For context, this post is for newsagents outside of WA with lotteries since the WA situation is very different, more beneficial for retailers.
The Lottery Corporation is moving through a significant period of transformation. Its latest financial reports show more growth digital sales, which now account for 41.8 per cent of total turnover. For the company, the benefit is financial. Digital transactions offer a variable contribution margin of roughly 26.9 per cent, significantly higher than the margins produced through physical stores.
This digital expansion is not just about a website or an app. It is a strategy to capture a younger demographic. Statistics show that over 60 per cent of new customers are under the age of 45. These players value the convenience of mobile play and the ability to set personal spend limits, a feature recently mandated for Keno players to improve long-term sustainability.
For retailers with lottery, lottery products are often a key driver of foot traffic. However, the retail experience is becoming more expensive to maintain.
Retailers currently face rising merchant fees and card payment costs. Retailers pay interchange rates significantly higher than larger corporations. This pressure is compounded by the “store-within-a-store” branding requirements that The Lottery Corporation mandates, which can limit how newsagents use their floor space for other profitable goods.
What retailers need to understand is the financial metrics for TLC. For every $100 spent, TLC earns roughly $15 EBITDA online compared to $5 in-store. This $10 difference is largely because the company retains the commissions that would otherwise go to a newsagent.
While I get that lottery products are important for retailers, I don’t see upside. Customers are migrating online. The increase in in-store operating costs is not adequately covered by price increases or traffic growth.
I think retailers need to be careful when considering capital investment in lotteries. Don’t get sidetracked by big numbers. It’s important you understand the full cost of the agency business.
In my own situation, I’ve not had lotteries in my newsagencies since 2013. I have more control over my retail space and have more control over my business as a whole. My mental health is better as a result, for sure.