CREJ - Retail Properties Quarterly - September 2015
The Colorado Lottery has given over $2.8 billion in distributions back to local communities and the state of Colorado through its proceeds partners program since its beginning in January 1983, when a single, $1 scratch game was launched. Sales for the first fiscal year were just under $137 million. Times certainly have changed over the last 32 years. Scratch tickets now are offered at price-points ranging from $1 to $20, with sales growing to a record of $377 million in the recently completed 2014 fiscal year. Lottery games contribute in excess of $500 million annually to lottery sales since 2010. Retailer Benefits Lottery sales and proceeds at current levels wouldn’t be possible without the efforts of more than 3,000 retailers across the state, from traditional lottery trade styles such as convenience and grocery stores, to independently operated liquor stores, bars, restaurants and bowling centers, among others. Retailers that sell lottery products are paid a commission for every ticket they sell and for every winner they cash, which positively impacts the economy along with providing an opportunity for consumers and retailers to give back to their local communities with every ticket purchased and sold. Lottery retailers can be a single, freestanding business located in a neighborhood or part of a strip center in cities and towns across Colorado. It is important that retailers understand the importance of lottery profits and incremental sales to their bottom line as a result of the additional customers driven to their business. Also, it is important to understand that lottery players enjoy convenience and accessibility to lottery products at local retailers. However, there isn’t a presence in all centers, especially large regional, power, lifestyle or outlet centers where many consumers shop. There are many reasons why centers choose not to be a licensed lottery retailer, but also there are some misconceptions that tend to dissuade others. Many are not aware of what type of retailers can sell lottery products, who to contact or how to initiate the licensing process. Sometimes property and mall managers feel that lottery sales in their centers is not a good fit, or leases are written in a way that makes it difficult or less profitable for tenants to sell lottery. However, the most common issue seems to be the lack of awareness of the benefits lottery has to offer to businesses, centers and the local community. The Colorado Lottery always is looking to license quality retailers and gain a presence in centers where it is currently absent. Expanding the retailer base also is the only sure way to improve the accessibility to the product and increase sales and proceeds. Prospective retailers must ensure that lottery tickets can be sold securely, profitably and within the lottery’s high standards of integrity. Retailers and property managers should evaluate the benefits that come with selling lottery tickets and the positive impact it can have for their business, shopping center and community. Commissions and Bonuses Commissions paid by the Colorado Lottery are among the highest of any lottery in the country. Retailers receive 7 percent commission for scratch ticket sales, 6 percent commission for jackpot ticket sales and a 1 percent cashing bonus for all winning tickets validated at their business. They have an opportunity to earn additional marketing and selling bonuses as well. Total profits earned by lottery retailers have grown from just under $30 million in fiscal year 2007 to over $40 million in fiscal year 2014, which equates to an annual average of around $13,000 in gross profit per retailer. In addition to the increased cash flow and bottom-line benefits, the sale of lottery tickets can drive additional consumer traffic with lottery-sponsored promotions and advertising, all with minimal upfront costs for licensing and bonding fees to the retailer. Proceeds Distributions The mission of the Colorado Lottery is to efficiently create and sell its games with the highest standards of integrity while maximizing proceeds for the people of Colorado. Profits from lottery sales are distributed to proceeds partners, including Great Outdoors Colorado, Conservation Trust Fund, and Colorado Parks and Wildlife. The groups are tasked with distributing the funds to improve and support the creation of new parks, trails and recreational facilities, preserve open space, conservation education and wildlife projects, all of which positively impact communities across the state. Spillover funds above the statutory limits are given to Building Excellent Schools Today, which issues funds in the form of grants to underfunded school districts to address health and safety issues. Selling lottery tickets can benefit businesses not only because of additional traffic it can drive to centers, but also provides an opportunity give back to the community.