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Lotteries after lockdown - Part 1
Many lotteries have reported an increase in online players due to retail shutdowns in place across the world. But will this lead to a permanent shift in player behaviour, asks Joanne Christie.
Lottery operators have historically taken wildly different approaches to selling online and consequently achieved wildly different levels of success in the channel. But even those that have put a huge amount of resources into the endeavour have found that largely, retail remains the dominant channel for customers.
Partly, this is due to demographics – it is widely recognised that older people are more likely to play the lottery than younger people. And partly it is due to ease of access – in many countries tickets can be bought during a supermarket shop, so people don’t have the same incentive to make the move online as they do with other products.
However, the sudden arrival of novel coronavirus (Covid-19) has changed things significantly. Widespread lockdowns have made it difficult – in some cases impossible – for players to buy their tickets at retail outlets. This has created a drop in retail sales but also an opportunity for lotteries to ramp up their online player base.
In many cases any online uptick won’t be enough to compensate for the retail losses. On the other hand there is a possibility that a significant number of the new online players – some of whom are usually retail players, others completely new players – could add to the long-term revenues of operators.
Shift in preferences
“Like many businesses, we have seen some impact on National Lottery retail sales – in-store sales typically make up around 70% of our total sales – as a result of the ongoing disruption caused by Covid-19,” says Camelot commercial director Neil Brocklehurst. “As part of our measures to support National Lottery retailers, and in line with government guidance, we’ve been encouraging players to only buy tickets in retail if they’re already in store doing an essential shop and to play online instead.
“What’s clear right now is that there has been a change in the way some people are playing the National Lottery during this period. Due to the fact that we’ve been encouraging people to play and check their tickets online and on the National Lottery app, we’ve seen a significant increase in people downloading our app and traffic to our online channels.”
However, he says it’s too early to say how many of these new online players will remain online, adding that “the UK National Lottery has always been a primarily retail business and we don’t expect that to change any time soon”.
Anna Romboli, head of the Tur business unit at Svenska Spel, says she is hopeful of a permanent increase in online play. “We see a rapid digital transformation and an increase in our online player base, and this increase seems to have accelerated due to Covid-19. These are customers that we aim to keep long term.”
“It’s very difficult to predict the long-term effect, but right now we can see a decrease in retail sales also here in Sweden, as the Swedes stay at home to a large extent. And since the crisis is on everybody’s mind, the general focus on lottery products isn’t that high.”
Others, however, fear that not only will online not make up for the retail decline in the interim but also that the retail decline will prove permanent. Yakir Firestane, director of digital at the Health Lottery, says the lottery has seen a rise of around 10% in online play but a 40% fall in retail play.
His worry is that while the online gain may remain, retail will not bounce back. “I don’t think that we will go back to where we were before the pandemic in terms of our retail/online split.
“My fear is that the treatment, in terms of the behavioural treatment that people have received by being denied the ability to play in retail for six weeks, maybe longer, is just too long for them to regain old habits. They will have learned new behaviour, which is either they came to us online or they found something else to do with their £5 a week.
“I think that our lottery is in a similar position to the newspaper industry. You see about the same drop in newspaper sales, about 30-40%, and yes, you see an increase online, but the revenues are not the same and many fear that the people who have stopped buying the newspaper will grow out of the habit.”
Adapt to survive
This risk makes it all the more important that lotteries adapt their offerings in the meantime to make sure players don’t get out of the habit of playing.
One way the Health Lottery is doing this is via product innovation. “We’ve accelerated our delivery pace, so we launched a new gambling website two or three weeks ago, we launched a new scratchcard – which has the best odds to win £100,000 in Britain – two weeks ago, and we are releasing a new product almost every fortnight, which is significant. We usually release stuff much more slowly,” says Firestane.
On the other side of the Atlantic, the New Hampshire Lottery Commission has adopted a similar strategy. “[In April] we started launching two e-Instants a month to ensure there was ample refreshed content for our players,” says Kelley-Jaye Cleland, director of sales and product development. “Previously we only launched one per month, with the exception of the first few months of launch. We anticipate this being a permanent change.”
Lotteries have also focused on the accessibility of their products. At Camelot, Brocklehurst says: “We’ve taken measures to make it easier for people who might traditionally play in retail – for example, we’ve lowered our minimum online deposit limit from £10 to £5 to ensure that people who just want to buy a ticket or two play online instead of going out to a shop unnecessarily to do so.”
This focus on ease of access has in some cases extended beyond online. For example, in early April Svenska Spel reintroduced proxy play, whereby customers can nominate an individual to place bets or buy lottery tickets on their behalf in retail outlets. It was a move aimed largely at elderly customers and one that has been “very positively received”, according to Romboli.
“There will always be a group that prefers the retail experience and also a group that will just not be able to make the move over to online play. However, this group is decreasing over time,” she says.
In the Czech Republic, Sazka has taken steps to encourage these elusive older players online. For example, shortly after the Czech lockdown began, it put together online tutorials on how to create an account and how to deposit money, aimed at those aged 50-plus.
“We track a KPI which is newly registered [customers] and these numbers since March have doubled. And more interestingly, we clearly see an older audience becoming now an online customer. [These are], of course, regularly a retail customer,” says Sazka chief executive Robert Chvatal.
He says this was just one part of its strategy to invest more in attracting additional online customers during lockdown. “Even in the deepest corona times we did not think for a second on the necessity to invest capital expenditures into making our online platform more robust.”
So far, Sazka’s investment seems to be paying off. At one point only 70% of Sazka’s Czech retail network was selling products and it’s likely many players stayed away even when they could access retail outlets. However, in a statement released alongside its 2019 annual report in April, the company said Czech GGR year-to-date remained in line with the company’s budget.
In fact, in April it said it was slightly above expectations, with a strong online performance making up for any retail loss. “The Czech business is still pretty much delivering what it was delivering last year, which I think is a phenomenal achievement,” says Chvatal.