Collateral benefits: Retailers benefit from the lottery's big payouts

Melbourne Beach couple David Kaltschmidt and Maureen Smith claimed a portion of the $1.58-billion Powerball jackpot in January. Florida retailers scored their own prize. The Publix store where the couple bought their ticket got a $100,000 bonus from the Florida Lottery. Overall, Florida retailers earned $115 million in commissions and bonuses from selling tickets for the January jackpot and the rollovers that led to it.

At a 5% commission, lottery tickets rank among the lowest margin items at convenience stores, which typically have 30% margins. Stores could spend that commission just on the labor to sell tickets and additional security to get all that cash to banks. During the jackpot craze, “you almost need a separate person running the register,” says Whitney “Stoney” Smith, an executive with the 16-location Hudson Food Stores based in Chiefland and a board member of the Florida Petroleum Marketers and Convenience Store Association.

For retailers, the attraction of the lottery lies in the opportunity to sell the lottery hopefuls other goods and the free media ride that growing jackpots bring. Smith says Hudson stores made sure to stock produce racks, novelty items and drinks by the lottery machine to capture additional sales.

The Florida Lottery says its games attract high-frequency customers who boost traffic and sales by an average of 11% for retailers. The average customer spends $10.35 in-store compared to $6.29 for non-lottery customers, the lottery says.

Smith says Hudson stores saw sales increase 14% in January, though they dipped by single digits in February. Overall, “we feel it was definitely good for our stores,” he says. “We’re having a good year.”

The lottery, which in June reached the $30-billion mark in transfers to education over its 28 years, has a slew of incentives to get retailers to sell more tickets. The lottery pays $2,000 to $4,000 on some new games and double commissions on others. Selling a Lotto winner or Mega Millions winner brings at least $10,000 to a store and, depending on the number of rollovers, up to a maximum of $100,000. The Powerball, which also maxes out at $100,000, starts at $20,000. (California paid the store that sold the winning ticket there $1 million, and Tennessee, which sold the third winner, paid $25,000 to the store that sold its winner.) There are other incentives to stores for lesser winning tickets and a 1% commission to cash a winning ticket.

The Florida Lottery, thanks to the January jackpot, set a record for monthly sales of $715 million. Schools got $114 million from the jackpot and its rollovers.

Tags: Around Florida, Retail & Sales