Andreas Kötter, Chief Executive Officer, WestLotto, Münster, Germany

Andreas Kötter, Chief Executive Officer, WestLotto, Münster, Germany

How will the world be different when we come out of this crisis - and how will the lottery industry, retailing, consumer shopping and recreational behavior be different? 

In my opinion, it is not possible to give conclusive answer to this question right now. The crisis continues and at the moment we cannot determine the complete impact, particularly the social and economic dimensions. Only one thing is clear, worldwide we currently are learning how vulnerable we are, individually and as a society. This will have a major impact on our enlightened and economically dominated world. However, I do recognize that some trends will probably consolidate.

I expect an increasing sectoral deglobalization in some industries. For example, many value chains will become shorter. Current trends are already growing regionalization in food supply, shorter supply chains in industry and increased warehousing. In other parts, there will be a changed form of globalization. Cooperation in health policy will become increasingly global, as will the expansion of the digital infrastructure (5G). Digital trade is currently experiencing a massive increase. Platforms such as Netflix are experiencing a record of 15.8 million new subscribers in Europe in the last quarter, while Airbnb is experiencing a dramatic drop in revenues. This crisis hits some hard, others less so. The digitalization of commerce will be further intensified.

A second trend that I believe will intensify is a more flexible working environment. The current situation shows all industrial leaders that people are perfectly able and willing to work from home and with state-of-the-art software applications if they have a sufficient IT infrastructure. Not all things work as they used to, but differently. We will have to be prepared for the fact that the relationship to the workplace will change, partly dramatically. We as a lottery provider will not be able to isolate ourselves from the rest of the business world.

A third trend that is clearly emerging is that international lottery cooperation’s are becoming more and more successful and have a stabilizing effect. In Europe, we are currently experiencing dramatic developments in some countries and the associated economic shutdowns due to COVID-19 - in some cases, such as Italy and Spain, regional drawings cannot take place. An international lottery draw such as Eurojackpot, which can still be organized, is of central importance.

Despite all these trends, it is also clear that lottery is and will remain part of our customers’ daily routine and has contributed to the stability of society. Lotto continues to stand for trust and is part of everyday culture

What should we be doing to position lottery operators for success in the post-coronavirus world? 

The balance between the consistency for which large lottery providers - good causes - stand and the ability to adapt flexibly to changing environmental conditions in order to grow with the target group will be the big challenge. As already mentioned, the trend towards digitalization is continuing. We are currently recording double-digit growth rates among online customers. Especially the share of customers >45 years of age stands out, who want to be sure to play "their numbers".

It will be important to know how we integrate our regular players, who are of central relevance for major lotteries, in our online activities and how we can adapt our online solutions especially to this target group.

At the same time, the trend towards digitalization does not automatically mean a decline in terrestrial services. We will have to continue to invest here in order to maintain our market share.

On the product level, it is important to notice the new trends that have been reinforced by Corona. Topics such as e-sports and gaming and thinking in terms of cooperation have become more important.

Our asset is also the reliability of our IT systems, which we must continue to safeguard for the future. At the same time, this is also a key to find ways to review and improve operational efficiency.

Unfortunately, illegal providers are using the crisis to win customers for illegal gaming offers in the digital channels through a massive increase in advertising expenditure. After the crisis, we must take stronger action against illegal providers and encourage politicians and regulators to act more consistently.

Lottery has performed better than other sectors in past economic recessions.  How severely will the economic repercussions of coronavirus impact Lottery? 

This is due to our special product and sales structure. This also exists because of our cultural uniqueness. Lotteries are usually sold together with other goods for daily use. This unique selling point is sometimes an obstacle, but in this case, it has usually been an advantage. Nevertheless, we see a difference in sales between impulse products such as instant lotteries and classic lottery products. Large lotteries stand for the fulfillment of people's dreams, which occur during economic upturns and downturns, possibly with a different accentuation. An analysis of the stakes together with the course of the GDP in times of economic recession therefore shows more or less no direct connection.

 

What opportunities will emerge in the post-coronavirus world?  For instance, won't people be travelling less, and if so, might that be an opportunity to appeal to locally-grown forms of recreation like Lottery and casino gaming?  For instance, in spite of months of social distancing, can't we expect that humans will quickly return to our natural state as highly social animals?

I currently assume, and social-psychological studies also show this, that a significant proportion of people want to quickly find their way back to their normal lifestyle after the shutdown. Especially adults with families are literally yearning for the "pre-corona structure", in which the family live, work and leisure activities is clearly regulated.

For us as a lottery provider, however, major questions will come up.

Will the large lotteries be able to demonstrate their real social added value in the future or not? My conclusion is that if lottery companies do not manage to do so, it will be increasingly challenging them to keep their good position in society. The pure legal mission is not enough. It is about a good mix of purpose, social vision and position as well as attitude. One of the essential questions will be: how do we strengthen the social fit from lottery providers to the beneficiaries? And: how do we, as lottery providers, create an online solution that gives our target groups a familiar lottery environment?

How might we reinforce the symbiotic relationship that Lottery has always had with its retail partners?

Our stationary sales network is a central element. Fortunately, the majority of the shops did not have to close due to the crisis. In these times, our retailers are the first contact and reference point for millions of people. This is why we immediately showed the hygiene information of our government to people on all display areas in the shops. Here we took a clear position and demonstrated a concrete benefit that goes beyond the sale of our products.

Nevertheless, of course the shop operators, who are free traders and not employees of the company, have suffered economically from the shutdown. That is why we as a company have not hesitate to support them with, for instance, financial bridging aids, organizing individual external consulting on financial aid and investments in hygiene measures in the shop. During the crisis, we talked to each other a lot and the bond has become even closer. In the future, it will be important to continue this and to create a more modern shopping experience together with our retail partners.

Shapers of public policy will have a lot on their plate over the coming months.  Even so, shouldn't we expect that commercial operators, in a spirit of "not letting a good crisis go to waste", to push even harder to open up markets and further marginalize lotteries?  I am concerned that the whole regulatory front will tip even further to favor the more aggressive, higher-prize-payout model of the commercial sector, or even worse, a further erosion of enforcement action against illegals.  What can we expect on the regulatory front, and what might we do to defend the interests of government lottery stakeholders?    

Regarding regulation, I do not see it like that. Particularly in Germany, we are in the middle of the socio-political discussion about the regulation of gambling starting in mid-2021, and it is clear that the regulation of gambling, considering cultural and regional differences, will continue to be of central relevance. This is important for the regionalized lottery providers and we also see this as a strengthening of our portfolio and of our relationship with our beneficiaries.

What we can clearly see, is that illegal providers have significantly increased their advertising spending and are currently making an enormous effort to recruit customers and increase sales. In the first place, politics must always put the protection of players and create appropriate conditions in enforcement.

 

For us, the following applies: We must be allowed to create and offer attractive games. In this area, international cooperation’s in particular have shown their efficiency and demonstrated that the Lotto family can work together successfully.

 

What are some of the new challenges and obstacles that we will need to adjust?

As a real new challenge after the Corona crisis, I believe that we all assume that we will be fine when COVID-19 is defeated. The problem is, all the major social and economic challenges from before COVID-19 are still there, if not in an even tougher form.

The global discussion about environmental pollution, globalization especially with regard to justice and distribution issues, the major challenges of demographic change and of course the question, what role and position do the providers of the big licensed lotteries play in this? Moreover, of course, in the world of gambling we still have the challenge of our own product portfolios and the necessary efforts in the consumer and player protection sector.

We have to face all these questions with great energy and creativity. These will be tremendous tasks, which we will have to continue to master consistently under the impressions and results of COVID-19.