How to Win Big By Becoming a Lottery Retailer
Growth in the convenience store sector has been steady for the past four years, and in 2018 the industry saw an overall surge in sales of 8.59% to $654 billion. While key drivers of this jump in in-store sales included fuel sales and food sales, another category emerged as having a significant impact on industry sales last year: lottery ticket sales. Let’s delve into some of the avenues of folding lottery ticket sales into your product mix and how doing so can impact your operation’s bottom line. Continue reading for information on how to become a lottery retailer.
National and State Lottery Programs
Lottery programs can be considered to be managed at two levels of oversight – national and state. At the national level, there are several programs that are managed independently of state regulations across state lines. At the state level, there are several associations where member states work together to create consistent lottery programs managed by state legislation. Let’s take a look at each of these levels in more detail.
National Level Lottery Programs
It’s first important to clear up a slight misnomer at the start of the discussion of national-level lottery programs. Officially, there are no lottery management programs organized on a legislative level by the federal government, thus there is no official “national” lottery program. However, two lottery programs have such a broad market presence as to be considered the default national lotteries: Mega Millions and PowerBall.
The management and oversight of the Mega Millions brand – from the financials to payouts to jackpot projections and other administrative tasks – are shared by all member state governments. As such, in order for your convenience store operation to sell Mega Millions branded lottery products, you would have to go through your state’s specific website. The drawings for Mega Millions are centralized and are highly regulated – the security and auditing involved in a single drawing can take upwards of 3 hours for a bi-weekly 60-second drawing event.
The second nationally available lottery brand is Powerball and similarly is managed at the macro level by the collective of states that allow the brand to operate within their borders. While products sold in each state must be redeemed in that state, drawings are centralized to the PowerBall brand’s website and can be viewed as they happen. .
State Level Lottery Programs
Again, it’s important to clarify the terms we are using to differentiate lottery programs we consider to be state-level. Regardless of what game or product being discussed, the state level is where lottery management programs truly live and breathe. Regulations, taxes, fees, and all other costs and associated requirements of participation are defined and outlined by state governments in partnership with other states, so that lottery programs in a general sense play and operate similarly from state to state, with the differences primarily being in the distribution of revenue generated by games, the payouts to retailers on winning tickets, and other administrative and tax considerations. There are two state-level associations primarily responsible for organizing and managing the various lottery programs in every state and territory across the United States.
The first is the Multi-State Lottery Association (MUSL), with 37 state and local legislatures partnering to organize lottery programs. MUSL primarily features the Powerball brand and its variations from state to state on its website, as well as a number of other branded lottery products available to member state lottery programs.
The second organization managing state-level lottery programs is the North American Association of State and Provincial Lotteries (NASPL), and it represents 52 lottery organizations across the United States as well as programs located in the District of Columbia, Mexico, Canada, Puerto Rico, and the United States Virgin Islands. The association’s major function is to act as a platform of communication for lottery organizations to develop and communicate best practices and educational resources for use across the industry, with the added role of advocating for the lottery industry on an ongoing basis.
Becoming a Lottery Retailer
Becoming a retailer for lottery products is a process that is state-specific and requires you to visit your state’s lottery website. There you will find the compensation and benefits specific to your state for being a retailer. Lottery programs are designed with incentives to become retailers by including percentages paid back to the retailer for winning tickets as well as for cashing out winning tickets.
Your state’s lottery website will also include licensing requirements – including the documents you will need to provide, background check and credit check forms to fill out and return, inspection documents, and contacts in government departments necessary to move forward in the licensing process. There will also be very clear documentation outlining your responsibilities as a retailer as well as retailer training materials designed to help you and your staff ensure your retail operation is operating within the requirements outlined by your state’s lottery program.
For our Connecticut-based clientele, the Connecticut Lottery website provides a one-stop-shop where you can find everything you need to apply to become a retailer, as well as how you’ll benefit from participating in the state’s lottery program. Retailers in other states looking for information on becoming a lottery retailer should click on the appropriate state link listed on NASPL and navigate to your state’s link on how to “Become a Retailer”
Benefits of Becoming a Lottery Retailer
When you consider whether or not to get into the lottery game, by the numbers, the retail lottery industry’s statistics speak for themselves. With more than 200,000 retailers in 2018, the lottery industry took in more than $85.5 billion in sales, with $23.4 billion transferred to state and local governments earmarked for education, infrastructure, green space initiatives, elderly assistance, and other socially impactful programs.
As mentioned above, the cost benefits aren’t just going towards the organizations and programs designated to benefit from the lottery programs by state legislation. Programs are specifically designed with incentives to entice you as a retailer to take part in the lottery program. Generally, for every sale of a ticket, a percentage is filtered back to you as a retailer. If a winning ticket is sold, a percentage commission is paid back to your store for selling the ticket. These incentives work out to roughly 5%-6% of ticket sales with commission payouts as high as 1% for jackpots, depending on state-established thresholds. With net margins on fuel sales at the same level requiring more infrastructure and overhead to achieve, the low overhead retail lottery programs sell themselves.
Embracing retail lottery programs has an added residual effect on shopper behavior of increasing a shopper’s purchases at the register. In the study referenced above from the National Association of Convenience Stores, 95% of lottery ticket buyers will purchase at least one additional item while at the POS, creating a spend by lottery ticket customers 65% higher than non-lottery customers.
Lottery Management Systems Make Retail Easy
You might be thinking to yourself that these programs sound complicated, involved, and could cost you more in operations costs managing them than you’ll end up making on the back end. If you were to try and manage a retail lottery program manually, then yes, you’d be absolutely correct. Luckily, Success Systems has a cost-effective solution that will help you integrate a retail lottery system into your operation that will minimize the time you need to spend administering the program.
Our lottery management software is one of the most comprehensive audit and reporting solutions of its kind on the market. With our software, your employees will have an easier time issuing tickets from the various games in rotation and be able to quickly and correctly reconcile payouts. The software can scale to your inventory needs as you add or remove games, and provides the necessary security to ensure the authenticity of tickets sold and any resulting winnings. The reporting systems, designed to provide your management team with the necessary high-level insight into program performance, have the additional benefit of enhancing the credibility and transparency necessary in an effective retail lottery program to guarantee customer trust. And at the core of these reports, the resulting data and analytics create the necessary business intelligence for your senior leadership to make informed decisions when it comes to your lottery management system. All of this goes towards your employees being able to manage your lottery program with the maximum level of efficiency, saving you time and money on labor costs, as well as improving your customer flow through at the register.
Regardless of the type of lottery tickets your program includes – from scratch-offs to pull-offs, from vending machines to a lotto terminal – either of our ePB Books and ePB Accounting software for convenience store management packages will provide your management team with tools to manage real-time inventory, financial accountability, and revenue analysis in a way that ensures you’re getting the most out of your partnership with the established lottery vendors with whom you do business.