Targets Internet sales, mobile phones, and 'big box' stores
Saying it would generate more cash for the state, New Jersey Senate President Richard Codey will push a plan to expand the New Jersey Lottery by selling tickets at big box stores such as Home Depot or Target, adding internet sales and even allowing people to play the games with their cell phones.
Codey (D-Essex) said the Lottery has untapped potential that can help ease New Jersey's fiscal woes over the next decade. He said he believes the state can expand where and how lottery tickets are sold within several months, and without enacting a new law.
"We've got to look at any way we can bring in more revenue," said Codey, who co-sponsored the law that enabled casinos to open in Atlantic City in 1978. "This doesn't cost you anything and the upside potential is tremendous."
Gov. Jon Corzine said yesterday he and Codey have had discussions about some of the possible expansions, which he called "reasonable."
"We run our lottery fairly efficiently, so it's just a matter of how far we want to push the envelope," he said.
Given the economic recession and resulting drop-off in revenues, Corzine said the lottery plan is unlikely to make a major dent in the state's immediate financial struggles.
"I don't think it's going to have major budgetary impact. It might help us keep parks open, but we're not talking about a significant shift in dollars that's going to change the context of the 2008-2009 budget," he said. "It's worthwhile in adding into the mix."
Such a move, however, could draw static from liquor outlets, convenience stores and other smaller businesses that now dominate New Jersey's lottery ticket sales.
The lottery has been a major source of revenue for state government since it began in 1970. It is expected to provide $845 million in the current budget year to pay for programs that benefit veterans, community colleges, school children, the disabled and others. Overall, the lottery is expected to collect about $2.4 billion — up $530 million from 2000.
However, Codey said after adjusting for inflation, lottery revenues fell slightly over that time, citing Wall Street financial analysts who have advised him on the move. He declined to name the analysts.
Codey said the consultants believe lottery proceeds could be boosted by more than 40 percent over the next decade, which would raise an extra $1 billion in revenues. He could not give a short-term estimate of how much it would immediately generate for state coffers.
New Jersey has the eighth largest revenue-producing lottery in the nation, but last year generated less than one-third the money of New York, the national leader. Pennsylvania ranks just ahead of New Jersey.
Codey said the consultants found that even with 6,100 lottery retailers, New Jersey ranks just 20th in the nation in the ratio of people to places where they can buy lottery tickets.
"We're stagnant. You have to look at the lottery in a new way," Codey said.
Codey said one way of boosting the lottery take is to expand beyond convenience stores and other smaller mom-and-pop businesses and offer tickets at "big box" department stores like Wal-Mart, Target and Home Depot.
Nothing prohibits these big retailers from becoming lottery agents. Codey, however, said the state should make a big push to convince them to sell tickets, perhaps by developing specific games tied to the stores. He also said he knows of no state that markets lottery tickets this way.
The website of the North American Association of State and Provincial Lotteries says "lottery tickets are sold at more than 240,000 locations throughout North America. Most of these locations are conventional retail outlets such as convenience stores, gas stations and supermarkets." No spokesperson for the group could be reached for comment.
Jeff Lenard, spokesman for the National Association for Convenience and Petroleum Retailing, said bringing huge retailers into the lottery picture would hurt many New Jersey stores already squeezed by market pressures such as high cigarette taxes that drive business to neighboring states. He added that selling tickets in big box stores may not guarantee that the state will sell more.
"You just don't know if these launch, whether it will work or not," he said.
Lenard said while outlets like convenience stores probably would remain the chief place most people buy their lottery tickets, "it would make things more challenging on a competitive basis. You'd probably see more stores reinvent themselves or get out of the business."
John Holub, lobbyist for the New Jersey Retail Merchants Association, said he thinks some of the big stores he represents would be interested but others would pass. "It's definitely an intriguing proposal. I would imagine some retailers would consider it," he said.
Codey said another potential is internet sales, along with using technology to permit cell phones and personal digital assistants like Blackberrys and Palms to be used to purchase tickets. Codey also wants to explore allowing advertising on the backs of lottery tickets.
"Using new technology is obviously an untapped source," he said.
Just a few months ago, Codey raised the possibility of letting a private company lease the lottery in exchange for billions of dollars in up-front cash. He floated that idea as a partial alternative to an unpopular toll-for-debt plan that Corzine proposed. He said that remains an option but he now agrees with administration officials that full private takeover would face constitutional hurdles and would take a long time to implement.
His new plan would have the state enter into an operating agreement with a professional consultant to give the consultant a cut of every new dollar generated through expanded marketing. But the state Lottery Commission would retain oversight.
"Our goal is to maintain oversight and control of this asset, while unlocking what may be billions of dollars in revenue potential," he said.
Corzine's proposed $33 billion state budget includes many cuts, including shuttering some state parks and slicing aid to municipalities, hospitals, nursing homes and other groups. Last week, Corzine conceded state revenues in the budget year that begins July 1 could be as much as $500 million below what he has projected.
"We're all looking to try to restore some cuts and yet make some cuts," Codey said. "But I think we also should be looking to how we bring in new revenue."
Plan gets mixed reviews
Behind the counter at the Krauszer's store in New Brunswick, owner Atul Tijoriwala knows his regulars by name, engaging them in the peppy small talk that keeps his store feeling like a family-run business.
Most of the people Tijoriwala sees regularly at the Bayard Street market are buying lottery tickets — the bread and butter of convenience store revenue. But that could change, some store owners say, with a plan by Senate President Richard Codey to promote the sale of New Jersey Lottery tickets in new venues like Target and Dunkin' Donuts.
"I'd like to get away from just convenience stores and build a different market," Codey said yesterday, suggesting residents could even play the lottery on their Blackberrys. "You've got to take a fresh look at it."
But Codey's plan was met with alarm by convenience store owners.
"It's not right," Tijoriwala said. Using big box stores and other nontraditional venues will only dilute existing sales, he said. "It's like cutting the throats of convenience stores and small businesses."
At Royal Mini-Mart in South Bound Brook, employee Manny Mansuri said expanding lottery sales would only drain customers.
"We're a small business," Mansuri said. "If they go to Home Depot, they'll buy it there."
Customer Jerry Parks said he would keep buying his tickets at Royal, but others might not.
"It's good to see the state get more money, but why knock out the little guy?" Parks said.
Shoppers at a Bridgewater mall with a Target and Home Depot were more pragmatic, however, saying convenience stores need to share the wealth to feed the beast of state debt.
"I think it makes sense," Hillsborough resident Mark Gernett said. "Why should they have the exclusive right?"
Tom Dominko, of Bethlehem in Hunterdon County, said he would "absolutely" buy lottery tickets at Target and credited Codey with "a lot of good ideas."
"At least this one doesn't abuse the drivers of the state," Dominko added, referring to Gov. Jon Corzine's plan to boost highway tolls.
But Jim Ovens of Edison said he'd rather leave stores like Target to be "more of a family-type place."
"I think there are enough places that sell them now that they don't have to be here," he said.
Codey is thinking differently, seeking to infiltrate an untapped shopping demographic. Convenience store owners, he said, would probably keep their clientele.
"I don't think it will hurt them as much as they think," Codey said.
Chris Ward, a shopper at Target in Bridgewater, said she rarely buys lottery tickets, "but I'd probably be more likely to buy them if they were at a mainstream store."
Home Depot spokeswoman Jennifer King said selling lottery tickets is a new concept.
"I've never heard anything like this before," she said. "I really don't know if there would be any interest."
Codey said he hadn't reached out to big box stores, but he suggested there are ways to make the venture attractive, like creating scratch-off games that would include in-store savings. He also floated the idea of using tickets for advertising and said his plan could raise an additional $1 billion over the next decade.
At Quick In Food Store in Bound Brook, owner Pam Gandhi said she didn't expect to lose customers at her shop across from the train station parking lot.
"They're coming here," Gandhi said. "They don't want to lose time. They don't go to Target."
Even when customers are loyal, however, there is reason for concern, shop owners say. In the tight quarters of Downtown News Stand in Jersey City, people pack in to play the numbers at what locals consider a lucky spot. Owner Chandra Patel called Codey's expansion plan a "bad idea."
"All the prices have gone up," Patel said. For mom-and-pop shops, "it will become harder and harder for them to survive," he said.