Lotteries

Retailers selling lottery products, especially outside Western Australia, should read the latest results released by The Lottery Corporation. The investor presentation desk along with the ASX release contain useful information, including this from the CEO:

“We grew our active registered customer numbers and digital share on the pcp and, pleasingly, held onto most of the gains we made during the large jackpots in 2H24.

“This was delivered against a backdrop of 14 per cent lower Division 1 prize offerings across our three most popular games, and economic pressures that saw consumers increasingly seek value and purchase less frequently. The below-model jackpot outcomes are part of the variation in jackpots that can impact volumes in the short term, but naturally smooth out over time.

“We have been pleased with the success of the new Weekday Windfall lottery game, which is resonating strongly with customers. Our next game refresh will be to Saturday Lotto – our second-largest game – which includes increasing the Division 1 prize from $5m to $6m.

“The lotteries market continues to be attractive, delivering uninterrupted, long-term growth, generally ahead of combined population growth and inflation. This, together with the strong fundamentals of our business, underpins our ability to generate strong returns for shareholders through the economic cycle.”

Elsewhere in their published materials they call out digital for its value to their business:

Digital share growth vs pcp, driven by own-digital turnover, benefited margins

Digital is sitting at 40.4% of turnover. Two years ago TLC was reporting digital sitting at 38.4%.

A challenge for retailers remain unchanged: restrictions on use of retail space, especially in city and suburban locations that are more regularly and easily visited for compliance checks.

The Lottery Corporation has recently written to its retail network with an updated position on the sale of tobacco:

The recent media attention given to the illicit sales (i.e. sales not permitted by law) of vapes and tobacco products has resulted in some adverse publicity and brand risk for retailers who sell lottery products in addition to tobacco products.

While we acknowledge that the vast majority of retailers do not engage in these activities, this heightened scrutiny is a reminder that retailers must always adhere to the law and act with integrity, fair dealing, and ethical conduct under the Business Operational Requirements outlined in Clause 4.2 of the Franchise Agreement.

The Lott will now ask whether retailers sell tobacco products, and where a licence or registration is required confirm that retailers are licensed or registered, as part of the Site Survey program commencing from Cycle 3 FY2025 on Monday 6 January 2024.

This new process will involve our Site Survey partners confirming you have a valid tobacco licence or registration, taking a photo of it and noting the expiration date.

The associated Outlet Procedures Manual update notification will be available on Retailers Web from Tuesday 17 December 2024.

Any lotteries retailer found to be engaging in the illicit sale of vapes and tobacco products will be in breach of their Franchise Agreement and risk termination.

This is a good move given inaction by federal and state authorities in relation to the sale of illegal tobacco and vape products. It will be interesting to see the extent to which The Lottery Corporation backs up their note with action.

This is a big issue for The Lottery Corporation since they proudly promote values that one could argue are not aligned with the sale of tobacco and vape products at all.

We believe in building a better tomorrow, which for us means making real change for our customers, small businesses, our charity and industry partners and government stakeholders.

I wonder, too, how their support, even if it is indirect, is viewed by the health and community groups with which they are aligned.

Some retailers promote tobacco as they know it leverages well off the lottery traffic. Since the The Lottery Corporation retail network is franchise network, The Lottery Corporation has a significant role to play.

It will be interesting to see how this issue plays out in 2025.

The Lottery Corporation (TLC) published their full year results this morning in which they reported that for the full year, 40.9% of lottery revenue came from online, for which they note: Nearly half of the growth in digital share came from digital sales on which commissions are retained.

On the $200M Powerball jackpot, they note on page 16: Turnover of $320m; equivalent of 1 in 2 Australian adults purchased an entry; digital sales 47%.

On page 16 of their deck they note: Elevated personalised marketing through digital channels.

Digital features in their plans:

At least one analyst has noted today that in the second half of the financial year, digital sales hit 42% of revenue.

What all of this means for lottery retailers is: focus on attracting shoppers to your business for products beyond lotteries while serving lottery customers the best you can.

Lottery shoppers are migrating to digital purchase. I think in-store purchase will decline except for big jackpots. Act now to make your business attractive for non lottery purchases so that the migration does not negatively impact the value you derive from your business today and when you choose to exit. Lobby to limit capital investment in representing TLC in your business and push to open the currently quarantined TLC required space so you can pitch other products, like some of your competitors are allowed today.

Also, if I had lotteries in my businesses, I would be actively pitching syndicates through TheLott app to capture business outside of my shop. What TLC has enabled here in the last year in this space is terrific for retailers I think.

Click here to access all the ASX announcements from TLC.

Now, if you are still with me and reading this, thank you by the way, here is what TLC should do to better connect with and support the retailers who do currently account for the majority of their business:

1. Open the TLC dedicated space and allow retailers to reasonably place other products to maximise the lottery shopper visit.
2. Work with retailers on seasonal collab opportunities.
3. Make it easier for people using the TLC website or app to find nearby retailers.
4. Pull back on some breach criteria as the stress caused for local small business retailers does hot match some infringements.

I don’t think any of these moves would harm or damage business prospects for TLC. In fact, I suspect they would improve thanks to retailer happiness.

On the issue of suppliers to retailers also selling direct to consumers, this is a road suppliers need to navigate thoughtfully and with respect to the retailers they supply. TLC makes it clear in the presentation that selling direct is more profitable for them. As a public company, driving shareholder value is their top obligation. However, lumbering retailers with obligations that hold back the retailers is, in my opinion, unfair, socially irresponsible. TLC needs to address this.

I read recently a news article claiming that around 30% of lottery sales were online. That number is wrong when you consider the FY2022/23 Annual Report from The Lott:

The Lottery Corporation’s digital reach

The Lottery Corporation continues to successfully grow its digital presence through the release of regular website and app enhancements, data-led personalisation, and dedicated marketing focus to maximise visibility and traffic. Our business adjusted for the return of pre-COVID purchasing behaviours which, as expected, had a greater impact on our Keno business than our Lotteries business (being more closely associated with in-venue play in pubs and clubs which were closed during COVID). Our digital channel is a growing and significant part of our business, accounting for 38.4% of Lotteries turnover and 13.9% of Keno turnover in FY23.

Their half year results released in February this year saw this grow.

1H24 also saw digital share growth resume (up 120bps to 39.6%) following a period of consolidation of COVID era gains. 

It stands to reason that the number will be higher in the soon to be released FY2023/24 Annual Report.

A newsagency business in Australia is closing next week and the lottery part of the business is moving to a local real estate agency.

This move is another example of The Lottery Corporation significantly relaxing its approach to what makes a good retail fit for its products. I expect there are plenty of existing lottery retailers keen for similar relaxing of the rules that apply to their offering of lottery products – like space allocation and use.

As I wrote here on May 3, the tech implementation by The Lott for the new game has been selfish and poor.

Despite strong protests from me to senior management at The Lott, they, in their infinite wisdom (bless them), plan to reuse a product code for the new game. This  code is currently linked to a payout department.

In our opinion, this is a seriously stupid and dangerous move by The Lott. They should have used a completely new product code.

Failure to adhere to the steps outlined in our knowledge base advice will result in all sales for the new Weekday Windfall game being treated as payouts or lotto wins. This risks you disbursing funds to customers by mistake.

Have you taken steps with your newsagency software to be ready? If you haven’t, and a mistake at the sales counter is made, it could be expensive.

When I was in Perth on Tuesday morning this week I opened TheLott app on my iPhone and purchased a ticket. Lotterywest and Lotterywest retailers should be concerned about this.

Here’s the latest ad from TheLott on TikTok. This is 100% focussed on driving direct digital purchase with no mention of in-store.

While TheLott needs to do what it can to drive sales, and therefore shareholder value, the company places selfish, onerous and restrictive demands on its retailers, denying them the opportunity to maximise opportunities for their retail businesses.

I’d like to see TheLott ease demands and restrictions on its retailers, to allow them to make more profitable use of their retail space. This latest TikTok ad campaign opens an opportunity for this discussion since it is 100% about TheLott’s digital sales.

For those unaware, TheLott imposes tight restrictions on its retailers as to how space is used at, near and leading to the lottery sales counter. These restrictions deny retailers revenue opportunities. One could argue that the rules and restrictions placed on retailers by TheLott are all about branding that, in time, will have played a role in digital migration.

I think TheLott has invested in this TikTok ad because it knows there are shoppers in the TikTok viewer pool they can attract. The restrictions they place on retailers deny them maximising the same opportunity for their businesses.

Lottery purchases will continue to migrate online. It’s convenient for purchase, ticket checking and prize redemption. I am not saying it is over for in-store purchases. Rather, there is more growth opportunity from online I think.

Powerball jackpotting last night and setting up a $150M first prize draw for Thursday next week will be a distraction in plenty of shops over the next week, unfortunately.

While many will cheer the sales and commission boost, sustained value for retailers is a challenge given many who will visit a shop for the first time to buy a lottery ticket will not look around, get acquainted with the business and plan to return. That’s not the fault of the retailer. rather, it’s what happens with huge jackpots like this.

Given the selfish and tough rules from The Lott as to how the space they control can be used, retailers have few options to leverage greater value from the lottery jackpot shopper.

A chunk of hours allocated for the next week on back to school, Valentine’s Day and other better margin and more sustained opportunities will take a back seat in labour challenged shops.

The jackpot is good for most retailers for sure. I suspect, however, it will be of even more benefit for online sales.

If you have lotteries in your newsagency, I hope the week is huge and profitable for you.

Several lottery retailers have contacted me to discuss this. The thing is, we won’t know until the day.

Boxing Day sales are bigger in some states than others.

In locations where it is a big sales event, lottery customers may impact store traffic and this could dampen sales results.

In locations there Boxing Day sales are not a thing, the jackpot presents an opportunity.

If I had lotteries and was running a Boxing Day sale I’d prepare the shop layout and register placement such that any lottery traffic bounce did not hurt hoped-for Boxing Day sales.

I’d also try and leverage each opportunity for the other.

Lottery jackpots are a terrific boost sales, but unwelcome when they hinder better margin business.

A Boxing Day sale has more opportunity for return business that a lottery jackpot I think.

I saw The Lottery Office being promoted on a huge billboard at Essendon Fields in Melbourne a few days ago, promoting huge jackpots. Going to their website they are pitching prices bigger than current Australian lottery jackpots.

I recall politicians saying they would ask on overseas lotteries being promoted in Australia yet here is The Lottery Office as big as ever, representing their global ownership.

While Lottoland may have retreated from this ‘betting’ space, The Lottery Office has not. Theirs is not a betting pitch like Lottoland.

When a player purchases a lotto ticket online in one of The Lottery Office’s official Government licensed lotteries, The Lottery Office purchases a matching ticket with the same numbers in an overseas draw. In the event of a win, The Lottery Office collects the prize amount*, and then pays the winner the exact same amount collected, guaranteed!

If I was a lottery retailer with The Lott, and gee I am glad I am not, I’d be angry at what The Lottery Office is doing since it is expensive to be a franchisee for The Lott.

I am grateful for the opportunity to attend the 90th birthday celebration of Lotterywest in Perth last week. It was a terrific night celebrating this much-loved organisation.

It was wonderful hearing stories of how grants from Lotterywest to community groups and others had helped so many locally. From local schools to health organisations to environment projects, funds from Lotterywest make a positive impact in Western Australia.

It was equally wonderful hearing genuine appreciation expressed for the retail network, which is primarily made up of newsagents. The Premier, Lotterywest Chair and others all commented on the importance of the retail network and the true partnership between them and the Lotterywest organisation.

You only have to see the recent commission increase, recall the generous financial support through Covid and understand their process for new outlets to see the practical and mutually valued nature of the relationship.

The Premier in his speech made note that Lottery was unique, the only state owned lottery business in Australia. This ownership position is key to the practical value Lotterywest is able to deliver for local communities as well as between supplier and retail partner.

Newsagents at the event were appreciative of Lotterywest. I think key to that is the trust and respect for the Lotterywest brand in the community. Selling Lotterywest products is like selling support for the local community.

Happy birthday Lotterywest and may there be many many more understate ownership.

The latest Annual Report of The Lottery Corporation, released this week, is worth reading if you’re a lottery retailer. as it provides a good roadmap on their plans. It also includes insights on digital (online) revenue versus in-store.

A continual focus on digital innovation, combined with leveraging data to personalise marketing and optimise customer experiences, saw the digital share of Lotteries turnover grow to 38.4%, driving margin improvement. Customer analytics and personalised communication continues to deliver commercial uplift, increasing the efficiency and effectiveness of our advertising.

Digital was 18% 5 years ago. While it has grown over time, the growth in recent times is modest.

For context, further in the document (pg 17):

In terms of distribution channels, digital turnover increased by 0.4% and retail turnover decreased 2.7% – a solid result considering overall Division 1 prize money on offer, which drives store traffic, was down. Digital turnover accounted for 38.4% of all Lotteries turnover. The introduction of Store Syndicates Online added to digital performance, and active registered Lotteries customers grew by approximately 132k in the year to 4.2 million. Across our two distribution channels, we’re investing in accelerating convergence and in enhanced personalisation of digital experiences.

I think this is a key note (pg 20):

We invest in a digital program that aims to align with the way customers consume media and engage with our product.

And this is interesting (pg 20):

We continue to strengthen and diversify our physical retail footprint to meet our customers’ evolving preferences.

From a lottery retailer’s perspective the report reads well. It certainly notes the value of introducing store level syndicates to the digital offering. Retailers tell me they certainly like this. Customers I have spoken with like it too.

I’d like to see TLC relax in-store space and location requirements so as to enable retailers to more easily leverage lottery traffic and drive lottery traffic. I wonder if that will happen as they further diversify their retail mix.

I’d also like to better understand the apparent shift I retailer focus. It feels like they are approving more tobacco outlets, which if true, would be at odds with words from the company about community and health. I mean, what good comes from tobacco products. Also, reports this year show that retail channel to be loaded with challenges.

The Lottery Corporation has issued an update to the manual that documents rules for retailers selling their products. The rule update bans the use of Buy Now Pay Later (BNPL) payment methods for the purchasing of lottery tickets.

While this is a matter for The Lottery Corporation to determine, operationally in retail there are implications as I covered in correspondence from my newsagency software company, Tower Systems, to senior management at The Lottery Corporation.

I have just seen the rule changes in relation to buy now pay later.

The problem is that this rule will be very difficult for retailers to enforce given that AfterPay gives customers now a virtual card on their phone and it presents across the counter as a credit card payment.

We have looked at whether we can automatically block the payment from within the POS software. With tech today, it’s the banking organisation that manages types of payments.

We could do something along the lines of what we have done with the Indue, cashless welfare card, work, check what’s in the basket and manage restrictions. But that would cost a chunk of money and it would involve tech changes from many parties.

What POS companies like Tower could do, but it would have a cost, is interrupt a transaction with lottery products in the basket where card payment is presented and require the retail staffer visually check the type of card being used before allowing it to proceed or not.

The challenge here is that your company has issued the new rules without thinking through real world implications.

I can see situations where retailers unwittingly accept AfterPay as a method of payment, costing the retailer valuable margin dollars and putting them in breach of the rules that govern their sale of lottery tickets.

With the way BNPL payments are handled across the counter today, it is only with a visual check of the virtual card being used that the retail associate can have the information required to know what type of card has been used.

In high traffic settings the time disruption for such a check will be challenging to deal with. There are also shoppers who will not want to show their phone to show the method of payment.

An integrated tech solution is better for all concerned. But, doing this properly would be expensive.

The less there is a requirement for human engagement on checking the better for all concerned.

While BNPL providers have their own rules, I think The Lottery Corporation is more likely to enforce the rules than the BNPL providers.

Hopefully, a workable solution can be found.

In the half year results released by The Lottery Corporation released yesterday there are some data pints that may interest newsagents.

It is terrific that Lotterywest approached its existing existing retail partners to apply for additional locations:

Interested in another Lotterywest outlet location? 
The next round of new Lotterywest locations will be available on our website and open for Expressions of Interest from tomorrow.

The Expression of Interest process sources new Lotterywest outlets and business owners, giving retailers the best opportunity to operate a successful lottery business in prime locations for player access.

These locations have been approved after thorough analysis that indicates unmet player demand, minimal impact to existing retailers and a benefit to the community.

How to apply?

You will be able to apply for these new locations via the Lotterywest website and on Retail Link.

Anyone interested in opening a new outlet for any of these locations must complete and submit an online application by 5pm, Wednesday 29 March 2023.

We are also holding an online information session on Tuesday 28 February at 5.30pm. Please email retail.enquiries@lotterywest.wa.gov.au to register your attendance.

If you would like to receive an email notification in future, on the day that new locations are advertised, you can subscribe via the link located on the Lotterywest website.

If you have any questions, please contact Customer Services on 133 777 and ask to be put in contact with Retail Support or your RRO.

I’m in the US for the Atlanta Gift Fair as well as to look at innovative retail while the National Retail Federation conference is on here. Yesterday, I got to visit the Player’s Club, a fresh approach to lottery retail. I shot a short video about it just now:

Lottoland has launched KenoGo in Victoria.

It will be interesting to see how it plays out. The move follows the company winning a 20 year licence.

Newsagents are reporting a surge in instant scratch ticket sales in the lead up to Christmas 2022.

In our small country town shoppers prefer Powerball and OzLotto. But this Christmas something happened and scratches were all the go.

Around 20 newsagents I have spoken with say sales doubled, some tripled and a couple even quadrupled.

Last year I sold 44 scratchie packs, this year I sold 160 gift packs

I had no idea as I don’t have lottery products in my shops. The feedback was fascinating.

It started in November. We ordered more stock. December was huge. And it didn’t hurt our regular gift sales.

Several sold out of all scratch ticket stock completely.

I sold out completely. They were a more common Christmas gift than I’ve ever seen.

I’ve not heard a bad story about scratch ticket sales for Christmas. But, the sample size is small.

Talking with a group of newsagents the other day, I wondered if it was an economic indicator. Back when I did have lotteries in one of my newsagencies, there were customers who would buy one of the $10 scratchy tickets as a gift because they felt the gift was worth more than the ticket price.

I’ve not noticed any change in marketing for scratch tickets. So it’s hard to be sure as to why sales this Christmas were so strong. My hunch, though, is that economic factors, or concerns, did play some role in the apparent sales surge.

It will be interesting to see sales results from The Lottery Corporation, to see if they match anecdotal comments so far.

Lotterywest has been engaging with existing retailers on the process of considering new possible locations:

Dear

In June we launched our new Expression of Interest process for sourcing new Lotterywest outlets and business owners, giving retailers the best opportunity to operate a successful lottery business in prime locations for player access.

New locations
Lotterywest identifies locations by assessing their potential to support a new outlet and is only approved after a thorough process that indicates unmet player demand, minimal impact to existing retailers and a benefit to the community.

New locations approved under this new process are now available to view via the Lotterywest website and on Retail Link.

Anyone interested in opening a new outlet for any of these locations must complete and submit an online application by 5pm, Wednesday 9 November.

Expression of Interest applications
Applications for new locations are assessed through a fair and competitive process, considering the most suitable combination of location, business type and business owner.

Business plan assessments, site visits and face-to-face interviews will be conducted with shortlisted candidates before appointing the successful applicant.

How to apply?
Please visit our website to view available locations, download our EOI Information Pack, and apply.

We are also holding an information session on Tuesday 4 October at 6pm. You can attend in person at our Lotterywest office or join online. Please email retail.enquiries@lotterywest.wa.gov.au to register your attendance.

If you have any questions, please contact Customer Services on 133 777 and ask to be put in contact with Retail Support or your RRO.

Kind regards,
Lotterywest

The most common complaint I get from retailers about The Lottery Corporation is their lack of transparency and fairness when it comes to new outlet consideration.