Scratch-Off Fever
Lottery may be a staple of most convenience stores, but some retailers are not content just to have it. 7-Eleven Inc., for instance, has taken note of its customers’ desire to feel lucky and is bringing lottery to the next level through a partnership with the Virginia Lottery.
The two organizations joined forces this spring in a bid to drive business on both sides of the equation — a key strategy of the Richmond-based Virginia Lottery.
“We have about 5,300 retail partners. I often say lotteries don’t really sell tickets, it’s our retail partners that do,” said Paula Otto, executive director of the Virginia Lottery.
Convenience stores account for the majority of the Virginia Lottery’s retail outlets, although it does have a strong presence in big grocery chains, some drugstore chains and, like many other state lotteries, “a fair amount of non-corporate stores” — some of them franchisees of the big names like 7-Eleven and some of them individually owned, mom-and-pop stores.
“Convenience stores are very important to the lottery. The channel represents about 75 percent of our retailers and about 80 percent of our sales,” Otto said. “7-Eleven is our largest retailer in terms of number of stores under that name, including franchises. It is responsible for approximately 20 percent of our overall sales.”
That statistic makes the Virginia Lottery’s recent partnership with 7-Eleven so notable. In March, they launched an exclusive scratch-off ticket that is only available at 7-Eleven outlets and sells for $7 — a deviation from Virginia’s usual $1, $3, $5, $10 and $20 scratchers.
The ticket is still available in some stores, but not in all 7-Eleven locations at this point. As of Aug. 28, the lottery had sold approximately $2.2 million worth since its launch.
HOW IT WORKS
The partnership is a result of the lottery’s quest to do something different while growing its business. In the past two to three years, instead of asking its corporate partners what they can do for the lottery, the lottery has asked how it can help the corporate partners achieve their goals. As Otto explained, they’re turning the question upside down.
“We know helping 7-Eleven and our other partners grow their business helps us grow our business. What 7-Eleven told us is that they are putting a huge emphasis on fresh foods. They want to be known as a destination for fresh foods,” she said. “We came up with the idea that every 7-Eleven Virginia Lottery ticket would be a winner and the prize would be one of their food items.”
Specifically, the bottom of every 7-Eleven scratch-off ticket is perforated and a coupon is attached for a 7-Eleven fresh food item. “It’s a way for lottery players to try one of their food items for free when they buy a ticket,” Otto explained.
The rest of the 7-Eleven scratch-off plays like a regular lottery ticket, with a prize structure that players would expect for the $7 price point. The prizes include “a very clever top prize” of $711 a day for a year, according to Otto.
“We’ve had a lot of fun with the $7 price point and with the top prize,” she said, pointing out there are other prizes as well. “Lottery players generally play to win cash. Even though we give away other prizes, like soda or Slurpees or hot dogs, they are generally playing for the cash.”
INSTANT SUCCESS
The ticket hit stores March 10. First-week sales had the 7-Eleven scratch-off selling about where the Virginia Lottery expects a $5 ticket to sell — which is the closest price point.
“It’s a bit unusual because we are only distributing to 700-plus stores, so it is a little hard to compare to a ticket that is distributed to all 5,300 lottery stores,” Otto said. “We are really pleased with that, given that it is only selling at 7-Eleven and it is selling at about the same as a ticket that is distributed across the state.”
Meanwhile, the redemption rate for the food items was tracking at about 25 percent.
WHAT THE FUTURE HOLDS
According to the lottery, the scratch ticket is only one initiative under a yearlong rolling partnership between the Virginia Lottery and 7-Eleven. The evolving plan does not include another proprietary ticket at this time, but the lottery continues to collaborate with 7-Eleven to develop products, promotions, incentives and programs that benefit both parties.
Given the success of the 7-Eleven partnership, the Virginia Lottery has since partnered with Home Depot Inc. The pair launched an exclusive Home Depot ticket on April 7. Since the home improvement giant is not a lottery retailer, the Home Depot ticket is for sale at the lottery’s traditional retail outlets.
“We feel having a partnership with a strong brand, be it 7-Eleven or Home Depot, is good for that brand because it is bringing them exposure to potential purchases they may not otherwise have. And it’s good for us because they are strong brands, brands that people like and use every day, and it’s a way for us to potentially expose those customers to lottery,” Otto said.
“Convenience stores are very important to the lottery. The channel represents about 75 percent of our retailers and about 80 percent of our sales.”
— Paula Otto, Virginia Lottery