How do lottery retailers make their money?

August 26, 2009 9:54 AM

How do lottery retailers make their money?

Do they make money on a per ticket sold kind of thing, or do they get paid a certain amount each month that they are selling tickets? Is it different for mega-millions/powerball vs scratch-offs? Or is it the opposite, like they pay the lotto folks for the privilege of selling tickets, as a way of getting people into their shops?

posted by Grither to Work & Money (23 answers total)

As far as I know they don't until they sell a winning ticket. That's when they get a commission on the winnings.
posted by mrflibble at 9:56 AM on August 26, 2009

I believe they get a commission for each ticket they sell, and, if they sell a winning ticket above a certain dollar amount, they get a bonus according to a sliding scale. The larger the jackpot won, the larger the bonus. Though, as an overall percentage of the jackpot, these bonus payments are likely quite small.
posted by dfriedman at 9:56 AM on August 26, 2009

With the big lottos at least, they get a prize of their own for selling the winning ticket.
posted by robocop is bleeding at 9:56 AM on August 26, 2009

The other thing to keep in mind is that the various lotteries in the US are subject to different states' laws, and so the answer for, say, New York State lotteries may not apply to those of another state.
posted by dfriedman at 9:59 AM on August 26, 2009

Response by poster: That's a good point dfriedman, I'm specifically asking about New York in this case...but any and all answers are appreciated!
posted by Grither at 10:03 AM on August 26, 2009

In Texas, for our state lotteries "retailers such as grocery stores, gas stations, and liquor and convenience stores sell Texas lottery tickets, getting a 5% commission for each ticket they sell."
posted by Houstonian at 10:05 AM on August 26, 2009

Also in Texas, they receive bonuses. Retailers pay (I believe $15) for a license to sell lottery tickets. This comes from our Texas Lottery Commission; maybe NY has a similar government organization?
posted by Houstonian at 10:09 AM on August 26, 2009

Best answer: According to this this site, NY State Lottery retailers earn a six percent commission on every dollar spent on a New York Lottery product
posted by GregCOTF at 10:11 AM on August 26, 2009 [1 favorite]

In Missouri they get some fixed rate per scratch-off ticket. Which is to say, they buy a roll of 300 tickets at some price N, and then sell them for 2N.
posted by jeffamaphone at 10:20 AM on August 26, 2009

I worked at a lottery retailer in PA in the early 90s. Back then, we got 5% of ticket sales.
posted by MegoSteve at 10:24 AM on August 26, 2009

Some of them have made money by giving you back a "Not a Winner" ticket that is not the one you gave them, then checking yours after you're gone. An unusually high percentage of lottery retailers here in Canada and elsewhere have won big prizes.
posted by weapons-grade pandemonium at 10:24 AM on August 26, 2009

Here in PA stores get 5% of total ticket sales, both scratch off and 'numbers' games. Also the store that sells the grand prize winner gets a small cut. Honestly 5% isn't really worth the hassle and time of the employees lottery tends to take up, but lottery gets customers into the stores.
posted by K5 at 10:26 AM on August 26, 2009

nthing commissions on winning tickets in Vermont. Plus, it's almost a community service seeing as proceeds go to the State Education Fund.
posted by papayaninja at 10:28 AM on August 26, 2009

Yea, as K5 suggests, it gets customers into the stores where they might buy other stuff. My parents ran a convenience store that sold lottery tickets (in NJ) and the real money was in all of the coffee and drinks and snacks they sold, not in the lottery sales.
posted by cabingirl at 10:35 AM on August 26, 2009

Here in the UK, retailers get a minuscule percecentage of each Lotto sale. I think it's 0.5%. The money is made on the other items the customer buys when they're in the shop getting their Lotto.
posted by Solomon at 10:36 AM on August 26, 2009

In Florida, the retailer gets 5% of total sales.

As K5 said, it's not a moneymaker, but it gets people into the stores, where they can also buy cigarettes and beer.
posted by alligatorman at 10:38 AM on August 26, 2009

For scratch-offs in Pennsylvania it used to be that retailers were able to buy a 500 ticket roll ($500 retail) for $475 dollars. Sure, you make a bit of money, but the sunk costs are high. The benefit is that people who come into buy lottery tickets also usually buy cigarettes and other convenience items at the same time.
posted by mrmojoflying at 10:49 AM on August 26, 2009

My understanding in NJ is that they only get any money for big payoffs. For everything else (scratchoffs, etc.) it's just a loss leader -- gets people in the store.
posted by condour75 at 11:05 AM on August 26, 2009

In California the retailer gets a very small commission for selling lottery/mega millions (etc.) tickets and the scratch off tickets. If someone wins the Super Lotto jackpot in their store, they receive .5% of the jackpot. Not sure how much they would get for a Mega Millions jackpot winner.
posted by wiretap at 11:59 AM on August 26, 2009

As for the rest of your question, (in California) it's sort of a privilege to carry lottery in your store (you CAN be banned from selling it if you try to do something shady regarding redeeming prizes for customers), but you definitely don't have to pay them anything to have it. They set you up with all the equipment you need and come by periodically to install new signs and such. Retailers definitely like to have lottery because it draws in customers but it's almost impossible to make any sort of remarkable income selling them.
posted by wiretap at 12:04 PM on August 26, 2009

In Ontario it's about 5% depending on the game, etc (+ a bonus when they sell jackpots), but what's important to keep in mind is that it's all margin (even for places where it's a lower percentage). They don't pay for the machine, or the inventory, or anything else. It's a free 5% just for showing up (once you incur the cost of setting up shop, obviously). Much better than anything else in the store. What would you rather do? Get 10 cents profit for pushing a button or two and selling a $2 piece of paper that you didn't pay for and don't incur any ongoing costs for, or get the same 10 cents in profit for selling a $2 bag of chips you had to pay $1.90 for upfront, stack on the shelves, keep in inventory, hope that no one steals, and pray that someone wants before it spoils?
posted by loquax at 2:32 PM on August 26, 2009

Best answer: Retailers in NY State get 6% commission on ticket sales. If they sell a winning Mega Millions ticket, they are eligible for a $10,000 bonus. If they sell a winning NY Lotto ticket, they are "eligible to participate in special retail promotions and other events designed to recognize their winning efforts". Source. (Personal anecdote: I know a retailer who sold a winning NY Lotto ticket, and he didn't get any extra money from it, just some promotional materials from the state.)

As many have said, retailers make more money off the stuff people buy when they come in than they do off the ticket sales.
posted by bedhead at 4:17 PM on August 26, 2009

In New Zealand, it's 7% of all sales, minus terminal fees (which if memory serves are 1% of sales, making the effective commission rate 6%).

Sadly, no bonuses for selling a winning ticket, though they send the retailers the cool "POWERBALL (or whatever) JACKPOT WON HERE" posters which does tend to significantly increase sales in the immediately following weeks.
posted by lwb at 8:14 PM on August 26, 2009