Lotteries

Tabcorp has boosted the price money for Lucky Lotteries in a move that appears to seek to drive sales. The prize pool usually stars at $1M and increases $240,ooo each time it is not won. Tabcorp intervened at $2,680,000 and boosted the prize pool to more than $6M.

The unexpected boost makes the product more interesting, more easily pitched, and that’s mission critical for Tabcorp and, I am sure they hope, their retail partners. Certainly, plenty of retailers are pitching it one social media.

Several newsagents have reported sales lower than expected sales from the $150M Powerball jackpot last week. Sales for the $100M the week before were good but the expected jump for $150M did not happen.

A couple of those I spoke with raised the question of lottery fatigue. That is, tiredness among lottery shoppers for jackpots.

Lottery fatigue is a real topic of discussion as you can see at the LA Times, USA Today, KOLO TV and MarketWatch.

While the big jackpots get all the media attention, every day there are winners of smaller am punts who are thrilled with their win. Even low prize wins of $10,000, $1,000 and less are a thrill for the winners, they are something worth celebrating.

One way to combat lottery fatigue at the shop level is to celebrate all the wins, no matter how small, and to pitch the thrill of each price being circulated back to the community.

I think focussing on the everyday when it comes to lotteries would be wise rather than the obsession of recent times on the massive jackpots.

Footnote: to any who say this post has been written to downplay or denigrate lottery sales – you are wrong. I hope newsagents have a bright future from lotteries.

Plans for the next week in many retail outlets have changed as a result of Powerball division 1 not going off tonight. It’s a good challenge to have, particularly right now between major seasons.

The Tabcorp 2018/19 Annual Report will be sobering reading for any lottery retailer for in that year, revenue from online lottery ticket purchases rose 39.8% from the previous year. For reference, online revenue grew 22.6% in the FY17/18 year over the FY16/17 year.

While the company refers to this shift in revenue source as part of its omnichannel, I see it as a migration from in-store purchase to online.

They have sought to support retailers with a modest increase in income, which has complex strings that keep retailers positioned more as servants than partners.

The size of the increase in Tabcorp’s own direct sales does not directly correlate with a decline in sales in-store. However, it is happening from what I can see at some stores. As a lottery customer, the benefits of online and in-app purchases far outweigh the in-store.

For its future, Tabcorp needs to continue to push growth in online purchases as they are, I suspect, more valuable to the company than in-store purchases. With retailers playing such an important part in brand awareness and facilitating access to online, the company needs to keep them in check.

I don’t have lotteries in the newsagency businesses I have today. I did have years ago, but not today.

At some point, decisions will be made by retailers along the lines of decisions some of made many years ago about our home delivery runs. There will be a point when the requirements, price retail space cost and all the hoop jumping is not financially worth it.

What can help retailers today with a decision they may wish to make in the future is success at attracting new shoppers for purposes other than to buy a lottery ticket.

Tabcorp’s latest results are to me a strong call to retailers to relentlessly pursue non lottery new traffic opportunities cities through their businesses. Lottery retailers who do not do this will see their business results perform in line with the results achieved by Tabcorp. If the company continues to successfully grow online purchases and if that is achieved at a cost to in-store purchases then lottery focussed retailers will lose revenue and business value.

To be clear – I am not criticising Tabcorp. If I was a shareholder, which I am not, I would applaud their strategy. My criticism, if there is one, would be at retailers who are not acting already to make their businesses more relevant outside of lotteries. This is mission critical in my view.

Note: the image is from the Tabcorp published investor presentation.

Lotterywest sent a terrific email to its retailers on Sunday:

Thank you for your contribution to an amazing year for Lotterywest and the community organisations we support.

Thanks to you, players and staff this 2018-19 financial year final sales reached more than $985 million*, a 15 per cent increase on last year and a record year in Lotterywest’s history.

The record return is a testament to the hundreds of small, local businesses and retailers who are behind Lotterywest games.

It is another positive step following the new laws to ban online lottery betting organisations and the initiatives announced last month by the State Government to boost sales and create long-term sustainability for Lotterywest’s network of small retail businesses.

Retailer commissions on Lotterywest sales will increase by 10.8 per cent from December this year ensuring Lotterywest continues to pay the highest retailer commission in Australia.

This financial year Lotterywest’s jackpotting games went to $60 million or above, five times, making a significant contribution to our record sales.

Collectively, more than $736 million* was returned in the form of prizes and grants to our State.

We supported 613 not-for-profit community organisations and local government authorities, who received more than $102 million* in direct grants.

$180 million* was allocated through statutory grants which benefit WA public hospitals, sports and recreation, and culture and the arts.

Lottery winners received more than $454 million* in prize money and we met 58 Division One and 44 Scratch’n’Win Top Prize winners in the Winners Room.

These figures have been updated on the Lotterywest website if you wish to share them.

We’re extremely fortunate in Western Australia to have the only lottery in the nation, and one of the few in the world, that is State Government-owned and operated, where the profits raised go directly back to the community.

Check out the story hub to find out how grants have made a difference in your local area and share the news with customers.

We look forward to another fantastic year ahead.

Kind regards,

Premier Mark McGowan and Susan Hunt, PSM, Lotterywest CEO

The AFR reports that the Macquarie Bank has bans credit cards for gambling.

The changes, to start on July 1, will mean any transactions classified under the merchant codes as gambling will be blocked when the card holder tries to pay.

The move is in response to growing regulatory and government concern, both in Australia and overseas, about easy access to credit by problem gamblers.

Other card providers, including ANZ, Bankwest and CBA offering cash advance rates on credit cards, typically charge interest rates of more than 21 per cent. It is not known whether these, or other banks will be introducing a ban.

This story will continue to evolve. A benefit for physical shops is that they can easily take cash as a form of payment. Also, software used in shops that sell items from multiple categories does not differentiate what is in the basket.

Okay so OzLotto did not go off and next week’s jackpot is now $80,000,000. This offers a nice traffic boost that lottery retailers can leverage. It’s an opportunity to seize.

From the front door, within the rules of what is allowed, pitch what differentiates your business, what can be easily understood and what could bring them back.

AMCA, The Australian Communications and Media Authority, released this today:

ACMA finds Lottoland in breach of the Interactive Gambling Act

An Australian Communications and Media Authority (ACMA) investigation has found that Lottoland Australia Pty Ltd has breached the Interactive Gambling Act 2001 (the Act) by providing prohibited interactive gambling services.

The ACMA investigation found that several Lottoland online jackpot betting services were games of chance which are prohibited under the Act.

These included the Mon & Wed Jackpot, Tue Jackpot, Thu Jackpot, US Millions, and US Power jackpot betting services.

Lottoland disputes the ACMA’s findings and has commenced legal proceedings.

Lottoland’s service, Daily Millions, was not found to breach the Act.

The ACMA will not be making further comment while legal proceedings are on foot.

I am grateful to Ash Long from the Melbourne Observer, and friend of newsagents, for sharing this.

The WA Premier made an announcement today of initiatives supporting lottery retailers.

• Retailer commissions on Lotterywest sales to increase by 10.8 per cent from December

• Lotterywest to roll out package of initiatives to boost sales and create long-term retailer sustainability for small businesses

• New initiatives will ensure Lotterywest can continue to support WA community through grants program, which delivered $260 million back to the community in 2017-18

Premier Mark McGowan today announced that retailer commissions on Lotterywest sales will increase by 10.8 per cent from December this year, helping small businesses.

This will increase the total gross commission for retailers from nine per cent to 10 per cent, which is a 10.8 per cent increase overall, ensuring Lotterywest continues to pay the highest retailer commission in Australia.

The increase will form part of a package of initiatives designed to boost sales of Lotterywest products, ensuring long-term retailer sustainability and a strong return for the Western Australian community through Lotterywest grants.

Here is the email sent to Lotterywest retailers:

Dear

Today the McGowan Government announced that we are developing a package of initiatives to support retailers.

This includes an increase in gross retailer commissions from 9% to 10% for most games (excluding Cash 3, Super66 and Scratch’n’Win) which will come into effect from December 2019.

As a Lotterywest retailer, you are important to our business success and we are committed to assisting you where we can in these challenging economic times.

Over the coming months we will engage with you and other key stakeholders on the shared issue of sustainability, to work out what these initiatives will look like and seek feedback.

For more information, please read the full media statement. I have also included the Premier’s personal letter you received yesterday.

Your Retailer Relationship Officer is available to answer any questions you have. You can also contact our Customer Services team on 133 777 or contact@lotterywest.wa.gov.au.

This is a significant project for Lotterywest and we look forward to working together to build a sustainable retail network, so we can continue a strong return for the
WA community.

Kind regards

Susan Hunt PSM
CEO Lotterywest and Healthway

Questions and Answers

What is the new commission rate going to be?
The new gross commission will be 10% for all games excluding Cash 3, Super66
and Scratch’n’Win because these are inclusive of commission.

When will we find out more about the initiatives?
We will send you an information pack detailing these initiatives over the coming weeks.

Will there be a price rise and what should I tell my customers?
There will be a price rise from December 2019. Further information will be provided closer to this date, which will include what you need to tell customers and when.

This, in case you missed the half year results announced by Tabcorp two months ago:

I spent Easter in rural Wisconsin and the only place I saw lottery tickets for sale was at supermarkets, where they had this vending machine close to the main exit door.

XchangeIT reps say they have been asked to connect lottery terminals with newsagency POS software. They are talking with POS software company its about feeding transaction data from lottery terminals to POS software.

As I understand it, XchangeIT will receive transaction data that you select on your POS terminal to add to a sale. If you have multiple lottery terminals the feed will all be to one XchangeIT location and you’ll need to select the right transaction.

Here’s my question for those who capture lottery product sales in their newsagency POS software: are you likely to use something like this or will you stick with scanning tickets?

I am asking the question here since I don’t currently have lotteries in my newsagencies. My feeling is that the XchangeIT planned approach is clunky and that it brings another party to lottery transactions that does not add value.

Here is the ALNA announcement in full:

A better deal for lottery retailers: New Tabcorp model
After years of negotiating, ALNA and LRA are pleased to have secured significant improvements for you.
Today the Lott has announced a positive new retail remuneration model that reduces costs, increases commissions, and opens the door for newsagents and lottery retailers to benefit from digital sales.

We know there was a need for change and ALNA and LRA have worked very hard for many years to conclude a lengthy negotiation on a raft of changes to address shop fit costs, remuneration challenges and the cultural divide created by being excluded from online. We have made numerous submissions and thirty recommendations, and we are pleased to see these being implemented in this comprehensive and positive new model that we have been able to negotiate with Tabcorp to benefit our members.

More details about the remuneration model are attached, with more information still to come. Here is a summary:

New model

• Increased commissions: More than 10% increase in commissions* earned on lottery product sales for outlets who achieve nine criteria that are existing requirements (subject to appropriate regulatory approvals by state gaming authorities for price increases and commission adjustments).                                                                                            For example, for a business with an average of $22,000 a week in lottery sales, this represents $220 extra commission a week or over $11,000 per year. And a retailer with an average of $50,000 a week in lottery sales could earn an extra commission of $26,000* per year – and this does not include the commissions from digital sales and the refund of DigiPOS.         *Retailers that are fully compliant have the opportunity to receive more than 10% additional income from the sale of lottery products (compared with FY18)

• Refund of DigiPOS: Along with other savings already achieved by ALNA and LRA on shop fits, this new model removes all DigiPOS fees, and on top of that you will receive a refund for already purchased DigiPOS screens. For example, a two-screen outlet who had installed DigiPOS already at a cost of $8000, will receive this back in full as a cash-in-hand refund. For stores that install DigiPOS in the future,  the Lott will now pay for the total cost of future DigiPOS screens and all reasonable maintenance costs, completely abolishing these costs for retailers. This change is worth $17million over five years to retailers.

• Digital sales: Recognising that omni-channel customers are the most valuable, retailers will finally benefit from online sales through an opportunity to earn commission and bonuses from all digital lottery purchases by members you register and through registered omni-channel customers who buy online at least once per year.

•  Free membership for customers: Free membership for all customers, win notifications and a digital wallet for prizes that can be used in retail stores for new lottery purchases with no merchant fees.

•  Adjusted franchise fee: A 1% increase in franchise fees is overcompensated by the increase in commissions and a performance adjustment to this franchise fee, along with the other new benefits available from the remuneration model.

How do you access the new model?

• Engage with site surveys and comply with your franchise agreement, including nine criteria that are existing requirements e.g. participating in free training. This is rewarded by eligibility for the new benefits.

• Offer new free membership registration to customers from your lottery terminal to link their online lottery purchases with their in-store purchases so you can benefit. Data shows that customers prefer to use both channels (for example, in-store during opening hours and online outside business hours). These customers spend more overall than any other lottery customer. This results in bonuses and commissions paid to retailers from online sales.

We are here to help you:

• Many of ALNA’s and LRA’s recommendations have been implemented to make this new model easier to use and achieve. And we will be actively providing you with support and advice to help you comply with and benefit from this new model.

• ALNA and LRA will be providing you with site survey guides and a checklist to help you receive a Green Performance Rating, which gives you the highest commissions and benefits available in this model.

• You will receive methods to provide feedback on the model and its ease of use to ALNA and LRA.

• The new model is unable to be introduced in South Australia at this stage and we will be working hard with the South Australian Government, regulators and our retailers there to get agreement on an approach that will allow our retailers to benefit.

We appreciate the patience our members have shown during this lengthy, complex and at times very involved consultation process based on detailed analysis and collaboration. The result is a better deal for our members that addresses many of the challenges and that opens the door for an improved partnership.

We have prepared more information explaining the new retailer remuneration model for members HERE

ALNA’s CEO Ben Kearney spoke at the launch of the remuneration outcome today and you can read his speech HERE

You can also read ALNA’s media release on the outcome HERE

If you have any questions, please contact your State Manager, come to our roadshows in March and April or email feedback@alna.net.au.

For the ALNA Roadshow schedule, click HERE