Written by: Danny Bogus, Principal Digital Consultant
The Michigan Lottery is an exemplary case study to examine the impacts of online sales (“iLottery”) throughout an organization including its network of retailers. After beginning with an unadvertised beta launch in the summer of 2014, iLottery has quickly grown to surpass $8 million in weekly sales as of March of 2016. Meanwhile, the retail business has set all time records for sales, profits and retailer commissions.
The reality of player channel preference has been consistent with focus group results obtained prior to the launch of iLottery in Michigan. During those interviews, many existing retail players were opposed to the idea of registering online, didn’t like the requirement to provide banking information, didn’t always trust that iLottery games would be fair, and preferred the game play experience (i.e. scratching) of retail games over their digital counterparts.
Clear evidence of player channel preference can be found when examining categorical sales comparisons. Specifically, keno and instants were the only two categories of games sold online during the first fiscal year. During that time, online instants accounted for two-thirds of iLottery sales, or roughly $98 million, while online keno contributed $49 million. In parallel, retail instants and retail keno reached all-time records and grew by more than $100 million and $30 million respectively.
Perhaps the most compelling indicator of player channel preference was observed in the Keno “To Go” product sold at retail. Players who purchase Keno “To Go” watch their drawings online after buying in-store, and are literally a few clicks away from playing a Keno game with improved prize returns, quicker play action and the supposed convenience of avoiding a trip to the store. Yet this product was unaffected by the launch of online keno and it drove the majority of growth within the retail keno category.
It is clear that retail channels have not been negatively affected since the launch of online sales. In fact, a better argument can be made in support of iLottery increasing overall player engagement and driving cross-channel sales. Programs such as the Online Game Card, purchased at retail and redeemed online, have helped to bridge the two channels while providing added traffic and commissions to retailers.
The first year has not been a fluke. At the midpoint of the second year, iLottery has experienced explosive growth and retail sales are yet again on pace to set all time record highs. The multi-state and in-state jackpot games launched online in February and were followed by the first mass media awareness campaign to promote iLottery. The results were spectacular, with iLottery sales surpassing $1 million per day (81 cents weekly per capita) and gross gaming profits reaching nearly $4 million during the month of February.
Performance has been tracking in line with the long-range goal of delivering $480 million in incremental profits from iLottery during the first eight years of operation. If Michigan stays the course, the iLottery program is projected to deliver roughly $120 million in supplemental profits during fiscal year 2021. Retailers are also expected to play an increased role in driving online sales and they stand to benefit from this new market as well.
The Michigan Lottery’s success story should be a page in the book of every lottery looking to convince its stakeholders of the value, certainty and complementary nature of this new sales channel. Multi-channel growth has been observed across the globe where iLottery is present and the industry is finally obtaining domestic evidence as well. Perhaps not too far ahead, as the trends continue to take shape, iLottery will be viewed universally as one of the safest bets to achieve incremental growth.