RALEIGH, N.C. — In January 2015, the North Carolina Education Lottery joined an effort to make convenience stores more convenient for potential lottery players by allowing them to play the lottery digitally while filling up their gas tanks.
Play at the Pump, a cloud-based payment platform, allows people to play Mega Millions, Powerball and Cash 5 without going into the store. With the swipe of a debit card and a $1 transaction fee, players can get their numbers for the next drawing.
Linq3, an Atlanta software company, developed Play at the Pump to try to engage the 70 percent of convenience store customers who never enter the stores, instead likely standing idle at the pumps for the average three-and-a-half minutes it takes to fill up.
"It's about convenience and security," said Matt Lovelle, chief operating officer for Linq3. "Families don't have time to go in the store."
Sean Watson of Columbus County was buying gas in July when he noticed the Play at the Pump option and entered the Carolina Cash 5. "I'm always on the go," Watson said. "It's convenient." It also turned out to be lucrative for Watson, who claimed a $157,333 jackpot.
Despite the convenience, Play at the Pump has been slow to take off in North Carolina. After nearly two years, the option is available at only 208 of the roughly 6,330 gas stations in the state. Back in January when the Powerball jackpot reached a record high of $1.5 billion, Play at the Pump's Powerball game brought in $146,808 in sales, compared to more than $86 million for traditional paper-based tickets.
Part of the problem is technological. While Linq3 provides free installation, retailers must have updated pumps that support the Play at the Pump software. In a case study conducted following the Missouri Lottery's partnership with Linq3, the company noted that "[t]he software many retailers used at fuel pumps ... was outdated, prohibiting the simple onboarding process Linq3 typically offers."
But another hurdle for Linq3 is that convenience store owners remain apprehensive about a technology that moves lottery sales outside the store, where customers can't also buy a soft drink or a pack a cigarettes with their Cash 5 ticket.
Retailers make only about a nickel for every gallon of fuel sold, and commissions on lottery tickets are roughly the same, said Jeff Lenard, spokesman for the National Association of Convenience Stores. By comparison, retailers make 12 cents on the dollar for each in-store sale.
"The two lowest margin products in a convenience store are fuel and lottery tickets," Lenard said. "You want to be mindful of how you offer them, because they lead customers to other items."
Retailers get a 3 percent commission on each sale using Play at the Pump, with Linq3 getting 4 percent and the rest going to the lottery. Station owners have to weigh that commission against the potential loss of sales inside the store, said Gary Harris, executive director of North Carolina Petroleum and Convenience Marketers, which represents fuel retailers.
"It's a decision that each retailer has to make," Harris said. "Outside sales give retailers a smaller percentage than indoor sales. That's a disincentive."
Manish Gandhi, who owns an Eagles station at 4102 Tryon Road, has had the Play at the Pump for about six months. He said he thinks that it is good for his customers, but "hasn't been that great of a revenue center."
Staying relevant in digital age
Lovelle with Linq3 said he's not discouraged by the slow roll out of Play at the Pump compared to paper tickets..
"As with any emerging technology, it takes time to achieve full market adoption," Lovelle said. "We are very pleased with our current business performance."
Linq3 cites the success of Play at the Pump for fuel retailer Murphy USA, which has made the biggest commitment to the software of any retailer. Since the partnership, Murphy USA's overall lottery sales increased by nearly 5 percent, according to a case study conducted by Linq3.
However, they may be an outlier.
But Lenard notes that the majority of Murphy USA's more than 1,100 locations are in close proximity to a Walmart, as a result of a partnership between the two companies, and that takes some of the pressure off of in-store sales. Murphy Express, of which there are about 220 nationwide, is more of a kiosk, offering vending machines and other services with more fuel pumps but no "in-store" sales.
"People don't say 'I'm going to get a Murphy sandwich' like they will a Sheetz," Lenard said.
Concerns over customer autonomy threatening convenience stores is nothing new, said Lenard, who traced the beginning of this movement back to 1964, when the first convenience store operator began allowing customers to use self-service fuel pumps. Back then, state fire codes prevented anyone other than convenience store staff from pumping gas. Pay-at-the-pump service was first offered in the mid-1980s.
"The big concern was if you allow customers to pay at the pump, you've given them zero incentive to come inside the store," Lenard said.
For Lenard, these concerns have largely dissipated. These days, he said, it's all about convenience.
"We sell convenience," Lenard said. "It's about a customer coming to your store and not someone else's. You've differentiated yourself, you've made yourself more convenient and you may have even taken pressure off of your gas price."
Van Denton, communications director for the lottery, said that staying relevant in the digital age is biggest draw for store owners to implement this new technology.
"Any sales organization, whether it's the lottery or Target, grocery stores, they're all trying to take advantage of technology to meet customers where they are and stay relevant," Denton said.