Couriers have become a buzz-worthy topic in the lottery industry.
Their reach throughout the US is becoming more expansive each month. Just this week alone, one of the five main options in the country was named as an official provider for The Associated Press.
These third parties that provide online sales of retail lottery draw games are making an impact, but there is still much room for growth.
One area that could push the couriers to another tier is developing their sales of retail scratch tickets.
Currently, just two of the five couriers offer sales of those products, and even that is limited.
But, with scratch tickets accounting for the majority of lottery sales in the country, it would benefit the couriers to be able to provide these options, as well.
Scratch tickets responsible for over 75% of US lottery business
According to a report from Eilers & Krejcik Gaming (EKG), there was $108.4 billion in US lottery sales last year. Of that total, roughly $83 billion came from scratch-off ticket sales. That is 76.6% of the US business.
EKG reported that courier services had $905 million in lottery sales in 2023. That led to $120 million in revenue.
Their sales total amounted to just 0.83% of the overall lottery sales in the US for the year.
When it came to revenue, two of the five couriers accounted for 94%. Jackpocket led the way with 64% ($76.8 million), while Lotto.com had about 30% ($36 million).
The one thing those two couriers have in common is that they both offer the purchase of scratch-off tickets in select states.
Jackpocket is able to sell scratch tickets in two different states, while Lotto.com has them available in five.
The majority of courier services can only offer draw tickets, which means their business model is focused on less than a quarter of US lottery sales. It’s clear there’s a lot left on the table for these companies.
Lottery courier scratch tickets take over an hour
One state where scratch tickets are offered on both Jackpocket and Lotto.com is Texas.
As part of its report, EKG went to Texas to test out the user experience when buying a scratch ticket through a courier.
The biggest takeaway from its testing was the amount of time it took between making a purchase and getting a result for the ticket.
With couriers, a user has to make a purchase, and then the courier has to actually go and buy the retail ticket. Scratch games also require the user to scratch said ticket and film the process to send to the customer to verify the transaction.
EKG provided a video of what these scratch purchases look like from the customer’s view.
According to Chris Krafcik, Managing Director of EKG, the average time it took to receive the scratch ticket result after purchase was about 30-90 minutes.
Krafcik also noted that due to the long process, the couriers only offered scratch ticket purchases at the higher price points, $20 and up.
He discussed both factors during an appearance on Zero Latency: An Eilers & Krejcik Gaming Podcast:
“This long turnaround time plus hefty ticket price made, I think, for a pretty suboptimal experience. Knowing what we do, about the importance of instant tickets to the overall TAM (total addressable/available market) opportunity and couriers, it definitely struck us as an area where a lot of energy and investment is going to flow over the next coming years.”
With limited ticket purchasing options and a long wait, it’s clear the courier experience has a long way to go to catch up to simply buying scratch tickets at a retailer.
Growth in scratch-off market could propel courier services
EKG projected that courier sales would jump from 0.83% of the lottery market share in 2023 to about 2.6% in 2028.
While that number is still small, it’s also a conservative projection by the company.
Krafcik noted that its projections are based on the limited growth of the instant ticket market:
“Depending on how you calibrate our model, you can get to some fairly sizable numbers, most of which, though, depend on additional geographic expansion, and then much deeper penetration of the instant ticket product.
“But our model is calibrated pretty conservatively right now and doesn’t make any sort of aggressive assumption about instant ticket penetration or growth.”
EKG’s current compound annual growth rate (CAGR) for scratch ticket sales over the next five years is 76%. It believes that would lead to $1.3 billion in sales for scratchers by 2028.
That number can balloon quickly if these couriers are able to provide a more efficient experience and get access to selling scratch tickets in more states.
The success couriers have had with draw games is a good start for their industry. But, the gold mine is still on the other side of the fence.
Photo by Steve Snowden via Shutterstock
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