Lottery Tickets Could Be Negatively Impacting Your CPG Sales
By Emily Rudolph
Posted May 03, 2019
Skupos analyzed lottery ticket sales in convenience stores across the country to see how the numbers stack up against the infamous $1.537 billion Mega Millions Jackpot in October of 2018, the second largest lottery jackpot in American history. Generally, lottery ticket sales are known to be quite predictable and pair well with other impulse purchases. However, we found the biggest jackpot days actually hurt in-store sales, presenting c-store owners with a unique opportunity to bridge this gap by converting new customers into loyal patrons.
For this analysis, Skupos extracted daily ticket sales in both dollars and quantity during the month of October to identify shifts in spending trends and market basket dynamics. Our hope is that these findings will aid c-store owners in making informed decisions on how to capitalize on lottery ticket sales going forward.
Super Jackpots: Impulse vs. Destination
For c-store owners, major lottery events like this have been sold as a valuable opportunity for in-store promotions. According to NACS, about half of all U.S. lottery tickets are purchased at convenience stores, accounting for 9% of all c-store purchases. On October 23rd, 2018 the odds of winning this record-breaking jackpot were calculated at one in 302.5 million, or 0.00000033%. Those numbers continued to dwindle as the jackpot grew in size, cycling through weeks of drawings without a single big winner.
Lottery tickets, known as one of the industry’s most reliable sellers, offer c-store owners an upper hand when it comes to supersized jackpot drawings — or so we thought. As it turns out, the bigger the jackpot, the more the cost-benefit threshold begins to shift ultimately creating an entirely new kind of customer opportunity. As Don Burke of CSP Daily News puts it, “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. 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.”
Inside the Market Basket
In many states, patrons must visit a store location in order to play Mega Millions or Powerball which, to Burke’s credit, certainly increases foot traffic. NACS reports that 95% of lottery buyers will purchase at least one additional in-store item with their lottery ticket, raising the overall basket for lotto’ customers to $10.13 as opposed to $6.29 on average.
To put this to the test, Skupos analyzed scan data from stores across the country and found that consumer habits followed that of NACS top 5 in-store categories (2017) although the market basket incidents of non-lottery ticket pairings for this super jackpot were surprisingly low. This suggests that many of the secondary items paired with lottery tickets are actually additional lottery tickets, a theory that is evident in the data below. While other sources indicate a boost in overall sales due to lottery ticket sales, during super jackpots, our study found the majority of these increases to be made up only by lottery tickets. In fact, during the largest jackpot drawings sales on non-lottery items dropped dramatically.
What’s particularly interesting in the case of Mega Millions is that peaks in overall sales dollars mirrored that of tickets sold in relation to weekly drawings without much deviation — even on supersized jackpot days. Ultimately Skupos’ data did not reflect lottery ticket pairings as a major driver in revenue. When we excluded lottery ticket sales from the overall revenue for stores throughout the month, what we found was that c-stores saw, on average, a 5.7% increase from lottery ticket sales alone on the highest jackpot drawing days. Lottery ticket sales only account for 3-4% of overall revenue on days without lottery drawings and on days where lottery ticket sales were the highest, CPG sales actually went down. For forward-thinking store owners, this data is pivotal. Could long lines at the register and an influx of lottery customers actually be hindering CPG sales in stores?
“If you have 20 people in line that’s great; they’re spending money on lottery tickets and many are new people there for the first time,” explains NACS spokesman Jeff Lenard, “but if that 21st person is a regular wanting something else and the line doesn’t work for that person today, that person may not be back tomorrow.”
Prioritizing the In-Store Experience
Instead of focusing on additional lottery signage and indulgent promotions at the register, we suggest store owners consider how to maximize the in-store experience for both lottery players and everyday customers. This is not to say c-stores shouldn’t continue to highlight top-selling items along with lottery signage at the point of sale, but instead, prioritize promotion strategies that will cultivate long term engagement with patrons. This means focusing efforts on driving more customers, especially on days without lottery drawings.
For example, try incentivizing customers to return after the winning numbers have been chosen. Ask them to present their ticket for ‘buy-one-get-one’ on cans of Coca Cola as a consolation prize or consider offering $.50 off on candy at the register in exchange for their lottery receipt. Store owners should feel encouraged to experiment with new tactics to incentivize engagement with new customers. Another example of this might be taking the promotions to social media, sharing something like, “Didn’t win big in last night’s lotto drawing? Bring your ticket back to the store for $0.50 off your next energy drink purchase!” By maximizing opportunities to drive foot traffic in-store, c-store owners can begin to bridge the gap between CPG sales and added lottery revenue. The goal here is to cultivate a rapport with your customers that not only makes you money but keeps them coming back for more.