Convenience stores sell approximately half of all lottery tickets sold in the United States. On any given day, a convenience store serves around 1,100 customers a day: 300 at the gas pump and around 800 inside the store to buy drinks, snacks, and other convenience items, including lottery tickets.
Commissions on lottery tickets vary by date but are typically 5% to 6%. That means on a $2 ticket, retailers make about a dime. Stores that sell winning tickets also receive commissions, and the size of these large jackpot commissions vary by state. In some states, these commissions are capped at a certain level (as low as $10,000), while in other states they are a percentage of the total payout, as much as 1%.
Lottery also is a great traffic driver for convenience stores. According to a NACS study, 95% of lottery customers buy at least one additional item inside the store. The overall market basket, or “spend” for items by lottery customers in convenience stores is $10.35, 65% higher than the $6.29 spent by non-lottery customers.
Lottery customers tend to be regular customers and are inside the store where they often buy other items. Those in-store sales are critical because stores also have low margins selling fuel. Over the past five years, the net margin on fuels (before expenses) has been 6.2%. After expenses, retailers only make around a nickel per gallon profit selling fuel.
Lottery is legal and multi-state jackpots are in 44 states. It is prohibited in Nevada, Alabama, Mississippi, Utah, Alaska and Hawaii. However, even in states where lottery is legal, some retailers opt to not sell lottery. Low lottery commissions, combined with the cost of terminals and the need to have these terminals in a spot that could be used to sell other impulse items, are some concerns that these retailers raise.
There is no question that there is an excitement in stores as customers dream of the possibilities of the largest jackpot in history. It gives retailers a chance to shine and enjoy the excitement in their communities. And it’s great to hear the conversations in these communities across the country about what people would do to possibly use the winnings – or dream about a better future.
Selling a winning ticket can also garner media attention at the lucky store. See how one convenience retailer reacted to the attention after selling a winning ticket involving a previous record jackpot.