Abacus attended the National Association of Convenience Stores (NACS) in Atlanta this October. Our interactions at the event revealed an increasing interest from major C-store chains in integrating lottery services into their point-of-sale (POS) systems. Notably, a prominent chain has specifically requested the Abacus integration solution in their forthcoming RFP. Their interest in POS-integrated lottery services is far from surprising, given the benefits it offers retailers:
- Speed of Service (the need for a second scan or a separate trip to the lottery terminal)
- Increased Player Satisfaction (faster transaction)
- Reduced Labor Costs (distribution and accounting)
- Elimination of Shrink
All four of the above points are significant improvements in removing friction from the process of selling lottery tickets. The absence of these benefits can lead to notable operational challenges. Take, for instance, the issue of shrinkage. In a typical setup, where multiple cashiers operate the same lottery terminal and instant ticket dispenser, the end-of-shift reconciliation process becomes a logistical nightmare. I’ve personally experienced this as a former C-store owner, often leading to restless nights worried about instant ticket shortages—a feeling I jokingly refer to as “Post Traumatic Ticket Shortage” (PTTS), even a decade after exiting the business. It’s these very challenges that underline the importance of understanding the psychology behind retail practices and the transformative impact of POS integration.
Insight #1 – Selfish Synergy
I ponder human nature in business; what drives us to action? Each one of us individually and each company works on a “what’s in it for me” basis. It aligns with man’s need for survival. Any entity that is not “self-interested” probably wouldn’t survive very long. In the case we are talking about, the survival of the commercial retail enterprise, it should go without saying that this is paramount to the retailer, every day. Each retail store stands on its own P&L, even the big national chains can’t keep a store open if its gross revenue minus its costs is not positive. Profit on a per-store basis is like gravity; it can’t be denied.
So just like you at your lottery where you tend to focus your efforts on what will increase your sales and transfer to good causes, a retailer focuses his efforts on what will keep his head above water by bringing in more gross profit or cutting his outflow of expenses. The key to our mutual success then is to create mutual gain for the retailer and the state lottery by helping them solve operation problems and be more profitable than they are now.
The P&L scorecard of a retailer is scrutinized every month; I can tell you that. Most retail locations are just one bad year away from being closed, which puts a tremendous amount of stress on the organization and store management. It is not a game; it is real life with huge investments and people’s careers at stake. Lottery can be the retailers’ next big solution to needed sales growth and profitability. This in turn will increase the lotteries’ sales and profits to good causes.
Insight #2 – Control or Sales?
So let us now venture into the mind of the retailer as he looks at the vast array of categories and items available for him to sell. From experience, in most cases, the retailer concentrates on selling more of a particular product, as measured by the sales for the same month of the prior year. But if a category is a major contributor to shrink, he may spend most of his time simply assuring that he doesn’t lose product, for this will destroy the category. The lottery CAN become a very high shrink category if not handled properly. Today, it is indeed in the retailer’s best interest to spend the majority of time concentrating on not losing product to shrink, at the expense (usually) of concentrating on new sales.
Over my 30-year C-store career, I saw fuel sales go up by 5X on a per-store basis after fuel was brought into the POS from an outside terminal. This model is the same for lottery, once the retailer has control of a category, you will see their focus change from mostly “control,” to “how can I sell more.”
It wasn’t just the insertion of the product into the POS, over time the design of the store, was to “sell more,” the marketing of the product, was to “sell more,” the psychology in the mind became to “sell more,” instead of merely controlling the category. Let’s do the same for the lottery category today.
Insight #3 – Want it Now
At one meeting we sat on this week, the Head of Innovation from a National C-store chain asked, “The Abacus integration is such a no-brainer, why isn’t it available everywhere right now?” We had to explain that the market for integrated solutions is just starting to open up in the U.S., but it is starting to move at a faster pace now. Abacus is signing up new states and vendors on a weekly basis. He was nonplussed. “This is such a simple solution; why wouldn’t it be adopted everywhere?” he asked. I had to think for a minute as to how to answer that question. For when a retailer “gets it,” they want this service—NOW.
The collaboration between Abacus, the point-of-sale providers, and retailers is beginning to ramp up with some real interest in integrating lottery not only into the manned and self-checkout lanes but also into the next generation of retail platforms. This move to add lottery to the cash registers will bring on the biggest Renaissance of the lottery category (and sales) since the invention of the terminal 30 years ago.
And it all starts in the mind of the retailer and a realignment with their self-interest. Together, we can change the psychology of the retailer.