STRATEGIC PARTNERS
The harder an ATM entrepreneur works, the luckier he gets.
January 7, 2002
"Convenience and cash are both king, today more so than ever," said Jerry Jeffers, discussing his success owning and operating 14 ATMs in Augusta, Ga.
His soft Georgia accent belies the fact that Jeffers, vice president of a convenient store chain and owner of First Augusta Financial Services, has entrepreneurial blood in his veins.
"In our convenience stores, I was frustrated," he said. "I tried to put a bank into one of them, and they (the bank) turned me down.
"I said to myself, 'If you're not going to put one in, then I will.' So I started researching, and it got more and more interesting."
Jeffers had his own ideas on identifying a good business proposition, and analyzed the ATM business thoroughly before making a move.
"I went to step one, and the questions I had were answered. So, I went to step two, and everything looked good. I went to step three, and things kept working out," he said.
Jeffers was pleasantly surprised, because he'd gotten negative answers in steps two or three on previous business ventures and killed them.
Jeffers spent six months looking into ATM ownership. "After all my research, I felt like I could actually fix one," he said. "I had to feel comfortable all the way down to that stage."
Putting ATM ownership to this kind of test should be the norm, not the exception, Jeffers explained. He believes the best recipe for success hinges upon knowing all the positives and negatives ahead of time as much as possible.
Know your niche
One rule of thumb Jeffers uses for placing an ATM is whether of not he would use the machine at that location himself.
Like buying stock in products you use and like, "I put ATMs in places I've been and said to myself, 'It would be very convenient if I had an ATM here.'
"Also, I try to go into places (i.e. c-stores) where banks have turned them down. In my opinion, banks are scared to pioneer in anything. They want to do at least 1,000 transactions per month. Well, there's a lot of the market out there with less. And, that's my niche," Jeffers explained.
"My main competitor is not a bank as it used to be when I first got into the business," Jeffers continued. "It's other deployers."
As the spread of off-premise (O-P) ATMs continues, many might believe Jeffers' niche is narrowing considerably.
Bill Koch, senior consultant for NCR Corp., is not among them. He believes there are still many more O-P ATM sites still available, and said the challenge is to think creatively about underserved locations.
Jeffers, in typical entrepreneurial style, looks at the proliferation as a positive. "The cost of owning an ATM is dropping drastically. And with that, I'm able to take those low-cost ATMs and continue to put them into places banks and others can't go," he said.
Customer motivation
Jeffers believes there are three reasons customers use ATMs.
1. If the customer is on the road and he realizes he needs money, he'll look for the nearest ATM, regardless of whether it's O-P or at a bank location. Everything being equal, good signage is what leads the customer's decision to choose one ATM over another.
On the other hand, customers don't like paying surcharges if they don't have to. Studies now indicate customers will go out of their way to avoid them by seeking out their own bank's ATM. Or, just to get money back at checkout without having to pay a fee, they may buy something at a store that provides Point of Sale (POS) debit-card transactions.
This may explain why surcharge fees have remained relatively flat for the last several years. On the other hand, it has pushed ATM owners to use the time they have the customer's total attention by "impulsing" him to buy more.
2. Impulse is the second reason a customer uses an ATM. The customer is in the store and suddenly decides to buy something, but he needs cash. There is the ATM, prepared to provide it.
Not only does the store avoid the problem of bad checks or having to pay charge-card fees, but the customer has cash and will buy other goods, pushing store sales up.
Koch, speaking last October at Thomson Financial's ATM2000 conference in Orlando, Fla., said getting customers to make impulse buys is a key to success for operators. He believes customers might spend 15 percent or more of their withdrawn cash in the store.
3. The third reason for using an ATM is its loation. The customer knows a particular location has a machine. He heads for it deliberately to get cash for a specific reason, such as going out to dinner.
More than just cash?
The backbone of the O-P market today is still the consumer's need for cash. Other technologies are coming along at a rapid pace; but since the public takes a long time to change its habits or to assimilate a new technology, people like Jeffers aren't too concerned.
Almost two years ago, Jeffers bought several MCD ATMs from NCR. "They are mostly stainless steel and the keys are stainless steel. Everything is heavy duty," he said. He feels he got a great deal on those machines.
"I need something that is not labor intensive. I don't want to have to keep going back to fix them," he explained.
He bought them by working through an Independent sales or service organization (ISO), E*TRADE ATM.
"A lot of times if you put someone in the middle the price goes up, but in this case, it went down for me because they sell 8,000 to 10,000 ATMs a year, whereas I'm only buying 14. They have major buying power, and I can actually buy them cheaper from them than I can direct from the manufacturer."
Though he can get up to four cassettes with his next ATMs (he's about ready to sell the NCR MCDs and buy some new ATMs), he only uses one cassette. He's found the denomination really isn't important to the consumer.
"Twenty dollar bills are all I dispense," he said. "I went out and actually surveyed some of the customers before I bought the machines, and that's what they told me."
Jeffers may be a little more savvy than the average small ATM owner. "It started in college," he explained, "when I was in marketing and the professor made us go to the grocery store and analyze the consumer behavior of purchasing cereal."
He expected to be bored, but he discovered that the cereal for children was on the lowest shelf -- down on their level. He realized how much impact kids had on the purchasing of cereal and how important location is for products.
"That's when I got interested in consumer behavior," Jeffers said. "And, once you understand that, it's a natural progression to feel like you know the consumer's need and want to supply that need."
In the future, "It won't be banks that drive the ATM industry from here," he said. "It will be the deployers."
