Why retail lotteries shouldn't fear online

The North American lottery market continues to grow at a pace, with more states launching online and mobile lottery games for the first time. However, with efforts understandably being directed towards online right now, it has left some within the lottery industry to question whether this channel is actually leading to a negative impact on retail sales.

Quite simply, those concerns aren’t justifiable. There are no examples of online sales cannibalizing retail revenues in the lottery market whatsoever. To maximize potential and avoid cannibalization, both channels need to work together in order to avoid stepping on each other’s toes and offer something different for each audience.

The Michigan Lottery has shown the way into how a successful online platform can help drive sales for retailers. They cleverly positioned products and promotions to good effect, boosting retail commission, which led to retailers to actually promoting the online lottery offering. The numbers don’t lie either. In the first full year of its internet offering, Michigan Lottery achieved online sales of $146m, and after three years this had grown to $613m. On the retail side, sales rose from $2.75bn in year one to over $3bn in year three.

Solving retail’s challenges

Online instant win games have been consistently driving record revenues for the North American market for some time now, proving to be an entertaining experience for players. Although physical scratchcards have been more than successful for lotteries over the years, the format does carry certain limitations and challenges. For instance, when a top prize is won early in its lifespan, lotteries face the task of removing these games from distribution or continuing to sell them despite the top prize no longer being available.

New technology solves this problem, as with online you can guarantee the top prize is available for every scratchcard purchased. Subject to specific market regulations, lotteries can present that offering to their players with a grid-based back-end for online instant win games, ensuring a win-win situation for both lotteries and their players. The digital world can also overcome the bonus limitations that come with physical scratchcards. While retail tickets offer a basic bonus game experience with just a symbol or a prize amount, online instant win games can provide a more entertaining and engaging bonus gameplay for players.

Flexible price points

The online environment provides greater room for testing new games and promotions too. While retail traditionally sticks to higher price points, online lotteries can test smaller price points from 50 cents or even 25 cents, which are ideal for those who want to get a few more plays per deposit. If these don’t work, these can easily be amended, something which would be far more difficult to do in the retail space.

The same approach can be adopted for bonus promotions. Online lotteries can experiment with unique offers by testing it with a target audience and analyzing results quickly. If it works, extend the offer, but if it doesn’t, you’ve got valuable feedback for future games and campaigns.

There are many factors to consider when launching an internet lottery platform for the first time, but most important of these is to continue to invest into the retail network. Developing products and promotions to drive customers from online to retail and vice versa will have a positive impact on both channels. By creating a strategy which sees both online and retail channels working together, great results can be achieved, as lotteries like Michigan have shown recently.

Jason Lisiecki is VP of North America at Instant Win Gaming and has spent more than a decade in the lottery industry, including nine years at America’s most successful iLottery in Michigan, and a spell as director of product at William Hill US.