Virginia Lottery Plays to Win With 7-Eleven Partnership

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Virginia Lottery Plays to Win With 7-Eleven Partnership

By Melissa Kress, Convenience Store News - 04/19/2015

RICHMOND, Va. — The Virginia Lottery is taking its relationship with retailers to the next level, partnering with them to drive business on both sides of the equation. A new partnership with convenience store giant 7-Eleven Inc. is a prime example of this new strategy.

"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 Richmond-based lottery's retail outlets, though 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. They are responsible for approximately 20 percent of our overall sales."

It is that statistic that makes the Virginia Lottery's recent partnership with 7-Eleven Inc. notable.

This March, the lottery and 7-Eleven 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 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 they can help their 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 food item.

"It's a way for lottery players to try one of their food items for free when they buy a ticket," Otto said.

The rest of the ticket plays like a regular lottery ticket. It has 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, she noted.

"We've had a lot of fun with the $7 price point and with the top prize," Otto said, pointing out that 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."

So far, the partnership has been well received. Looking at first-week sales, the 7-Eleven ticket was 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," she explained. "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."

The redemption rate for the food items is about 25 percent.

Given the success of the 7-Eleven partnership, the Virginia Lottery has since partnered with Home Depot. 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, like all other lotteries, are looking for new ways to attract new players. In Virginia, our strategy is to increase the number of people who play the lottery as a way to responsibly grow our revenues vs. continually focusing on loyal players and getting them to increase their spend," Otto said.

"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," she added.

The Virginia Lottery started in 1988 and was the 29th lottery in the United States. Today, there are 44 state lotteries, plus Washington, D.C.

Virginia was considered the first southern lottery, according to Otto, and its registers $1.8 billion annually, turning over more than $500 million a year for K-12 public education in the state.