How much do newsagents make on lotto? is another popular question people put to Google through a search. Indeed, there are at least 50 searches every day in Australia for this.
The short answer to How much do newsagents make on lotto? is … not much.
The actual percentage varies by type of product and location. That said, it is less than 10% out of which the newsagent has to pay for:
- Retail space. With lottery counter space and related requirements taking 15% – 30% of retail space and leases costing $50,000 in high street and $250,000+ in shopping centre situations, the cost can be high.
- Labour. The average hourly cost is $24 Monday to Friday and around $45 an hour on Sundays.
- Some technology.
- Insurance. This can cost several thousand dollars a year.
- Operating overheads like power.
- Ancillary costs such as cash holding for prize payouts.
For many newsagents, having lotto is good as it provides a base core traffic to the business. Smart retailers leverage this traffic for other purchases. However, this is challenging as there are strict rules newsagents have to follow as to what products they can put where. They are not allowed to create a barrier to lottery product purchases.
The real drivers for what newsagents make from lotto are labour cost and rent cost. Newsagents who can control these to minimise costs of both while maximising sales are in the better position. There are plenty able to do this.
In many newsagencies with lotteries, they have staff dedicated to this service. This means they are not able to maximise the labour cost by selling more expensive and better margin products. Lottery customers want to be served quickly. hence, the need for the lottery counter to be staffed at all times. Customer service is a key reason people purchase lottery products in a shop.
So, in answer to the question How much do newsagents make on lotto? I am not saying it is nothing or bad. Rather, I am sharing that there are real business costs that eat into what newsagents make from lotto and that it takes astute and attentive business management to maximise the opportunity while providing the level of service key to growing revenue.
Not all newsagents have lotto in their business and lotto is often available in retail businesses other than newsagencies.
The best customer experience with lotto is over the counter, being served by a human, someone knowledgeable about the games and able to have a chat with you. This is personal customer service newsagents are known for.
Note: I own Tower Systems, newsagency software company.
Tthe majority of lookers we find that if lotto commission pays the rent and its bonus if there is a surpluss after the rent payment then the rest is for Jam.
We know this isn’t all there is to it. The space return versus the mix of the rest of the store -the social eco nomic discretionary dollar for the suburb or locality etc all play a part in this.
However Lotto as an Host Franchise is intrinsic in itself for outsiders. Many won’t buy the business without it, yet they don’t know business nuances anyway.
It is therefore what you do with what you’ve got that makes you successful.
My favourite saying is when asked “how are you going”? I reply I am doing the best I can with what I’ve got”
Most prospective purchasers look to lotto as security and intrinsic in value for it is a lazy constant. Tkae into consideration that if lotto commissions nett the amount of rent plus then the rest of the store performance is a bonus.
As we all know this isn’t the point. Space allocation of having the rest of the store in underperformance mode is like the tail wagging the dog with lotto’s space being the tail yet performing as if was the dog.
Both areas of spce need to perform in their own right.
How much do newsagents make on Lotto is up to the retailer perhaps better put the way the blog says it’s how you use the foot traffic it supplies as to whether you manageto convert to more sales or not. i believe they are the same yet different. If lotto commission were extreme and the shop large in area i would think of having a separate service counter for the newsagency cutomers in the centre of the store giving a separtion of choice for the transaction of the moment.
For me I look for my non lotteries gross profit at least covering rent, overheads and wages including working owner wages. Lottery commissions are therefore the cream on the cake. The problem with lottery sales are that they are low margin and labour intensive. More often than not the average lotteries customer is not a purchaser of other products. I prefer to concentrate my efforts on higher margin sales.
Steve this is a very practical and sensible approach.
one thing we all shouls take into account is stock turns on other products and sales (the number of transactions etc)
How many cards does one buy in a year – 2-3 four or more same with Gifts and all other lines. The lottery purchaser has a freind a brother, sister uncle , aunt it’s just that they don’t buy for them very often. For themselves they are there and buy the staples.
Many say the customer comes in every day and only buys a newspaper and nothing esle.
the same person at another time slot does buy the card -their stationery and other items as well.
One is a service to “take sales” and the other mre profitable items are there to “make” sales.
Both are great for our business and the eny of a lot.
There is no need to prefer one against the other just respect each service we offer for it is what makes us what we are.
Interesting on cards Graeme, the Australian average in 8. In the US it is 12 and in the UK it is close to 20.
From what I see, cards is Ove of the least out of store promoted categories by newsagency businesses.
We all need to review our posts before submitting. The number of spelling, punctuation and general grammar errors makes reading the posts very difficult. It doesn’t need to be perfect, but sometimes I can barely make sense of a post.
Mark thanks for that, I wasn’t aware of the actual average purchase per head, it confirms what you say about the promoting of such a category is underdone.
Peter I agree, I am one of the biggest offenders. I have a very fast latest microsoft keyboard and mouse howver in the past 6 months ever since COVID the Telstra connection of fibre to the node and a lot more people at home our WI-Fi has slowed. The internet actually falls out 5-10 times a day, I reboot and awy we go again. When it’s fast it’s bloody fast when not it’s frustratingly slow.
Taiking with Telstra -if one can these days, they suggest strongly that I upgrade if I am operating from home. I explained that I operate from home and it’s encouraged by all Governments whenever possible.
Time concious people tend to do things at the same speed as before however I need to rejust my approach especially as there is no spell check for blogs, as I can see anyway.
i will try to be more patient and check before I click.
I’ve had a look at the maths as I’m looking to purchase a convenience store/supermarket, and once you add in their transaction charges, it’s pretty poor.
They list the commission at:
9% for $1 Instant Scratch-Its
8% for all other Instant Scratch-Its
10% for Lucky Lotteries
10.3% for all other Lottery Products
However, after transaction fees, you’re looking at:
7.2% for $1 Instant Scratch-Its
6.2% for all other Instant Scratch-Its
7.9% for Lucky Lotteries
7.2% for all other Lottery Products
Lotto expects a Minimum Average Weekly Sales Amount of $2,519 per week.
If you take that figure, and have an average 7% commission, your business would get $176.33 per week in commission, or $9200 a year.
For $9.2k, you’re expected to pay Lotto
$820 just for the right to apply.
$27.5k “site establishment fee” if you’re approved.
All outfitter costs (likely $10-15k).
$2842 training cost for two employees/supervisors (not including their wages).
plus
(unknown, maybe $800/year) Lotteries Special Risks Insurance and Professional Indemnity Insurance
$275 yearly fee from Lotto.
Extra fees if there are any changes to the business (there’s a list).
In addition, you have to pay for the employees to staff the Lotto counter, electricity & other costs, and keep cash immediately available for any cash prizes up to multiple lots of $1499. And the Lotto counter is typically insisted to be at a position that detracts from other possible quick impulse buys.
The only way it could possibly be worth it, would be if it attracted more customers for other things who would have gone elsewhere than it strips away, including that existing customers would likely spend less money on other stuff.
Query – In Australia, what is a profitable weekly net earning for every 100k AUD spent on buying a newsagency for an owner operated store selling lotto, tobacco and gift items?
Hi Sanjeev, no one can answer the question you have asked as there are variables that would impact the answer like the revenue of the business, the product mix. I know a business for sale for less than $100K that would provide $2K a week in owner income. I know of another for sale for $750K that on current numbers would provide owner income of $1K a week.
You mention tobacco – that’s a dead category for most in the channel.
Thanks Mark! Much appreciate an honest response! If I may ask – what business is it the one on sale for 100k and potentially earning 2k a week, please?
Hi Sanjeev, I’ll respond privately.