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7-Eleven's Vcom wins raves at RD

A presentation by Jay Giesen, the new leader of 7-Eleven's Vcom program, resulted in a lively Q&A session at last week's Retail Delivery Conference & Expo, and crowds visited the NCR booth to kick the tires on the kiosk.

November 12, 2002

Big Gulp is 7-Eleven's signature super-sized soft drink.

It may also well have been the reaction of the retailer's Board of Directors when it was asked to approve the expansion of the company's Vcom program.

Vcom, which stands for "virtual commerce," is what 7-Eleven calls the financial services kiosks that is installing in 1,000 of its stores. Though NCR, the manufacturer of the kiosks, has never disclosed what 7-Eleven pays for them, the cost of a single kiosk outfitted with similar features - including a Pentium processor, 17-inch touchscreen, bunch note cash acceptor, card dispenser and customer service phone - would be up to $40,000, according to information supplied by NCR.

While 7-Eleven plans to put a Vcom in 1,000 stores by March of 2003 and add another 2,500 locations beginning in July, it's uncertain if any of its remaining 2,200 North American stores will get the kiosks.

One size does not fit all

"This is never going to be an all-store program," said Jay Giesen, manager of the Vcom program. "We'd love to put one in every store, but the economic model just doesn't make sense right now."

Whether or not the program expands beyond the 3,500 stores, 7-Eleven has raised the bar on functionality. While the ATM industry is now abuzz about adding new services like money orders and check cashing to the transaction set, 7-Eleven was the first to actually do so. The retailer was also one of the first to switch from an OS/2 to a Windows NT-based platform.

Brad Lozier, NCR's vice president for NCR's Financial Solutions Division, called 7-Eleven "far and away the most advanced customer in the world in terms of providing services which had previously not been available in a self-service environment."

7-Eleven has already selected the first 3,500 Vcom locations, based upon the demographics of its target audiences. One key target is persons without bank accounts, which research indicates is about 14 percent of the U.S. population. The retailer also analyzed its competition, including supermarkets and check-cashing outlets.

It's possible, Giesen said, that some 7-Eleven stores might get a less expensive kiosk with not quite as much functionality. "There might be future opportunities down the road for a lower-end machine."

The company recently rolled out 49 Vcoms in Orlando, Fla. Giesen, who joined 7-Eleven in October after leading a Western Union initiative to deploy advanced function ATMs that resulted in several pilot sites in Texas, said one clerk's experience illustrated the need for the kiosks. "She had someone who came in at 11 p.m. to cash a check and then send an emergency money transfer," he said.

Vcom 101

7-Eleven first began exploring the idea of offering financial services in 1994. Its original effort, involving manned centers, generated positive results, with an incremental lift in sales at the 25 Texas locations where it was offered. However, Giesen said, it was too expensive to staff the centers.

The reason for adding finance to an environment better known for its Big Gulps was simple, Giesen, told a group of bankers attending last week's Retail Delivery Conference & Expo in Atlanta. "The convenience store industry is a lot like the banking industry. We have a lot of merger and acquisition activity and competition from new, non-traditional players."

7-Eleven also already offered some financial services at its stores, including more than 100 million ATM transactions and 30 million money orders a year.

7-Eleven began working with NCR in 1998 and created a kiosk that offered money orders and money transfers as well as standard ATM transactions. The original kiosks, which were an unwieldy 9 feet long and ran on an OS/2 operating system, were installed in 37 stores in Austin, Texas.

The two companies refined the kiosks, shrinking them to 5 feet and switching to a Windows NT operating system, before adding them to another 57 locations in Texas and Florida. In July of 2001, check cashing was added.

Killer app

Offered through 7-Eleven partner Certegy, check cashing has become Vcom's "killer app," Giesen said. Approximately 12,000 checks are cashed each month at the first 94 locations.

"The key business drivers are the ATM surcharge and check cashing. The others are opportunities for incremental revenue," Giesen said.

The Vcom kiosk was a crowd-pleaser in the NCR booth at last week's Retail Delivery Conference & Expo in Atlanta.

"Others" to be added in coming months include telecommunications services through Verizon and e-shopping through Cyphermint. 7-Eleven is also interested in stored value cards, auto insurance, sub-prime loans, bill payment -- which Giesen calls "critical" for the program's success -- and retail banking services such as mortgages, credit cards and depository capabilities.

In addition to Certegy, Verizon and Cyphermint, current 7-Eleven partners are American Express (ATM services) and Western Union (money orders and money transfer).

7-Eleven established an arrangement in which its partners help defray some of the expenses of the program which, in addition to the hardware and NCR's APTRA software, include Mosaic Software's transaction processing platform, cash replenishment by Brinks and first- and second-line service, also provided by NCR.

"Partnership is more than a buzzword with this program; it's a requirement," Giesen said, adding that the recruitment process was complicated by the fact that none of the services had previously been offered in a self-service environment.

The look of Vcom

Today's Vcom is just three feet wide and features fully integrated modules, unlike the second generation of the kiosks, which featured a Personas 78 ATM/sidecar combination. The Vcom logo and words "Checks cashed" are emblazoned on a bright red and yellow surround.

Some early Vcom designs were "too futuristic," said NCR's Lozier. "It looked too foreign, and we weren't sure people would want to use it. We went with something that was much more like a traditional ATM, yet friendlier. It has a touchscreen and big buttons, for instance."

A key challenge, Giesen said, is letting potential users know Vcom is available. Earlier this year, 7-Eleven began using greeters during peak hours - much as banks did, with obvious success, when ATMs were first introduced.

"Once someone has tried the machine and seen how easy it is to use, we think they'll come back again and again because they like the convenience," Giesen said.

Last October, the retailer introduced print, radio and television spots in areas with Vcoms. One 15-second TV spot features a frantic man trying to cash a check and ending up at a 7-Eleven, where a woman resembling the "The Wizard of Oz's" Good Witch encourages him to "Bank with the Big Gulp." Advertising efforts are complicated somewhat by the fact that Vcom is still far from a national program.

Eight district executives will manage a group of field consultants who -- armed with manuals and CD-ROMS -- will visit stores with Vcoms for employee training sessions, Giesen said. To assist in training efforts, 7-Eleven cashes all of its employee checks at Vcoms for no charge.

The fees 7-Eleven collects from customers, which vary from market to market, help make up for shrinking ATM transactions, which are declining throughout the industry on a per-machine basis as the number of ATMs continues to grow. Giesen said the retailer did experience an uptick in ATM transactions at some of the first Vcom locations, although he couldn't provide numbers.

Giesen said 7-Eleven bases fees for most services, such as check cashing, on what the local markets will bear. "We're probably not going to be the lowest cost, but we're not going to be the highest either. We want to be competitive," he said.

There is also an obvious benefit, Giesen said, in attracting "not only new customers, but new customers with cash in their hands."

According to Giesen, 7-Eleven believes an estimated 54 percent of Vcom users will make an additional purchase in the store. With the capability to "chain" Vcom transactions and maintain a "virtual balance" while a customer is at the kiosk, Giesen said 7-Eleven also encourages them to make multiple purchases while using the machine