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Why the Powerball is a mixed blessing for some retailers

This past Tuesday and Wednesday were most likely "the busiest days in convenience store history" in terms of traffic as Powerball mania reached a fever pitch ahead of last night's record $1.6 billion jackpot, according to the trade group National Association of Convenience Stores (NACS).

$1.6 billion Powerball jackpot to be split among 3 winners

One of the three winning tickets for last night's drawing were sold at a convenience store. One was at a 7-Eleven in California; another at a food mart in Tennessee; and a third was sold at Publix supermarket in Florida.

"Busiest is not the best, but it certainly was the busiest," said Jeff Lenard, a spokesman for the association, in an interview, adding that he will get a clearer picture of his members' financial performance in the coming days.

Sales of the multi-state lottery have hit about $3.3 billion so far this year, nearly as much as last year's figures, in the wake of unprecedented interest in the game. Members of the Multi-State Lottery Association are expected to split a $1 billion windfall. The jackpot for retailers, however, is more modest.

Inside the Powerball drawing

For every $2 Powerball ticket they sell, stores earn about 10 cents in commission. If they sell winning tickets, they can get anywhere between $10,000 to 1 percent of the prize's value depending on the state where they operate. The California store that sold one of the winning tickets from last night's drawing nabbed a $1 million bonus, while the Tennessee store that also minted a new multi-millionaire will earn $25,000.

Ordinarily, lottery sales help drive traffic to stores, which earn far larger profits from items sold inside their store than they do from gas, where they make about a nickel per gallon, according to NACS. Lottery players also tend to spend more money at convenience stores more than customers that don't play.

The Powerball, though, is a mixed blessing for the country's 152,794 convenience stores, and creates plenty of headaches, according to Lenard.

"What you hear from retailers is that that when these mega-jackpots happen there tends to be a decrease in other in-store sales," Lenard said. "That's because convenience stores sell convenience. If you have difficulty finding a parking spot or you are in a hurry and you don't want to stand in line, you will go somewhere else," to make these purchases.

Indeed, while CST Brands (CST), one of the largest U.S. convenience store chains, experienced some "operational challenges" yesterday, the company said in a statement that "the tremendous traffic generated by the surge in Powerball sales was exciting."

"It is certain to have generated incremental inside store sales allowing us to delight more customers on these historic days," the company said. It declined to be more specific.

When the Powerball hoopla dies down, so will the bump in sales convenience store operators have enjoyed. Moreover, now that jackpots have topped the $1 billion level, the payout will have to be significantly higher for Powerball to attract the same level of interest that it just enjoyed.

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