Lottery retailers say Internet sales will be bad for business

 By Jamey Dunn

Convenience store owners and other Illinois retailers are worried that a plan to sell lottery tickets online would cut into their profits and possibly lead to layoffs.

Following a decision by the U.S. Justice Department that allows for Internet lottery ticket sales, the state is moving forward with a pilot program to sell tickets for the Lotto and Mega Millions games online. The General Assembly approved the plan in 2009 as a founding source for the state’s capital construction program. Michael Jones, the superintendent of the lottery, said he expects Internet ticket sales to begin this spring, and he hopes to add Powerball ticket to online sales.

But retailers who sell such tickets are concerned that online sales will hurt their businesses. Bill Fleischli of the Illinois Petroleum Marketers Association and the Illinois Association of Convenience Stores said during a news conference today that lottery ticket sales bring customers into gasoline stations and convenience stores, and that prompts sales of other products, such as food and beverages. Since those other sales, and not gasoline sales, typically drive profits for gas stations — sometimes accounting for up to 90 percent of profits — Fleischli said anything that might reduce customer traffic into stores could be particularly damaging to businesses and potentially lead to layoffs. He said online lottery sales could result in 4,000 to 8,000 lost jobs. “And that would affect every county and every city in the state of Illinois,” Fleischli said. He added that lost jobs would mean a reduction in income tax revenues, and lost sales would cut into sales tax revenues.

Jones said that the online program would reach 300,000 to 500,000 Illinois residents who do not play the lottery now. “Our research suggested that it would attract a significant number of new players. ... There’s substantial revenue to be made for the state.” Those representing retailers said they do not want to block online sales, but they do want the implementation of the plan to be slowed down so their interests can be considered. “It can be a complementary and mutually beneficial relationship. It should not be one that pits main street retail against Internet [sales],” said Rob Carr, senior vice president of the Illinois Retail Merchants Association.

Retailers are backing House Bill 5676, which would lock in a 5 percent commission on sales for stores that sell lottery tickets. It also has provisions geared at driving online customers into stores. The bill, sponsored by Rep. Jim Watson, would also create a card, similar to a debit card, that would be required to buy online lottery tickets. The cards could only be purchased with cash, so they would likely have to be bought in stores, which would receive the commission on the sale, but they could be used to buy tickets in stores and online. Store clerks would also verify that purchasers are 18 or older. Fleischli raised concerns about the state being able to confirm the age of online buyers. “Our trained associates have been the gatekeepers for the lottery at preventing youth access because the lottery is an adult product. And we want to continue to be that partner and the gatekeeper,” he said. Prizes under $600 would also have to be collected at a licensed lottery retailer.

Fleischli said he and others representing retailers plan to met with Jones next week to discuss their concerns. The Illinois Lottery did not respond to a request for comment on HB 5676.