Boom Box

ATM dispenses more than cash for operators who pay attention.

Chuck Green, Freelance writer

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To Burt Eisenbud and his business partner, the clunky box at their two Naples, Fla., stores arrived with modest intent. Eisenbud, co-owner of E’s Country Stores, and his associate installed ATMs that do nothing more than dispense money at both locations when they recognized patrons in the immediate vicinities had no other nearby access to the service.

“We use ATMs as a convenience for customers to get cash,” he says. It was a crackerjack strategy, given that the ATMs now are profit centers, he says.

Seems Eisenbud is on the right track: Several industry experts also tout c-store ATMs more as dispensers, not financial kiosks where customers can cash and deposit checks and obtain movie tickets.

Norman Koza, owner of Elite ATM Wholesaler Corp., Keego Harbor, Mich., estimates that at least 95% of operators use ATMs exclusively to dispense cash. In fact, during more than 10 years in business, he has never sold an ATM to a c-store that does otherwise. He attributes the lack of interest in additional features to, for one thing, the inevitably that they’ll spawn more work for operators.

While those responsibilities might be fine for operators who own their ATMs, Koza doesn’t think it cuts it among those who lease a machine.

Also, based on limited return on investment, an ATM that does more than dispense cash simply isn’t worth an operator’s time, not to mention that the more the machine does, the more vulnerable it is to breakdowns, Koza says: “The more features, the more headaches.”

If that weren’t enough, c-stores (especially small operators) generally lack the resources of national banks, where multifunction ATMs are more common, according to Paul Saxon, owner of Electronic Transaction Corp., Brandon, Fla. Consequently, with less manpower, as well as thinner operating budgets, those operators are considerably more hard-pressed to maintain and keep a machine fresh.

Besides, in a world seemingly in a perpetual hurry, Saxon doubts there’s much of a drumbeat for multitasking c-store-based ATMs anyway.

“Customers want their money,” he says. Some individuals might be more inclined to deal with delays at a bank-based multifunction ATM than in a c-store, where speed and, naturally, convenience are more typically expected, he says.

Profit Potential

As hard as it might be for many to assimilate, some c-store owners, particularly “older-school guys,” are unaware of an ATM’s cash-generating potential, according to Koza: “They don’t want to realize that the technology’s there today and consumers look for everything in it that’s new.”

According to last year’s NACS State of the Industry Report of 2009 Data, 93.5% of c-stores fielded ATMs in their stores and generated a monthly average of $731 per location, marking a nearly 5% increase from 2008. (Updated numbers are to be released at the NACS SOI Summit this month.)

What is perhaps most striking about ATMs, though, is the gap between top-quartile and bottomquartile operators. This wedge is mirrored by chain size: Those with up to 10 units were generating about $550 in per-store monthly revenue. In comparison, chains with 500 or more stores were capturing more than $1,100 in monthly per-site revenue.

So do more stores lead to more revenue, or do some operators simply treat ATMs as not just a piece of hardware, but also an actual financial services category that justifies classic category-management tactics?

Only months ago, Wawa, Pa.-based Wawa celebrated its no-fee ATMs, heralding the one-billionth ATM transaction across its 575-store network. Part of Wawa’s success is centered on a longstanding relationship with its ATM provider, Diebold, and PNC Bank.

It’s also no secret that Wawa is a high-throughput operation with one of the c-store channel’s most enviable foodservice programs, meaning customers usually pay with plastic or pull cash from an ATM dispenser. Wawa officials could not be reached for this story.

But according to CSPedia, a CSP database that hosts updated profiles of more than 450 c-store chains with at least 20 stores, Wawa is in the midst of upgrading its ATM fleet to Diebold’s Opteva cash dispensers. The move will decrease Wawa’s cash-management costs while continuing to generate an anticipated $600 million via 7 million transactions monthly in Wawa stores. The dispensers also spit out coupons for discounted meals based on day-part. And that’s the point, several ATM vendors say: to embrace a holistic approach and integrate your ATM with in-store merchandise.

Consumer behavior around the ATM has changed dramatically, according to Bob Tramontano, vice president of marketing at NCR, Duluth, Ga. Kiosk transactions are up worldwide and, in general, people are comfortable using self-service options to avoid a visit to a local branch. Further, NCR’s research shows that 83% of consumers will choose a store where they shop based on their self-service options.

They certainly have an advocate in Dennis Witkowski, owner of JJ Muggs Stadium Grill in Jupiter, Fla. In a business like his, credit cards are increasingly popular and every time a customer uses one, Witkowski must pay a transaction fee—precious pennies lost per transaction. Of course, as the c-store channel well knows, those pennies translate into billions of dollars landing into the pockets of the banks and credit-card companies. Thus another incentive to ramp up in-store ties to the ATM, says Witkowski, who uses his machine strictly as a dispenser. So the benefits are, at minimum, twofold: Tamp down your swipe fees and also, according to Rick Updyke, president of the U.S. Business Group for Houston-based Cardtronics Inc., increase spend inside the store.

And that’s precisely what has happened with Witkowski. “Some people get used to coming to my restaurant specifically because I have an ATM,” he says. “It kind of becomes their place to get their cash and helps drive business into the restaurant.”

Finding the Right Spot

The fact that ATMs have become more compact also is particularly helpful to c-store operators, given the commodity of retailer floor space, says David Przysinda, president of National Terminal Services in Jupiter, Fla.

“We look at [an ATM] as a revenue- producing machine for a small space,” says Przysinda, who explains that, in light of an ATM’s dimensions, 17 inches wide by 24 inches deep, “you’re not looking at a big space— and the owners max every available inch of space in their c-stores to create profit and revenue for their store.”

Indeed, Saxon of Electronic Transaction Corp. calls the area occupied by ATMs “the most profitable 2 square feet of space in a store.”

 So what space in a c-store should an ATM occupy? That depends. Obviously, machines upfront can help snare more customers because it’s an “impulse” transaction and, as such, is used by those who need cash, says Koza. Ninety percent of ATMs are placed by the front door. However, Koza says, those in back should be situated in the line of sight of merchandise to pull traffic to those areas.

For Witkowski, the ATMs at his two stores are located near the hostess station, where customers are sure to notice. “You want to capture as much traffic coming by as you can,” he says. “I’d be losing a lot of potential [sales] if the ATM weren’t in a place where people saw it immediately.”  —Mitch Morrison contributed to this report 

Protecting Your Investment

Know your neighborhood, several vendors interviewed said when outlining how best to protect and optimize your AT M:

  • If your store is not open around the clock, do not place your ATM upfront, even if such placement generates more foot traffic. Experts say vandals will gladly damage a storefront to break into an ATM, and possibly steal the kiosk itself.
  • Stores in lower-income neighborhoods should stock the dispenser with tens rather than twenties. Other operators should consider mixing tens and twenties to give consumers greater flexibility.
  • Post an illuminated sign over your ATM that is visible across all sightlines.
  • Just like the gasoline dispenser, never let your ATM run out. Failing to replenish the kiosk regularly will cost you customers.
  • Establish a retail strategy for your ATM, beyond its inherent role of convenience.  

By the numbers

$731 Average monthly per-store revenue for ATMs

93.5% Percentage of c-stores that operate ATMs

150% How much top-quartile operators outpaced bottom-quartile merchants in ATM revenues

$1,114 Monthly per-store ATM revenue for chains with at least 500 stores

$551 Monthly per-store ATM revenue for chains with one to 10 stores  

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