STRATEGIC PARTNERS
When it comes to selecting an ATM service provider, large national companies often prefer to play with someone their own size.by Ann All, editor
March 11, 2002
Take the hassles of managing five ATMs -- installing the machines, filling them with cash, making service calls -- and multiply by a hundred.
That's the difference between running a program for mom and pop and running one for a large national retailer. Maybe that's why companies like Chevron, Safeway and Sunoco are choosing to consolidate their ATM programs, in some cases turning them over to a single national service provider.
In the beginning
In the early days of off-premise ATMs, as ISOs first began entering the market and banks jockeyed for prime locations, most retailers entrusted their local and regional managers with the task of finding companies to place machines in their stores. The result was a series of highly fragmented networks that were managed by a hodgepodge of providers.
"As more and more ATMs were placed in more and more locations, pressure was placed on local and regional management. So you ended up with maybe a thousand locations and 30 different suppliers," said Saul Caprio, director of marketing for Portland, Ore.-based Card Capture Services. "The decisions made by local management were not necessarily the best decision if you were looking at the company as a whole."
The quality of service varied from provider to provider. Some were equipped to create advertising programs or other in-store promotions; others were not. Different reporting periods resulted in additional paperwork.
As the ATM business matured, many smaller ISOs -- realizing that they were working with limited capital and manpower -- began focusing their efforts on individual merchants rather than retail chains. Some less successful ISOs vanished from the landscape entirely.
The big picture
As retailers became more well-versed in both the value and the cost of ATMs, some began examining their programs in aggregate.
"They realized it was worthwhile for them to take someone and assign them the responsibility of trying to sort through it, manage the system and create a better program for the company," Caprio said.
"When the ATM business was new, everybody was learning as they went," said Jeff Maulin, vice president of sales and customer service for Temple, Texas-based McLane FSP. "Now that we've been doing this for five years, the guys who have the opportunity to consolidate their programs can pick the best of the lot."
That's what Sunoco, one of McLane FSP's clients, did. Walt Ward, Sunoco's national category manager, said the company made "a conscious decision up front" to work with one provider, as opposed to several, after conducting six months of research.
"It was a matter of ease of doing business, while still focusing on customer needs," Ward said.
Consistency is one of the cornerstones of customer service for a large chain like Sunoco, which strives to keep surprises to a bare minimum.
"Whether a customer is in Pittsburgh or New Jersey, he'll probably be looking at the same piece of equipment, and it's going to be placed in a similar position in our store," Ward explained. "So that customer has the ability to identify our program and know what he's going to get."
While consistency is important, there are exceptions. But again, a larger ISO may be better equipped to analyze an overall program and tailor certain aspects to specific regions of the country.
"We wanted someone who could look at each of the different geographical markets within our larger market," Ward said. "We want to look like the marketplace looks. For instance, we don't necessarily surcharge the same amount in all 17 states."
Less is more
McLane FSP tries to streamline the number of vendors involved with large corporate accounts. For example, Maulin said, "When we do a big rollout, we try to make sure it's the same machine."
"Large retailers tend to want to have as few as possible of any one thing in a category. It's to your benefit to have all of the same cash registers instead of 30 different kinds," Caprio agreed.
Companies like Sunoco, which leases 500 machines from McLane FSP, are accustomed to dealing with just one source for each area of their business, Maulin pointed out.
"They get their gas from one source, they get their grocery products from one source. They've learned over the years that it's just simpler to deal with one group that can do it right instead of having to juggle four or five different ones," he said.
Although smaller retailers may be willing to line up their own cash replenishment and service, or even assume some of those duties themselves, that's rarely the case with a large chain.
"We chose a turnkey program to keep costs down from a staffing standpoint," Ward said. "With a turnkey program, I can manage the program myself. If we did some of those functions in-house, I'd probably need a staff of five."
Looking toward the future, Ward believes that larger ISOs are better positioned to take advantage of new technologies like Web-enabled ATMs. "I think that's another reason to be with a national provider -- someone that is more apt to have the capability to improve their level of technology and provide a uniform approach to that technology," he said.
Official channels
When McLane FSP receives an endorsement from the corporate office, Maulin said the company attends jobber or dealer trade shows to network with the individual owners. Corporate endorsement may or may not be an automatic "in" with franchisees.
"It depends on how the dealer feels about their franchiser. We've been successful with dealers because we've had the program with their corporate, but we've also run into the opposite," he said.
About half of Sunoco's 600 stores are company-owned, and half are owned by franchisees. All eligible stores participate with FSP, as Sunoco designates the FSP program for its franchise.
In the case of Chevron, one of Card Capture's biggest clients, the company's franchisees asked the corporate office to screen service providers. "They trusted that corporate had the size, skill and staff to investigate options on their behalf and recommend one," Caprio said.
CCS has deployed more than 300 machines for Chevron since earning the contract in January of 1998, with plans for more in the works.
While Maulin thinks there will always be room in the market for smaller players -- those with portfolios in the double digits -- he said it's tough for them to compete with ISOs that manage thousands of machines.
"A smaller ISO can be very effective at managing five to 50 sites within a 100-mile radius of their office," Maulin said. "But it's very tough to run a national program with hundreds or thousands of ATMs scattered all over the country. You've got to have a certain kind of infrastructure and a certain amount of capital."
"Smaller folks will always have a more difficult road in dealing with a Chevron or a BP or an Amoco on a national basis," Caprio agreed. "Many large companies just prefer to work with other large companies."
