Dollar General tests sale of lottery tickets in TN

11:35 AM, Nov 27, 2009   |    comments
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By Bonna Johnson, THE TENNESSEAN

What can't you find at a dollar store these days? Cross lottery tickets off that list.

Dollar General is testing the sale of scratch-off games, Powerball tickets and other lottery games at 37 stores in Tennessee. The Goodlettsville-based discount retailer began the pilot in January.

It's the Tennessee lottery's first foray into the dollar store market. Neither Family Dollar nor Dollar Tree sells lottery tickets.

It's a good move for Dollar General as it seeks to increase foot traffic, retail experts said. It also could force its competitors to take a second look at adding lottery games to their lineups, said Jim Hertel, managing partner at Willard Bishop, a retail consulting firm.

"This generates repeat traffic," Hertel said. "Lottery tickets have short shelf-lives. You buy this week and the drawing is held. You haven't won, so you're back in the market for another crack at it."

But one critic said the expansion of lottery sales to dollar stores, especially at a time of economic crisis, is just another way for the lottery to target those who can least afford to risk their money.

"That's whom the lotteries make their money off of," said Les Bernal, executive director of the Washington, D.C.-based Stop Predatory Gambling group. "Why do you think you don't see the lottery in luxury stores?"

Most lottery sales take place at convenience stores, gas stations and supermarkets. But lotteries are always looking for new outlets, said Kym Gerlock, a spokeswoman for the Tennessee lottery.

Dollar stores and drugstore chains could be the next frontier, Bernal said.

Until now, many such retailers have been reluctant to get into gambling, sometimes to safeguard their image. In other cases, retailers have steered clear of trying to sell lottery tickets because they wanted consumers to focus on shopping for regular store merchandise.

Although Kmart does sell lottery tickets in Tennessee, most other major chains do not, including Walgreens, CVS, Target and Walmart.

"We have no plans, yet," said Dennis Alpert, a Walmart spokesman. Some lottery operators, though, are hoping the world's largest discount chain will give gaming a chance now that its home state of Arkansas recently adopted a lottery.

In West Tennessee, the lottery is finalizing a deal for a drug store chain to sell tickets, Gerlock said. And, although it's not part of a chain, Haddox Pharmacy in Nashville is a lottery retailer.

'Drive more traffic'

In North Carolina, lottery officials recently approved vending machines to sell Powerball and other games that draw three, four or five winning numbers as a way to expand into chain stores.

It already operates vending machines that sell scratch-off games. Such vending machines can be more convenient than putting lottery terminals at each checkout lane in a big-box store.

In Tennessee, there are about 800 vending machines that sell scratch-off games. Most of them are in supermarkets, said Rebecca Hargrove, the Tennessee lottery president and CEO.

Dollar General sells tickets at its cash registers and vending machines, Gerlock said.

Dollar General stores in Georgia, as well, started selling lottery tickets earlier this year as part of the pilot program, said Tandi Reddick, spokeswoman for the Georgia Lottery.

"What's at the top of Dollar General's mind is how to drive more traffic," said Zoe Tan, an equity analyst with Morningstar Inc.

Because retailers only make 6.5 cents for every $1 lottery ticket sold, they often decide to offer lottery sales as a way to attract customers.

Convenience store operators, generally, don't feel threatened by the lottery's expansion into dollar stores, said Jeff Lenard, spokesman for the National Association of Convenience Stores.

Lottery tickets aren't the most profitable item convenience marts sell, Lenard said.

But "you get that repeat customer who comes every week, and he may end up buying coffee every time he comes," Lenard said.

A study by the national convenience stores group found that frequent lottery customers spent $7.07 per visit. Infrequent lottery customers spent $4.80 and non-lottery customers spent $3.47 per visit. Lottery customers also shopped more frequently and bought at least one other product 95 percent of the time they visited a store, the study showed.

In the survey, more than half the respondents called the lottery either "somewhat" or "extremely" important in deciding where to shop. And more than half of store managers said traffic increased when the lottery was introduced in their stores.

Such statistics set off alarm bells for anti-gambling activists.

"They are trying to put gambling products at everyone's fingertips in America," said Bernal of the Stop Predatory Gambling group.


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