[fusion_builder_container admin_label=”Desktop and Tablet” hundred_percent=”no” equal_height_columns=”no” menu_anchor=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” background_color=”” background_image=”” background_position=”center center” background_repeat=”no-repeat” fade=”no” background_parallax=”none” enable_mobile=”no” parallax_speed=”0.3″ video_mp4=”” video_webm=”” video_ogv=”” video_url=”” video_aspect_ratio=”16:9″ video_loop=”yes” video_mute=”yes” video_preview_image=”” border_size=”” border_color=”” border_style=”solid” margin_top=”” margin_bottom=”” padding_top=”20px” padding_right=”” padding_bottom=”20px” padding_left=””][fusion_builder_row][fusion_builder_column type=”1_5″ layout=”1_5″ spacing=”” center_content=”no” hover_type=”none” link=”” min_height=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” background_color=”” background_image=”” background_position=”left top” background_repeat=”no-repeat” border_size=”0″ border_color=”” border_style=”solid” border_position=”all” padding=”” dimension_margin=”” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=”” last=”no” element_content=””][/fusion_builder_column][fusion_builder_column type=”3_5″ layout=”3_5″ spacing=”” center_content=”no” hover_type=”none” link=”” min_height=”” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” class=”” id=”” background_color=”” background_image=”” background_position=”left top” undefined=”” background_repeat=”no-repeat” border_size=”0″ border_color=”” border_style=”solid” border_position=”all” padding=”” margin_top=”” margin_bottom=”” animation_type=”” animation_direction=”left” animation_speed=”0.3″ animation_offset=”” last=”no”][fusion_text]
As technology brings more convenient options at every turn, traditional brick-and-mortar stores are struggling to stay relevant. Just this year, Sears and Kmart have closed 43 additional stores; JCPenney has closed 138; and Macy’s has closed 68. Lotteries should be on the lookout, because if brick-and-mortar retail becomes less convenient for consumers, the U.S. lotteries are in a predicament—62.5% of sales come out of convenience stores.
“Just about everyone is facing a challenge from the internet,” Jeff Lenard, Vice President, Strategic Industry Initiatives, National Association of Convenience Stores (NACS) said. “Those who are best able to adapt are those who on some level are as convenient as the internet.”
They must adapt quickly. In 2014, 24.5% of teenagers did not have a driver’s license. That is a 47% decrease from 1983. And this trend goes beyond millennials. The total distance driven per person in the U.S. was at its highest in 2004; and by 2013, it had decreased by 9%, according to studies done by Michael Sivak and Brandon Schoettle. Fewer people driving less could be the result of many factors, but certainly the ease of online shopping, entertainment and telecommuting are contributing factors.
“Today, everything is available on your phone, so people may not feel the need to be out as much. There is also more of an experiential element to today’s customers, particularly the millennial; they would rather spend money on the experience,” Lenard said.
“I think [pixels] can change things. It is so much cheaper. You don’t see the product anymore, you see a high end commercial. The combination of pixels and story telling is going to be much more a part of the future. You are going to have a little bit of Las Vegas in every store—to be able to tell that emotional story that you might not be able to tell with a static display,” he said.
“What can the lottery do? Look to remains convenient, in terms of the best retail location and the fast experience, and look at the element of delivering a great experience,” Lenard said.
So what lotteries are creating unique experiences and using pixels to create the retail of the future today?
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Data-Driven Digital Screens
Norsk Tipping calculates that their customers meet their company brand 600 million times in a single year. They have modernized these meetings with a digital marketing concept (DMC). By retrofitting their retailers with digital screens, their new solution takes advantage of the existing large flow of customers and builds their brand.
“We want the majority of our marketing communication to be digital, which allows us to be in charge of the branding,” Ken Cocozza, Concept Developer, Norsk Tipping said.
Digital screens allow for dynamic content to catch the eyes of their customers. They have also moved their marketing content, which was at the back of the store, to be as close to the point of purchase as possible. “With everything that is developing in retail, we must be in front and try to be modern in the digital world,” Cocozza said.
The Norsk Tipping solution really separates itself with the potential for segmenting relevant information provided to retailers. Five percent of players’ gross purchase goes to the cause of their selection. Norsk Tipping can now promote the best causes in a given region for the retailers in that region.
“We want to make it more relevant in his local store so he can relate to the good causes in his area. That is the big next step for us in terms of digital. We want to use data-driven information far more than we use today,” Thorbjørn Unneberg, Executive Vice President, Customer & Marketing, Norsk Tipping noted.
This development in data-driven content will hopefully build stronger local loyalty for players’ retailers. “When you have centralized good causes, the local retailers don’t feel involved because it’s a long way from his store. Now we can say this store raised this much for this cause so they can relate to the good causes they are supporting,” Unneberg continued.
Norsk Tipping has nine different standardized setups for their retailers, with their interior concepts being scalable to the retail environment. Retailers can have one screen or several screens in two different sizes (48” and 65”). All run by a single media player per location.
The current retailer breakdown is 60% grocery and 40% CTM/special. The Norwegian market is concentrated in retail: in the grocery sector, there are three major chains and in the CTM sector, there are two major dominating chains. Currently, Norsk Tipping has upgraded the following amount of retailers in these categories: 3,002 standard retailers, 393 compact retailers, 164 special “traficpoints” retailers, and 85 special sports betting venues.
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Retailer Relationships
After the Irish National Lottery transitioned to private ownership in 2014, the management team, Premier Lottery Limited, revaluated their retailer program and decided to work on improving the retail experience for clients, optimizing multiple lane retailers (multiples), and drastically increasing new points of distribution (going from 3,750 to 12,000).
It was important to get the lottery retailers on board to improve lagging lottery sales after the 2008 financial crisis, but they needed to understand why the lottery was critical. “We created what we call a Lottery Story. Everyone in the organization could sell lottery, but we wanted it sold in a particular way—a commercial story. There are a myriad of categories in the FMCG (Fast Moving Consumer Good) sector all vying for the same piece of counter space, so we need to show why lottery was so important to the retailer,” Nialls Andrew, Head of Sales & Operations, Premier Lotteries Ireland.
“It was all about why customers would want lottery in stores. The lottery business in Ireland is 800 million euros, while the chewing gum industry in Ireland was 45 million euros. Lottery is 20 times bigger than chewing gum; however, chewing gum is on every till in Ireland, whether it be self-serve or in-lane. Similar story with chocolate which is at every till yet in terms of cash margin in Ireland the lottery category delivers a higher return for retail,” Andrews said.
It was only when the individual retailers and retail groups started to focus on the Lottery Story and calculating lottery turnover and actual cash margin compared to other FMCG categories, that retailers began to validate that story for themselves. It’s a story built on facts and independently validated research data. That was to be the catalyst that moved the whole thing on and allowed us to negotiate that best position in store for a category that was delivering the greatest cash margin to the retailer,” George Canavan, Sales Support Manager, Premier Lotteries Ireland.
Once the retailers bought in, the Star Store program was launched in 2016, which was designed to improve the lottery layout at retail and increase engagement with retailers. Retailers undergo a scoring system, called Star Mark, that measures retailers against certain standard benchmarks such as equipment placement, merchandising and promoting lottery draw-based games and scratch cards.
There was also a large investment in POS equipment including new Lottery Counter Units (LCUs). “We then set about completely redesigning our display equipment in-store to make lottery more visible and available in retail. Traditionally scratch cards were sold from dispensing units placed back of counter and we wanted to bring that to front of counter and the most impulsive locations in store,” Andrews said.
The Irish National Lottery’s top three grocery retailers—Tesco, Dunnes and SuperValu—also needed to be optimized. Previously, lottery services were only offered at a single point of purchase in a store, usually at a kiosk or customer service desk. With over 4,000 lanes across the three retail chains, the potential to increase points of purchase and access to players was huge.
“The key to the success of in-lane execution is customer awareness. There are two parts to this. There is shopper behavior, which has to change and then how we execute at the point of sale—people have to be aware of the product. When talking with management in all the major multiple chains, we explained that we were not interested in going in-lane in those stores unless we were in every single lane. ‘Mrs. Murphy’ who checks out in Lane 1 today may find herself in Lane 6 on her next visit and if the offer doesn’t look the same or feel the same, you simply won’t get that change in shopper behavior. The lottery offer needs to be consistent in every single multiple lane store across all lanes,” Andrews said. “They are the most impulsive product in grocery and that is why they should be in prime position. And there is no point in putting lottery in the store unless it is in the primary location which is at the belt and consistent across all lanes.”
“We’re currently in trial in all major chains with our retailer partners expressing huge interest to get those rolled across all lanes,” Caravan said.
“But the single biggest growth opportunity is the German discounters. Aldi and Lidl combined now have almost 300 stores in Ireland and our traditional multiple chains have approximately 600 stores nationally,” Caravan continued.
Unlike typical supermarkets that have 10,000+ different branded products, Aldi and Lidl stock fewer products, most of which are private label. This allows for ultra-low prices. The German discounters have made serious inroads all over Europe, and now are opening new stores throughout the U.S. In Ireland, they have seen their market share grow rapidly over the past 10 years and now command 22% share of the grocery market.
“When we looked at our offering across traditional multiples, lottery products were available on over 99% of all outlets. When we factored Aldi and Lidl into that equation, our penetration in what we call ‘Big Box’ retailing dropped to 66%, reinforcing the importance of breaking into this channel. Results from research studies conducted in 2016 suggested that almost 70% of all households shopped in those stores last year. It’s a category that cannot be ignored,” Caravan said.
“These major European retail chains do not offer lottery services in any other jurisdiction, but we have successfully launched ‘Lottery In-Lane’ trials in both Aldi and Lidl over the past six months and hope to be the first lottery in the world to successfully negotiate a national rollout with one or both of these retail chains in the near future,” Andrews said.
With all these developments, it is necessary for the lottery to continue their open dialogue with retailers, so they created the Retailer Council. Ten individual members each represent their respective retail bodies on this council. “The agent council was established some years ago and has become an important part of managing the changing retail environment and ensuring are retailers are fully engaged and bringing them along the journey as partners,” Andrews said.
He continued: “We share our plans with them and we ask them for feedback and if there is anything the lottery can do to enhance their business. Again, it’s about finding out what the issues are—don’t be afraid of the issues. We needed to change and grow our business following a long decline to ensure its future sustainability and we needed to bring our retailers on that journey.”
“Over the past two years, we’ve developed that forum, it’s a strong sounding board for floating new ideas and concepts. It has helped build our relationship with our retail partners which is now stronger that it has ever been… if we can get our council to endorse what we are doing that then filters down through the system and through their own communication network to their retailers and eases that buy-in,” Canavan said.
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A FMCG Giant
Loterie Nationale in Belgium took the concept of involving their retailers with their future plans even farther. In 2015, they decided they need to be more relevant to both their partners and their players. They conducted a large shopper survey to really understand where their players were shopping, what they were buying and what they would buy from the lottery.
“For us, the biggest insight was that before being lottery players, they are shoppers,” Stephanie Zimmerman, Business and Innovation Management, Loterie Nationale. “So lotteries need to become retail specialists if we want to be relevant.”
The lottery contracts with a company called Retail Detail. “They organize retail academies linking retail with digital, and have a retail of the future outlet in Antwerp where a lot of innovative experiences, tests and ideas are gathered under one roof,” said Marc Frederix, Chief Players & Markets Officer, Loterie Nationale.
The consumer journey illustrates different areas potential consumers could come in contact with your brand—from living rooms, to street corners, to convenience and newspaper stores. These custom-built, walk-through rooms have the latest technologies embedded in them, creating a “store of the future” atmosphere.
The Shopping of the Future road show gives a vision of small retail in the future. “You can use it with the retailers so everyone has the same vision of what is the shopping of tomorrow. We invite our newspaper stores and we give a presentation about technology and omni-channel. [We try to educate them that] technology is their best friend and not the enemy… Then we go to the containers and we present some new technologies, like digital screens. They were so excited,” said Zimmerman.
But working with retailers doesn’t stop with advances in technology. “Being relevant within the store of the future of retail has many faces. First, it means something different if you are a supermarket or a petrol station/newspaper store. And it’s not technology for the sake of technology,” Zimmerman said. “Take the example of digital screens. The content is very important.”
For instance, in one Belgium petrol station, the lottery uses digital screens outside and inside the store. The lottery did a FMCG promotion where if players bought a 5 euro scratch ticket, they got a coffee, chocolate or water bottle for free. The results were outstanding. It was the best-selling month for this petrol station; it jumped from their fifth key channel to their first in sales.
“It was very important that we position ourselves as a FMCG brand and not as a national service product. So the promotion was with Douwe Egberts (coffee), Milka chocolate bars, and Spa, the national water in Belgium. All of them are top consumer brands,” Zimmerman said. “We paid the media and the production. But the retailer paid for the coffee, and then he went to the chocolate and Spa company to do the promotion with us. A competitor of this petrol station saw this promotion and was so excited that he asked us to do it.”
Evolving the idea of lottery as a true, relevant FMCG in the minds of potential new retailers, however, is a different challenge. Many retailers have a preconceived idea of what the lottery offers and sometimes it is completely misplaced. “We see a huge opportunity in super markets. We are in only two super markets for the moment but not in the biggest; for us, of course, if we can go into 500 stores in the biggest retailer in Belgium that would be great. We realized early on in our pitch that they saw us as a service for their clients. They didn’t see us a FMCG brand,” Zimmerman said.
“We have 6 million players, which means 80% of your customers are our customers. We know them. We can generate traffic in your store. We can generate loyalty. We can increase frequency of visits. We can do more for you marketing wise. You are thinking about us how we were yesterday… We are one of the biggest FMCG brands in Belgium—as big as Coca-Cola,” Zimmerman continued. “And they are looking at us like, we didn’t know that!”
But this effort is lost if the lottery isn’t relevant for the players. The lottery revitalized their brand image with their players by investing in a pop-up holiday store on one of the most-visited shopping street in Belgium. The store was built in three weeks and stayed open during the holiday season. “Lottery is a very good gift for Christmas, but placing it in newspaper stores and supermarkets doesn’t make it magical. [So we decided to] do a gift shop in a dreamy environment and see if we can’t also make some special products,” she said.
The lottery created higher price point packaging. One offer was a package that looked like a Christmas Tree with 24 scratch tickets in it. It cost 48 euros. They also had a golden box with its own suite of scratch games that cost 60 euros. The endeavor was a huge success. The lottery pop-up store was the sixth best seller, yet it only sold scratch tickets. They plan to do it next year, hopefully in three different locations.
“We sell through third parties, so it’s their image. We are selling in a shop with a certain element that we don’t control,” Zimmerman said. “They don’t sell dreams. While we were selling product, it was also a positioning campaign for what we stand for. Before, we could only claim it in advertising, but now we could claim it in a physical environment.”
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Conclusion
Whether it be starting a Retailer Council or a full scale digital screen rollout with backend data information center for individualized content for each of their retailers, every lottery in the world could emulate at least one element of these strategies.
It is critical to review what other lotteries have done to avoid complications. “The in-lane is a big new project. People think that our in-lane displays are advertising. They don’t understand it is a product [which they can] purchase,” Zimmerman explained. “We have to educate them that playing lottery is not old school anymore.”
Just as importantly, lotteries also need to spend time and money educating their retailers. “Once our convenience stores realized how big lottery was compared to the confectionary business and the impulse business, the importance of that two feet of linear space [for lottery merchandise and POS] really hit home. And they engaged with us. That was the big turning point for me. When we got retailers to engage and that they understood the scale of our category,” Canavan said.
Finally, it’s just as important to get the retailers, and their associations, on board with future endeavors. There has been a consistent theme of a slight disconnect in communication between retailers and lotteries that has taken considerable resources to overcome, whether it is a disengagement from centralized good causes the lottery funds, the necessary POS placement at retail for lottery to thrive, or a misunderstanding that lottery is a FMCG product. For the foreseeable future, brick and mortar will be responsible for the majority of sales for lotteries. There will never be a point where the lottery is overly involved with their retailers. And the retailers want to be more involved with their lotteries.
“We know the lottery customer buys more than the non-lottery customer. It’s about 65% more lift. The lottery player is in the store more regularly. We’d like to be the channel of choice. I know there is various things going on in terms of internet gaming. We think we’ve made it convenient to purchase a lottery ticket and we’d like to be the channel of choice. Looking at how stores are evolving, there is probably some nice opportunities with ways that we can evolve with lottery,” Lenard concluded.
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