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Convenience stores expect boost from Mississippi lottery

By TED CARTER

Mississippi’s convenience store operators have heard the cautions that some of the money customers previously spent on dish soap, soda and bread will be diverted to lottery tickets.

But the prospect of making a nickel or more on each one-dollar ticket has the retailers saying, “Bring it on.”

Philip Chamblee, head of the Mississippi Petroleum Marketers and Convenience Stores Association, says he has seen the projections by Mississippi State Economist Darrin Webb. Those warn that a state like Mississippi populated by low-income people could see a nearly $20 million annual drop in retail sales once lottery sales hit the state’s projection of $604 million.

Chamblee concedes that Webb’s projections concern him. On the other hand, he says association members with stores in neighboring lottery states have said that damage to merchandise and food sales “really hadn’t been an issue.”

Those expectations helped to lead the governing board of the association to endorse a Mississippi lottery ahead of its passage this summer. The board represents 2,773 stores with a work force of 45,000 employees.

Together with motor fuels, food and merchandis, the stores do nearly $10 billion in sales a year.  That comes to $4 million a day, the association says.

Although the percentage the state’s convenience store operators will get from ticket sales has not yet been set, retailers elsewhere have typically received 5 cents to 6 cents on each dollar.  They will have to rent the terminals that process the tickets, probably for around $25 a week for each one, said Chamblee.

The store operators will sell a lot of tickets, perhaps even half of all sold statewide. That would happen if the Magnolia State follows the patterns of other lottery states, the association says.

The 5 to 6 cents on $2 in ticket sales, means retailers make about a dime. Convenience stores hit a jackpot of sorts as well when they sell winning tickets in the high-dollar drawings. The associaton says stores that sell winning tickets get commissions; the size of these large jackpot commissions varies 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 percent,” the association says.

The operator can also expect a bump in later ticket sales once word spreads about the lucky jackpot ticket the store sold, Chamblee says.

Jackpots and the commissions aside, selling lottery tickets is a strong traffic driver for convenience stores, he says.

The National Association of Convenience Stores (NACS) says a study it did found 95 percent 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, a sum 65 percent higher than the $6.29 spent by non-lottery customers,” the NACS says.

The extra traffic drawn into the store is an especially welcome offset to the low margin of about a nickel a gallon that convenience store operators get from motor fuel sales. The timing of new lottery sales for Mississippi operators could prove fortunate as well. It comes as the nationwide net margin on fuels has dropped 6.2 percent over the past five years, the NACS says.

Mississippi state government expects to net in the $80 million range annually, based on multi-state jackpot games bringing $338 million and instant ticket games $266 million. But the $80 million only happens if the state can get 30 percent of sales revenue. Neither Arkansas nor Kansas have done that with their lotteries according to Webb, the state economist.

Arkansas received an average of 18.7 percent of sales and Kansas 28.8 percent, for an average of 23.7 percent of sales, Webb told the House Lottery Working Group in November 2017.

“If the state receives 23.7 percent of sales, the net returns to state revenue could be as low as $61.2 million,” Webb said.

“The net impact to the state revenue will be positive, however, since the sales tax rate is 7 percent while the effective tax rate for lottery sales is as much as 30 percent,” Webb told lawmakers.

“If a person spends $100 at Walmart, the state gets $7; if a person spends $100 on lottery tickets, the state gets as much as $30,” he added.

Webb said his analysis used lottery sales breakdowns of 50 percent to payouts, 30 percent to government and 20 percent to costs.

He said in an interview earlier this month his office has not made changes to his 2017 projections. Look for more tweaks and more accuracy as some of the data used in the earlier analysis tested, Webb said.

“Once we have a track record and are trying to forecast the next year, we can forecast better,” he added.

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