Scientific Games set out to solve the fundamental problem that plagues the growth of the $45 billion lottery instant game industry. The company has innovated a retailer-friendly industrial solution to selling instant games. Its new SCiQ™ ecosystem eliminates accounting headaches, prevents theft and improves product promotion for retailers through the use of highly advanced technology.

“Scientific Games decided that the issues the lottery industry is facing with retailers are not going to get fixed at an industrial level until we wrap technology around the products. That’s what we did,” stated Jim Kennedy, EVP, Group Chief Executive, Lottery at Scientific Games.

SCiQ solves the accounting and branding problems associated with how instant games are currently sold. “It takes away the major pain points, improves the technology, and dramatically enhances the aesthetic execution—the branding. It allow us—the collective industry—to treat the lottery as a media channel,” he added. “Lottery touches 70% of the adult population on an annual basis. It gathers people together in a community. But lottery as a retail product category has been slowed down and inhibited because of its inability to be properly executed.”

SCiQ is a dispensing robot—a retail brainiac—that monitors all activity associated with selling instant games. “SCiQ provides insight, visibility and data for lotteries to better understand what the product is doing at every retailer,” stated Randall Lex, Director, Program Development at Scientific Games. “It allows us to reach new players through both mobile and brick-and-mortar, provide a better in-store retail experience, and attract new retailers that have stayed away from lottery products due to the laborious operational requirements. The SCiQ ecosystem will allow us to expand lottery’s footprint in areas that are vastly underserved, and attract new players who don’t come in contact with lottery today.”

The ecosystem starts with a SCiQ bin dispensing system that can sit on, in, under or beside a retailer counter to display instant games. Each individual game is assigned a number. The customer can pre-order games using a mobile app, or just tell the clerk. Then the games automatically dispense, and the retailer collects the payment. Behind the scenes, two separate data streams simultaneously track game sales and reconcile game sales.

“There are two very different data paths within the SCiQ ecosystem that converge to provide enhanced overall insights,” said Kennedy. “The first is the game information path, which is Scientific Games’ MAP™ System Analysis Insight data. The second path is the transaction details at the single game level for the supply chain, which includes the retailer’s shift accounting and approvals.”

Scientific Games currently is working with the 7-Eleven, Circle K, Kroger and Big Apple retail chains on pilot tests of SCiQ. “Circle K runs in multiple regions; their Southeast region is running the pilot now in North Carolina, and soon in South Carolina and Georgia. In Ohio, the pilot is running with Kroger,” said Lex. “In Maine, we are working with Big Apple.”

Kennedy added that “The Texas Lottery has been supportive with the process of getting 7-Eleven up and running with the pilot. Another major U.S. lottery is engaged with SCiQ at retail. Initially, we are intentionally very focused on a few key retailer relationships. It’s really important for us that the retailers are advocates of SCiQ, especially the key retailer relationships that we have developed over the years.”

It’s too early to do an in-depth analysis on the SCiQ pilots. “At participating retailers in Maine, we saw significant increases over the same period last year, in addition to operational efficiencies and full bins. At Circle K in North Carolina, instant game sales are up almost 20% over the same period last year. The only thing that changed at Circle K is the way games are displayed using the SCiQ system, and the instant game product is now front and center when you walk into the store. At Kroger, SCiQ systems were added to new distribution points within the store, augmenting the existing vending solution.”

“What we are doing is improving retailers’ financial performance by providing technology that saves them money,” added Kennedy. “The initial results show that the technology generates higher sales for retailers because of better execution, and gives the lottery transparency into the transactions. It’s hard to overstate this.”

Fighting Theft

Kennedy said a reality in the lottery business is that once a $300 pack of instant games is activated, it is cash. “Then, the retailer’s job is to manage risk —which becomes operationally complex.”

This puts a huge security burden on the 219,000 retailers that sell lottery games in the U.S. today. Scientific Games’ VP Retail Sales Development Jeff Sinacori ran the most successful lottery retailer outlet in New York before he sold the enterprise and joined Scientific Games. Jeff has spent the last 12 years working with lottery retailers to improve their sales through the firm’s SalesMaker™ program.

“As a retailer, I had a lot of loss and theft within my business—not only of tickets and cash, but also with my employees scratching game tickets, and fishing to try to win medium prizes of $100,” said Sinacori. “Overall, theft of lottery games accounts for $900 million a year in lost revenues just in the U.S. It’s a huge number. The more high-priced games a lottery offers, the more that number grows. It is big money. We needed to solve this issue and finally, we have a highly advanced technology-based solution.”

Kennedy said the $900 million represents about 2% of total instant game sales. “Plus, lotteries probably spend about 1% to keep this number at 2%. Unburdening the retailers of these operating challenges is key to improving their financial performance. That’s why SCiQ is so revolutionary.”