Surprise Of Surprises, Online Lottery Boosts Brick And Mortar Sales

[toc]A December 2016 study by Digital Gaming Group shows that, far from cannibalizing brick & mortar lottery retailers, the introduction of online lottery in Michigan has been beneficial to existing lottery retailers.

The report states:

“The Michigan Lottery’s success story should be a page in the book of every lottery looking to convince its stakeholders of the value, certainty and complementary nature of this new sales channel,” the report states.

“Multi-channel growth has been observed across the globe where iLottery is present and the industry is finally obtaining domestic evidence as well.

“Perhaps not too far ahead, as the trends continue to take shape, iLottery will be viewed universally as one of the safest bets to achieve incremental growth.”

No signs of cannibalization after two years

As the report notes, the Michigan Lottery launched its online lottery in the summer of 2014. Despite online sales growing to over $8 million weekly, the state’s brick & mortar lottery retailers still set new records for sales, profits, and retailer commissions.

This data mirrors the situation on the ground in New Jersey. There, the addition of online gambling is a net-positive on Atlantic City casinos.

This is somewhat counterintuitive, but happens for three reasons:

• Online brings in new players
• Inactive players become reinterested in lottery because of online offerings
• Online increases spend of existing players who become multi-platform customers

Keno great example of how markets co-exist

As was the case with the casino-online gaming relationship, the players drawn to online lottery have very little overlap with the brick & mortar customer.

One clear example of this can be seen in Keno To Go, which is available online and at brick & mortar retail locations. The report elaborates:

“Players who purchase Keno “To Go” watch their drawings online after buying in-store, and are literally a few clicks away from playing a Keno game with improved prize returns, quicker play action and the supposed convenience of avoiding a trip to the store,”. “Yet this product was unaffected by the launch of online keno and it drove the majority of growth within the retail keno category.”

Despite the convenience and better returns offered online, it wasn’t enough to persuade brick & mortar customers to shift their play online.

The report elaborates:

“The reality of player channel preference has been consistent with focus group results obtained prior to the launch of iLottery in Michigan. During those interviews, many existing retail players were opposed to the idea of registering online, didn’t like the requirement to provide banking information, didn’t always trust that iLottery games would be fair, and preferred the game play experience (i.e. scratching) of retail games over their digital counterparts.”

And as noted above, where there is overlap, average spend increases.

As the DGG report concludes:

“… a better argument can be made in support of iLottery increasing overall player engagement and driving cross-channel sales. Programs such as the Online Game Card, purchased at retail and redeemed online, have helped to bridge the two channels while providing added traffic and commissions to retailers.”

Lobby groups raising invalid concerns

The data flies in the face of the lobby groups’ concerns. These groups are vocal in states like Massachusetts, where online lottery legalization is gaining traction.

But by fighting online lottery, brick & mortar retailers could actually be hurting their business, not protecting it.