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Lottery revenue important to a host of businesses
Sunday, February 04, 2007 posted 04:53 AM EST
If the New York Lottery vanished tomorrow, many store owners would suffer. Their businesses rely on the 6 percent commission
they get from lottery sales.
"I would not be in business without the lottery," said Mike Palencar, who owns two convenience stores in Webster.
He estimates that lottery commissions amount to just 5 percent of his stores' total profit. But sales commissions aren't
the only benefit for the lottery's 16,000 vendors statewide. People coming to the stores to buy lottery tickets will usually
also buy groceries or gas.
"A 6 percent profit margin is very low for a convenience store. Nothing comes that close. Potato chips are about 20 percent,"
Palencar said.
But when there's a large Lotto or Mega Millions jackpot, customers flock to his store for tickets. They buy more lottery
tickets of all games, and more groceries.
Paul Theodorou, co-owner of World Wide News, with locations in downtown Rochester and in Webster, said lottery sales amount
to about 10 percent of his business.
"It's important because it attracts customers, and they may buy a newspaper, coffee or a magazine," Theodorou said.
Suzan Avies, co-owner of Suzay's Newsstand in Midtown Plaza, said lottery sales amount to about half of her profits. She
declined to say how many tickets she sells, but her business is one of the area's top sellers.
"We have a lot of office pools," she said. Some players spend more than $100 on tickets.
Her lottery sales, however, haven't been skyrocketing each year. "Initially it was going up every year," she said. "Now,
there's another store down the hall" selling lottery tickets and cutting into her sales.
Selling lottery tickets was always part of the plan to make her business succeed, she said. "You have to do a high volume."
In 1998, World Wide News downtown sold more than $1.6 million in lottery tickets, the second-highest seller in Monroe County,
behind Wegmans Food Market in Irondequoit, which had $1.7 million in sales.
"We offer lottery because it's another element of one-stop shopping convenience," said Jo Natale, a spokeswoman for Wegmans.
"It adds fun and excitement to the store. It also is a program that supports education in New York state, and it is a profit
center for us as well."
Of the top 10 lottery retailers in Monroe County, Wegmans stores hold nine of the positions; World Wide News is No. 7. Lottery
officials declined to provide sales figures for individual stores this year, citing competitive reasons for their vendors.
In 1998, 13 stores in Monroe County sold more than $1 million in lottery tickets. With a 6 percent commission, each store
earned $60,000.
Theodorou declined to say exactly how many lottery tickets he sells. "We have five (instant ticket) machines, and we can't
keep the books in there long enough."
The Bay Road Grocery has a lottery display on the counter showing 32 varieties of instant lottery tickets. Buying one of
each would cost $139.
Palencar estimates that 60 percent of his customers play the lottery. On average, they'll spend $5 to $7 on tickets. But
he has seen customers spend $500 or more in a day, including one man who had to come out of retirement because he had spent
his nest egg on lottery tickets.
Another regular customer plays the lottery "for a living," he said.
It's not unusual for customers to ask for 20 of the same ticket. One man bought an entire book of tickets for $500 as a Christmas
present.
Vendors must be fingerprinted before the lottery computer equipment is installed, and they pay $525 for a phone installation.
Once that is done, the state pays for the computer terminal, the paper for the tickets, everything except the labor.
"That's why we love it," Palencar said.
Vendors are given 45 days to pay for the instant tickets they receive.
Last year, Palencar's store sold a jackpot instant ticket, awarding the winner $2,000 a week for life, a minimum $2 million
prize. The lottery pays bonuses of $10,000 to store owners selling Mega Millions jackpot tickets, but stores receive only
publicity for other winners.
Palencar made a 30-cent commission for selling the winning $5 Win For Life ticket. He has pictures from the news conference
hanging in his store.
"I didn't get a flood of business from it, but it's a reassurance to my customers that there are winners out there," he said.
He doesn't play the lottery, and tells his employees they cannot play the lottery in the store.
"Customers already think we have an insight where the winners are," Palencar said. "We don't. But we don't want to give the
impression the employees are buying the tickets."
Businesses other than retailers benefit from the lottery, which employs 343 statewide, including lawyers, financial advisers
and people who keep the stores stocked with lottery tickets.
The lottery is allocated to spend 1 percent of sales for marketing and advertising. With sales in fiscal year 2005-06 of
$6.8 billion, that amounts to $68 million.
The lottery could spend up to 1.5 percent of sales five years ago for advertising.
Its advertising agency, DDB Worldwide, prints the large cardboard checks shown at winners' press conferences.
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