Gas, tobacco and cold beverages may be what get customers in the door. But don’t discount good old-fashioned luck in the form of lottery scratch-off and computer-generated tickets. They represent a consistent revenue stream for convenience operators, generating about $8,000 in sales weekly and 9% of total convenience sales, according to Management Science Associates (MSA).
“Lottery remains a very reliable source of revenue that sells itself,” says Don Burke, senior vice president of MSA, Pittsburgh. “It’s a category consumers rely on being able to purchase at a convenience store.”
But lottery is more than merely consistent; data suggests that it’s also complementary in building the market basket. Ninety-five percent of lottery buyers purchase at least one extra item inside the c-store, and the overall basket ring by these lottery customers averages $10.35, according to NACS. In comparison, those not buying lottery spend $6.29.
Curious which goods get rung up most often with lottery? Recent SwiftIQ findings shared at the 2017 NACS State of the Industry Summit point to 10 categories:
- Newspapers (112% more likely to be purchased with lottery)
- Bakery items (68%)
- Coffee (59%)
- Cigarettes (60%)
- Soda (56%)
- Bottled water (50%)
- Prepared food (50%)
- Pizza slice (48%)
- Energy drinks (41%)
- Gasoline (27%)
So is lottery the primary purchase driver, or a reactive afterthought? It depends on the size of the windfall. “Lottery is typically an impulsive, add-on purchase to some of the staples and destination items that drive consumers to a convenience store, like fuel and cigarettes,” Burke says.
But the dynamics change when the payout does. “The state lottery and multistate games are very dependent on the jackpots,” says Steve Montgomery, president of b2b Solutions LLC, Lake Forest, Ill. “When those jackpots get to a certain size, sales increase at a rapid rate. I think this is due to non-lottery players deciding to play.”
Burke concurs: “It is proven that when lottery jackpots increase, so does convenience-store traffic. That fact suggests that higher lottery amounts become a destination vs. an impulse transaction.”
Tales From the Trenches
Lottery is more than an impulse sale for Dev Chaudhari. Owner of five Green Apple and Stop N Go c-stores in the Gainesville, Fla., area, Chaudhari considers himself a lucky operator: One of his stores pulls in $1 million in annual lottery sales (more than double the average estimated by NACS) and counts 60% of its patrons as lottery players. He credits this to the fact that the store is on a main highway, has many low- to middle-income customers who often play the lottery, offers a wide selection of games, and provides prompt service that keeps checkout lines moving quickly.
“Eighty percent of my lottery customers are scratch-off buyers, while 20% play the online games like Powerball,” says Chaudhari.
Less than 10% of these shoppers are impulse lottery buyers, he says. “Some customers come in up to three times a day to play, spending up to one hour to scratch-off tickets right in the store after spending $300 or more.”
Four out of five of his lottery consumers purchase additional SKUs, the most common coming from the tobacco (60%), snacks (30%) and alcohol (10%) categories.
Lottery is big at Signal Food Stores too, where beer and liquor, cigarettes, fountain drinks, coffee and fuel most often accompany a lottery transaction.
“Lottery buyers are some of our most frequent customers,” says Sean Bumgarner, vice president of Scrivener Oil Co., the Ozark, Mo.-based parent company of 11 Signal c-stores in Missouri. “But I’m not sure they’re entirely loyal, as it seems that the most hardcore of our lottery buyers also visit our competition to purchase lottery tickets.”
Pat Determan, owner of Lyons Filling Station in Clinton, Iowa, says he operates in a blue-collar town, where buying lottery is viewed as a priority and tobacco is often purchased with tickets.
“We sell anywhere from $300 to $500 in lottery ticket sales per day, with sales peaking on both Wednesday and Saturday when Powerball drawings occur,” says Determan.
When the prize climbs to $300 million, “nine out of 10 people who come to our register will buy at least one $2 ticket,” he says. “If the pot is a normal $40 million, you do not get the same volume. When it gets to $100 million, more people will buy a $2 ticket.”
Improving the Odds
Want to encourage grab-and-go shoppers to pick four or more on their way out the door, or incentivize the lottery-minded masses to indulge in a packaged snack? Don’t rely on random chance—be proactive via promotional and propitious tactics.
Start by regularly publicizing lottery at the pumps and counter, especially when jackpots go higher, Burke suggests.
“Signage at the fuel pumps lets them know lottery tickets are available inside and can compel them to purchase, particularly if there is a high prize amount,” he says.
Also, consider offering bundled deals and discounts. “Place a cooler near the lottery register and offer something like two Red Bulls for $3 if they purchase lottery,” says Burke. “It’s all about effective signage around the area and secondary placement of products that are commonly in the market basket when lottery is bought.”
Chaudhari recommends offering a wide variety of scratch-off games and opening more facings of the same games to entice buyers to try their luck from different stacks.
Also, have a plan for high-traffic lottery days, and aim to improve the in-store experience for all shoppers, including lottery buyers.
“We have a separate area near the checkout where scratch-off buyers can play and not hold up the line,” says Chaudhari, who hired a second employee just to handle lottery sales at his lottery-centric location. “I’ve seen employees at other locations become annoyed at the time a customer takes to pick out a scratch ticket or pick their online lottery numbers. This makes customers less likely to purchase anything else or even return,” says Bumgarner of Scrivener Oil. “Remember that customers are not an inconvenience—they are the reason we’re here, and we need to make them feel that way.”
Try to reward loyal lottery clientele, too.
“We take care of our common customers who come in regularly to play and who spend a lot of time in the store by giving them a free bottle of soda or water,” Chaudhari says.
And remember that drawing attention to lottery becomes particularly important when America prospers.
“Studies have shown that lottery sales go up when the economy is bad, as consumers are looking for hope and luck,” Burke says. “When consumers have more money, they don’t necessarily think of the lottery—they see it as more of an aspirational-type purchase.”
A Jackpot of C-Store Facts
- About half of all U.S. lottery tickets are purchased at convenience stores.
- Lottery accounts for 9% of total c-store purchases.
- Average lottery sales weekly per c-store is $8,000.
- C-store lottery transactions peak on Wednesdays and Saturdays.
- Strongest c-store lottery sales occur from 3 to 5 p.m.
- C-store lottery commissions: typically 5% to 6% (depending on state)
Sources: NACS, MSA, SwiftIQ
The Scratch-Off Basket
While a fuel purchase is the most common item to accompany a scratch-off lottery ticket purchase, premium cigarettes are not far behind in frequency.
|Carbonated soft drinks||3.1%|
|Branded discount cigarettes||1.1%|
|Ready-to-drink iced tea||0.9%|
* Percent of scratch-off market baskets that include the item