With low margins at the fuel island, gasoline retailers are always on the lookout for higher profits elsewhere on the site. Having a convenience store is a great way to boost the bottom line, but other potential profit centers—from car washes to quick-serve restaurants—also beckon. And in recent years, advances in automatic teller machine (ATM) technology have increased both capability and convenience.
Now a staple in the c-store business, ATMs are expected by most customers. “C-stores are already a destination that people think of as having an ATM,” said Wes Dunn, business development director for the self-service product group of Tranax Technologies, a manufacturer of ATMS and kiosks based in Newark, Calif. “Now the advent of different devices has enabled ATMs to do more than what was possible five years ago.”
Distributor Mike Luther, senior account executive at Orlando-based Convenience ATMs, sells and places machines and accessories from several manufacturers. He also said that today's machines can do more for c-store operators.
“Although there have been advances in security,” he noted, “now there's an emphasis on software upgrades. It will be increasingly easy to download new software because these machines are getting high-tech and more reliable.”
Another differentiator among ATMs is the opportunity to choose machines that fit the needs of a retailer's operation. However, not all machines are created equal. Some are a better fit than others depending on the location. “Retailers need to ask themselves if they want to make the most amount of money or offer a service with least amount of hassle,” explained Haze Lancaster, a partner in ATM USA, LLC, Morrisville, N.C. The company sells, places, installs and maintains machines for retailers nationwide.
Grading the Upgrades
Options for ATMs vary almost as much as convenience stores. Tranax, for example, offers three distinct solutions. At the low end, the company's Mini-Bank 1700 is a basic cash dispenser for retail environments with low transaction volumes. The model complies with banking industry standards and features a VISA-certified encrypting PIN pad, voice guidance system, light action indicators, 5.7-inch monochrome or color LCD panel, 56K modem and integrated lighted topper.
The next step up, the Mini-Bank c4000, offers customized applications and graphics. In addition to basic features, the unit boasts a 10.4-inch VGA color monitor and is available in three platforms, either Windows CE, Windows XP or embedded. “It offers additional consumer services like gift cards, check cashing and bill pay,” said Dunn, “and it's expandable.”
Finally, the MiniBank x4000 comes with advanced features and enhanced security. The monitor is a generous 12.1 inches. The ATM can be set for remote communication via 56K dial-up modem, TCP/IP or wireless LAN. “With a touch screen, it allows you to put in your own applications, like full-motion video advertising,” said Dunn.
Retailers who see ATMs merely as cash dispensers might be missing an income opportunity. “The machines can be a great resource for people who don’t have bank accounts or have limited access to banks,” Dunn said. “Now they can pay their local utility bills and take care of their pre-pay wireless phones by paying cash. Instead of physically having to go to all those places, they can do it all in one location—your location.”
Five years ago Tranax introduced check imaging. “Now people don’t have to take their paycheck to the bank,” Dunn pointed out. “Your store clerk facilitates the transaction and then the customer goes to the ATM to withdraw their money. When that happens, people will usually spend at least some of their money in your store. And there’s a good chance that having an ATM in the store gives people the opportunity to pay with cash instead of a credit card.”
Thus, retailers can reduce credit card processing fees. And the ATM surcharges, which customers pay, is pure profit for retailers who own their machines or split at a negotiated rate if the ATM has been placed by a distributor.
C-store operators can optimize their ATMs by following some best practices. Machines should be carefully placed to ensure that only store customers can use the service. Security can be enhanced by purchasing such accessories as alarms or even smoke machines. Retailers can also put that security to work by having clerks place money in the ATM rather than keeping it behind the counter.
If the machine is purchased by the retailer, rather than placed and maintained by a distributor, “then you should consider upgrading the communication equipment,” added Dunn. “Although you can run ATMs on dial-up, high-speed connections are preferred because they save costs. And you can run your POS system off same connection instead of running multiple dial-up lines.”
Purchase or Place
To buy or not to buy? ATM USA and Convenience ATMs offer both options. But in some cases, admitted Luther of Convenience ATMs, “It's not worth the investment to buy the machine if volume is too low. There are pros and cons of purchasing. Although you get 100 percent of the surcharges, if the ATM breaks, then you have to fix it.”
By contrast, there is no charge to have a machine placed by an ATM provider, and the retailer is paid a commission based on the number of transactions. “The distributor does all the work for you, though you usually have to sign a contract for five years,” explained Luther. Yet if the idea of pocketing all the surcharges is appealing, buying an ATM is easy. “Anybody can own one,” added Luther. “You don’t have to be part of a banking network. And though you’ll have to set up a processing partner, that’s as easy as signing a form.”
Nor should retailers expect constant calls to fix broken machines. “The reliability of most ATMs is good,” said Luther. “Out of 50 machines, there might be one glitch every six to eight weeks—and usually it’s something as simple as running out of paper.” But if the problem is a broken part such as the dispenser, repair costs could run into the hundreds of dollars.
Skimping on machine quality won't save money in the long run. “Don’t buy anything on E-bay,” Luther warned. “You’ll probably get an ATM that might not be programmed with the latest software. Also, if it doesn’t come with electronic and physical keys, it could cost a lot to re-code.”
Buying from a reputable company is the safest option. Some ATM providers offer financing. “Think of your distributor as a partner,” suggested Luther. “We don't just sell you a machine. We’re knowledgeable about ATMs so that we can give you needed information and help anticipate problems before they come up.”
For example, a good distributor can assist retailers in choosing the right machine for each location. “The volume of transactions in a location is the key,” he pointed out. “If the unit will be in a high-volume location, you need a larger ATM. If the size of dispensers and cassettes are inadequate, you’ll spend more time filling up the cash more often. But you don't want to buy more than you need. Smaller ATMs will handle most medium-traffic locations.”
Just as there are options in machines, retailers have three choices in how to replenish the cash. “The ATM provider can do it,” Luther explained, “or you can take care of replacing the cash for a bigger cut of the surcharge. Or if you don't want to be bothered by keeping up with inventory, you can hire companies to fill up your ATMs for a nominal charge.”
Options also exist for setting the surcharge. “If you're the ATM owner, then you set the charge,” noted Luther, “but it should be priced at the going market rates. So know what’s going on around you. Recently, major financial institutions like Bank of America and Wachovia have started charging $3.” But if the distributor owns the ATM, he continued, “the amount of the surcharge that goes to the retailer depends on what you negotiate. We have a sliding scale based on the volume of transactions. If we put an ATM in your store, then we have to make money too."
Income potential for ATMS can vary widely according to each site. But Luther said an "average" c-store with gasoline can expect to clear between $500 and $600 per month. Further, these profits come with little or no work on the part of the retailer. Keeping track of profits is also easy, thanks to the Internet.
“If you own the machine, we give you access to a website,” Luther said. “You can go online and get instant up-to-date information on your ATMs, see how much money is in the machines, how long until it runs out of receipt paper and how many transactions have occurred.”
At first glance, it could appear that smaller retailers might prefer to avoid capital outlays and let distributors place the ATMs and do all the work, while larger chains might opt to buy their machines and keep all the profits. But in fact, small operators are often the hungriest to squeeze out every last dollar of potential revenue, while large retailers are more concerned with limiting their labor costs.
“A chain with 30 stores has 30 managers who must make sure the ATMS are loaded every day,” said Lancaster of ATM USA. “That's a lot to keep up with. And the more loads you make, the more risk you have for theft and accounting problems.”
Although keeping the entire surcharge is appealing, Lancaster offers a word of caution to retailers with ten or more locations. “If you’re considering buying ATMs and loading your own machines,” he said, “at the very least I recommend you hire an employee who is dedicated to the ATM business. Your ATMs can provide you a sizeable income. But it's got to be treated as a separate business.”
Another consideration is geography. “Even if you have just a handful of stores,” Lancaster said, “consider how stretched out they are. If your sites are widely dispersed, then a turnkey arrangement (of letting a distributor place the ATMs) might be the best option. But if you as the owner can be in the store and load the cash, purchasing could be the best fit.”
Lancaster agrees that choosing the right machine for each site—and then putting the ATM at the right location within the store—are vital. “You can buy an ATM for less than $3,000, but the parts will be expensive,” he said, “and some of these are clearly designed only for low-volume locations.”
And whether the ATM is purchased or placed, Lancaster continued, “Any vending product should be in a high-traffic location. Place the machine as close to the front of the store as possible, while also considering security. You can buy aftermarket accessories like tracking devices, enhanced security bolts and alarms.”
An important criterion for choosing an ATM provider is whether the company can alert retailers to current or potential problems. “All of the larger ATM companies will give you access to an online account to view activity,” Lancaster said. “Although that's standard for good ATM providers, look for companies that can provide monitoring assistance. Our company has the capability to send alerts to your email address, generate a phone call or send a text message.”
Especially for retailers who operate 24/7 locations, having access to round-the-clock ATM service is important. Downtime drives away both customers and profits. “If you're getting error codes on your machine,” Lancaster said, “then you certainly want 24-hour live tech support so you can solve the problem right away.”
In the end, Lancaster advised, “If you decide to buy your ATMs, make sure you’re getting a fair price—but don’t make price your first priority. Take the time to research your options. Look on the Internet and talk to other merchants in the business. Then find a machine and a provider you're comfortable with. Long after you've bought your ATMs, good customer service is what will matter most to you.”