Michigan to start online lottery sales: what effect on consumers and retailers?

Michigan Lottery- online effects on consumers and retailersEver since Detroit, Michigan declared bankruptcy – one tends to feel concerned about Michigan and its finances. The recent announcement that Michigan will start selling lottery tickets online by 2014,seems like a good move from a state revenue point of view. In fact, states like Illinois and New York also want to move lotteries online in a bid to increase state revenues and most states might eventually follow suit. 

For Michigan, the online move was not without dissent from Michigan legislators who raised concerns about the increased  possibility of gaming addiction , increased credit card debt and a lowering of customer footfalls into brick and retailer lotto stores.  As all states start to grapple with these important public policy issues- here are some thoughts:

  • Lottery research: Lottery related research has picked up over the last decade under the categories of gambling and gaming research. This as research suggests  that most people don't think of lottery ticket buying as gambling simply because lottery stores are everywhere and the state is involved in running the lottery worldwide. A nice review of lottery research appears in the Journal of Gambling Studies by Thai scholar V. Ariyabuddhiphongs.
  • Lotteries justification: Public policy justifies lotteries as follows:
    • The State is able to raise money  from the public through lottery sales without raising income or property  taxes
    •  Funding for worthy causes like public school education is achieved through lotteries. Thus, Michigan Lottery has contributed over $17 Billion to the school system since 1972
    • Helps decrease illegal gambling 
    • Compared to taxes that are mandatory, lottery ticket buying is voluntary
  • Lottery Addiction and Internet: Economists  Jonathan Guryan and Melissa Kearney define lottery ticket buying as an addiction when ticket purchases increase over time. You buy one ticket today and keep increasing your ticket buying just to improve your chances without realizing what Ariyabuddhiphongs concludes:if you bought a ticket every day from birth and lived to be 100 it would take you 383 life times to win a lotto!  Prior research suggests that parents playing lotto is a good predicter of their  children playing lotto as they grow up. Whether Internet will accelerate lotto playing among the more tech savvy younger people will need to be studied. 
  • Credit cards and online lotto tickets: When you buy a lotto ticket you have to pay cash at a retailer. How purchases, credit card debt and addiction might be affected will be interesting to watch as Michigan and other states adopt online lottery ticket sales.
  • Retailers will be adversely affected: Currently retailers in the lottery business are the distribution channel for tickets . There are about 11,000 retailers in Michigan who collectively make about $172 million in commissions according to the annual reports of Michigan Lottery.  While the per retailer commissions are modest at about $15,000 per year- the question of loss of footfalls will need careful study. Eventually if retailers lose too much income they might get out of lottery retailing. Keep in mind, that the enormous point of sale publicity including the "we had a winner" posters have changed public perceptions about lottery being more "fun" than "gambling."

Online selling of lottery tickets seems like an obvious thing to do today. But just as the upcoming  "Black Friday" is about brick retailers having their day – there is great charm in buying a lottery ticket at the convenience store along with the milk and some light conversation with the retailer. This as various other customers hang out reading the newspaper (yes. the paper version) and sipping coffee that cannot be done online, as yet.Contact StratoServe.

We wish our readers a Very Happy Thanksgiving !

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