image has been hurt lately by performance problems. But analysts raised doubts about how much additional business each company would garner by the combination. More businesses have established such partnerships under the assumption that consumers want to do multiple routine tasks in one location.

“On the surface, it sounds like this co-retailing relationship could work. Consumers continue to be strained for time and look for convenience,” said Bob Obernesser, a partner at McMillian/Doolittle, a Chicago-based consumer research firm. But he added that Wells should not expect to pick up droves of Starbucks’ customers, who might be in a hurry to leave after picking up their coffee.

In recent years, banks have established many branches inside supermarkets, with some success, and they are testing sites in copy centers and gas stations, among other retailers.

Earlier this year, H.F. Ahmanson & Co. said a handful of its Home Savings of America branches would share space with Diedrich Coffee Inc., an Irvine-based firm, but construction is still underway in the first such branch, in Santa Monica. Wells had planned in mid-1996 to open up Thrifty Payless drugstores in branches, but that deal fell through after Payless was sold.

For Wells, the state’s second-largest bank, after Bank of America, the move to find a retail partner is being driven largely by real estate considerations. Although it has closed scores of traditional branches since merging with First Interstate Bancorp in early 1996, Wells remains saddled with a network of branches that have become underutilized, as the bank has installed ATMs and other technologies that have reduced staffing and cut the foot traffic inside branches.

Ironically, the onset of popular Starbucks is likely to drive people back into Wells’ branches, although it is far from clear whether Starbucks’ customers will walk past the planned fireplace-like wall separating it from Wells to open up accounts.

Starbucks, on the other hand, has been opening more shops in California. The company now operates 312 outlets in the state, more than triple the number three years ago. By teaming up with Wells, the coffee company can continue to expand in prime locations in the state. Four of the seven planned Starbucks openings inside Wells will be in Southern California--South Pasadena, Pasadena, Glendale and Orange.

“This is very unique for us,” said John Williams, Starbucks’ director of brand management. Although Starbucks and rivals have set up in record shops, bookstores and computer superstores, Williams said, this is a first for his company, which isn’t just leasing space but has been developing the plan with Wells from the beginning.

The Starbucks inside Wells is expected to open early in the morning, even while the bank is closed. In addition to Starbucks, several of the Wells’ branches will also house Pressing Business, a dry-cleaning business from South San Francisco; Briaz, a popular sandwich shop based in Seattle; and PostNet, a mail and copy center based in Northern California.