In-store ATMs
September/October 2000
Fast
Cash Makes
$ense
Silly question. Want more people in-store, spending more
money?
The answer could be as simple as installing an automatic teller machine.
ASS&CSN finds out why 'holes
in the wall' are becoming so popular.
Everyone can remember their first time. Sidling up to
the wall, PIN scribbled on a piece of paper. Check the number, key it
in. Hey presto - cash. Cool! How easy is that?
Very easy. Australians have taken to automatic tellers
like the proverbial ducks to water but, until recently, those machines
were the exclusive preserve of banks and other financial institutions.
In 2000, for the first time in Australia, the number of
ATMs installed annually by non-traditional outlets (ie retail) is expected
to exceed those installed by the traditional 'owners' of the technology.
Our frantic lives demand convenience. Making several stops
- cash from the bank, food from the supermarket, petrol from the service
station - simply isn't part of the equation any more. Hence the rise
of the convenience store.
There is also the undeniable fact that banks are shutting
down their face-to-face services in many areas. The result of all these
changes is a huge opportunity for the smart operator.
"People want a 'one-stop shop' these days," says Mark
Schnitzerling from National Cash Systems, a private company which provides
ATM sales and solutions to the retail industry.
"They don't have time to go from one place to another,
so if they can park easily - which they can at a service station - and
get the petrol, some cash and the basics they need at home, then it
makes a lot of sense.
"If they're after cash, they might be embarrassed to go
through EFTPOS and find there isn't enough in the account to pay for
what they've bought. An ATM lets them check the balance themselves,
then withdraw what they need.
"Then they spend! All the figures show that having an
ATM on-site increases the average spend in that store. They have the
cash in hand and they'll do a lot more impulse buying, and that's good
news for the merchant."
Recent figures from the US suggest having an in-store
ATM can increase sales by 20-30 per cent. While there is not yet enough
data in Australia to draw conclusions, the experts believe the value
of an ATM here would not be far behind.
Comparing EFTPOS with an ATM is almost unfair. EFTPOS,
say the experts, ties up staff who might otherwise be involved in sales
and service and creates queues. It's also a system where people are
accessing their cash on the way out of the store AFTER they've made
their purchases.
With an ATM, customers access their cash as they walk
in. They do it themselves, with privacy and security, and then have
a bundle of cash in hand as they walk through the store.
The ATM itself can be 'stocked' one of two ways, which
the would-be owner can work out with their supplier. It is either 'cash
funded' with deliveries made by a security company, or a system of 'cash
recycling', with the merchant loading the machine with cash from the
register, a method that works better in regional areas than the city.
Either way, the ATM can be a real drawcard.
"The latest research suggests that bank branches are the
fifth most popular place to do the banking," says Nicola Roborgh of
NCR Australia, an IT company that provides ATM and point-of-sale solutions
for the retail and finance industry.
"The internet, supermarket, C-stores and workplaces are
higher up the list in terms of the preferred places to move money around.
Basically people prefer convenience to making a special trip to the
bank, so a business that can provide that convenience can do very well
from it.
"It's also interesting to note that an ATM is something
people trust - most people don't count the cash as it's being dispensed.
The ATM is now the 'face' of their bank."
Ms Roborgh says that sense of trust can work extremely
well for a service station or C-store operator who wants to install
a machine.
"We are committed to supplying entry-level or low-cost
ATMs to retail locations where historically it may not have been cost-effective
to install one. The smart operator will maximise the drawing power of
that machine, using signage and a location that will ensure people both
inside and out know it's there and available for use. If you can draw
ATM traffic that would otherwise go elsewhere, once people are inside
and using it, they will spend."
In other words, not only do people spend money while they're
in-store, but word gets around that you have an ATM - and more people
will use your site than one that doesn't have that convenience.
According to the experts, the business makes a profit
from the extra spending that's going on, but there also is a transaction
rebate system that returns a percentage of each transaction to the site
operator. That system generally operates on an incremental system according
to the number of transactions each week - if the transaction level is
high enough, the rebates will effectively cancel out what the service
is costing to operate.
The cost of actually 'owning' a machine will vary according
to the type of service (funding or recycling) and the number of transactions
per week.
"For the merchant service situation, where they stack
the machine with cash, it will probably cost them around $100 per week
and they'll get a rebate from the very first transaction," says Mick
Chivell, product manager - ATMs, for Armaguard which provides machines,
servicing and funds delivery.
"That's in a situation where the number of transactions
probably doesn't warrant cash servicing by us. The average cost is more
like $120-$140 per week for the full package (machine, cash and servicing)
with the transaction rebate value increasing in accordance with the
number of transactions.
"But the transaction rebate is not the big drawcard. The
real difference to the merchant's profits is more people through the
store with more money to spend."
When it comes to the 'golden rules' of installing an ATM,
it makes sense to go with a reputable company. The experts suggest you
do your homework and ask around.
"If you're aligned with one of the major oil companies,
they may have a preferred supplier," says National Cash Systems' Mark
Schnitzerling, "but it always makes sound business sense to go with
a tried and proven service provider.
"It's a good idea to go with a company which offers 100
per cent card acceptance so everyone has access to the ATM, rather than
the turn-off factor of discovering their card isn't accepted.
"You also need a reliable product and good service plan.
You don't want something that breaks down and takes forever to be fixed.
Once you've won people into the store, you don't want them to be frustrated
and going elsewhere."
"You don't just want a machine," agrees Armaguard's Mick
Chivell, "you want a full service arrangement, an ongoing relationship.
You need to find the company that will provide it. You want a service,
an asset, not a bunch of hassles."
Mr Chivell suggests that pre-purchase homework consists
of assessing how many customers you have each week, what you're doing
in cash sales and how many EFTPOS transactions are being handled.
"Once you have an idea of the traffic flow, you can do
your figures as to whether an ATM is worth installing. There's not much
point in having one if it's not going to increase revenue for you -
that doesn't work for you or the supplier, so do your homework and talk
things through with the supplier.
"Putting in a machine and then being faced with having
to pull it out is costly for everyone involved - the supplier, the merchant
and the customer. They're not going to be impressed if they have access
to funds at your site one day and the next time they don't. That's where
a little bit of effort on the homework will make it work."
Technology ensures that ATMs are becoming cheaper to install
and more flexible to use, offering the ability to dispense products
as well as cash - tickets, promotional dockets, phone cards and stamps.
What won't change is the fact they can make sound business sense in
a variety of ways, all of which add dollars to the bottom line.