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Survey: One-fourth of retail customers buy lottery tickets

Jan 25, 2005, 10:12 am

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Kentucky LotteryKentucky Lottery: Survey: One-fourth of retail customers buy lottery tickets

This is the second story in a four-part series on the Kentucky lottery and its local and state impact

One out of every four customers at area stores that offer lottery games regularly buy tickets, according to a random survey of more than two dozen retailers in Boyle, Casey, Garrard, Lincoln and Mercer counties.

And the ticket sales they generate - more than $62 million worth in all five area counties over the last six fiscal years - have produced more than $3 million in commissions for the 65 area Kentucky Lottery Corp. retailers.

In addition, the retailers get money from the corporation for selling winning tickets and for meeting or exceeding ticket sales quotas.

For each $1 in ticket sales, a retailer gets a nickel commission. When a retailer redeems a winning ticket, he or she receives a 1 percent commission; in other words, if a player wins $10, the retailer gets 10 cents.

Retailers get bonuses for meeting quarterly tickets sales goals set for each of them by the lottery corporation. The bonuses are 6 percent of the quotas.

In fiscal year 2004 alone, Kentucky's nearly 3,000 retaillers sold more than $725 million tickets statewide and earned more than $45 million in commissions and bonuses, for a cut of about 6 percent.

While most individual retailers aren't hitting any jackpots with the commissions and bonuses, most of those interviewed said the rewards boost their overall revenues. But just as important as the commissions and bonuses are to the retailers' bottom line is the income derived from additional purchases that ticket buyers make at their stores, the retailers said.

However, some retailers acknowledged a dark lining in the silver cloud. They noted that lottery ticket theft has been a problem, and that theft is the result of both inside jobs as well as break-ins. They also said that, while lottery games definitely attract many customers, the time it sometimes takes clerks to process tickets - including selling them and redeeming them - likely has driven some non-playing customers away.

Still, most retailers indicated that serving as lottery ticket retailers has been more than a break-even proposition.

"The lottery is a big draw for us," said Travis French, owner of Quickstop Shell Mart in Junction City, one of 20 ticket retailers in Boyle County. "Those games definitely pull in customers."

French estimated that 25 percent of his customers regularly buy lottery tickets, but most of them also make other purchases.

"Very rarely does a player just buy tickets," he said. "Most of them will also buy soft drinks, cigarettes, snacks, a loaf of bread or fill their tanks (with gas)."

While French said revenue from commissions and bonuses has not "made me rich by any means," he said his cut from ticket sales has been an "irreplacable source of revenue."

"If they took the lottery away from my store, that 25 percent of my customer base likely would go somewhere else," he said. "It would definitely hurt my business."

Ann Woodward, manager of Rocky Top Shell on U.S. 27, one of 11 lottery retailers in Garrard County, said from 25 to 30 percent of her store's customers are loyal game players.

"They don't only buy tickets, though," said Woodward. "Most everyone of the ticket buyers I see also buy other things, from gas to Cokes to cigarettes and other stuff.

"The commissions are good for our revenue, but they tell just one part of the story," she said. "The benefit to stores that sell lottery tickets is a two-chapter story: commissions from tickets and sales of other items. I can't recall the last time I took care of a customer who just bought tickets."

The biggest winning ticket sold in recent years at Rocky Top was for $600, said Woodward. The store initially received from the lottery corporation $30 in commission for selling the ticket and another $6 when the ticket was redeemed by the winner.

As for Woodward, playing the lottery is not her thing.

"If this store depended on me for its lottery revenue, it would go broke," she said with a laugh. "I don't play. I can't afford to."

Beverly Sagraves, manager of Walling's Grocery in Mercer County, one of the county's 14 lottery retailers, also reported that regular ticket buyers account for 25 percent of her store's customers.

"Most of our players buy tickets along with their groceries," Sagraves said. "Very few customers just purchase tickets."

The largest winning ticket she recalls selling was for $500, which resulted in a $5 commission for the store.

"Most of our revenue does come from grocery sales and always will," she said. "But the money we get in commissions does add up and does help our bottom line, there's no doubt about that."

A quarter of the customer base at Chambers Marathon on Hustonville Road in Danville also is comprised of lottery ticket buyers - apparently very active ones. Chambers Marathon frequently has been ranked by the lottery corporation as one of the "top performing" retailers in the area.

"The lottery certainly generates income for the business," said owner Paul Chambers. "A lot of people buy tickets with their gas fill-ups."

But Chambers voiced concern about two problems confronting some lottery retailers.

While a lot of retailers who own combination gas station-food marts face the problem of "drive offs" - motorists who fill their tanks then drive off without paying for the gas they pumped - some of them also have to deal with "walk-outs" - non-playing customers who lose patience standing in line behind people buying tickets and walk out of the store.

And customers who steal gas aren't the only thieves that victimize retailers. Theft of lottery tickets also is a problem from some of them.

"I don't have either problem," Chambers said. "My staff and I are pretty efficient and take care of all our customers, those buying tickets and those who don't, as quickly as possible. On the more important and costly issue of ticket theft, I have the security and bookkeeping controls in place to prevent the stealing of tickets, from the outside or inside.

"But I'm in touch with a lot of retailers in this area, and I know that there are problems with theft," he said. "I know of one retailer who had an employee take more than $20,000 worth of lottery tickets. From talking with these other retailers, it looks like 50 percent of the ticket theft comes from employees and 50 percent from thieves breaking into stores."

And Chambers is convinced that ticket theft is causing some retailers to go out of business.

"It's tough under normal circumstances to run a profitable convenience store operation. You add stealing on top of everything else they have to do to stay in the black and that can spell financial doom."

So far, though, lottery tickets have been a boon, not doom, for Chambers' bottom line. And he plans to keep selling them as long as it is a money-maker for his business.

"The lottery has been good for my business overall," he said. "But like the lottery itself, selling tickets is a little bit of a gamble, a little bit risky. You're hoping that you can make some money after all the time and trouble you go through in the selling, processing, recording and bookkeeping.

"So far I've been lucky and been able to make some money. Other retailers haven't been so lucky. The odds of a small business succeeding aren't good. They get even worse when there's theft. And they become downright grim when that theft is done by your own employees."


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