Rebecca Paul Hargrove

President & CEO, Tennessee Education Lottery Corporation

President, World Lottery Association (WLA)

Founder & Chair of Women’s Initiative in Lottery Leadership (WILL)

How will the world be different when we come out of this crisis, specifically the lottery industry and retailer, consumer and recreational behavior? What might be permanently impacted or changed?

Rebecca Hargrove:  I think that answer will be quite different depending on where in the world you live.  Globally, we see that Spain, France and Italy were impacted far differently than Australia and New Zealand.  In the United States, we see that New York is impacted quite differently than Wyoming.  The impacts of the virus have differed, and corresponding responses of city, state, and national governments have differed.  We know that lottery sales in some U.S. states have increased while many have decreased.  And while the varying degrees of restrictions impacts sales, the relationship between the severity of the virus, the degree of safer-at-home initiatives, and the sales of lottery tickets is not nearly as consistent as you might think. 

As we go forward, policymakers everywhere are trying to determine the best course of action to reopen the economy without risking public health.  If re-opening the economy goes smoothly, it’s easy to imagine the marketplace and consumer and lifestyle behaviors returning more readily to pre-virus norms. If problems continue and force a continuation or reactivation of restrictions, that would obviously impede any economic reopening. Two behaviors that affect our industry and will clearly be impacted by the crisis are how we shop and how we gather together. 

Since the 1990’s, purchasing has migrated online.   Given the life-altering circumstances of the last three months, I would expect that market-share has increased as consumers minimize the time they spend in public spaces like grocery stores, bars and restaurants. I’m sure that some people who never ordered online quickly learned how and began making more online purchases. Others, who were already online shoppers, probably increased the number and variety of items they buy online.  The longer we are in safer-at-home mode, the more likely it is that activities adopted during this crisis time will become habits that continue after the crisis abates.

We can be confident that brick-and-mortar retail is not going to sit idly as customers spend more online.  Since their survival depends on an effective response to this competitive threat, we can expect the rate of retail modernization, digitization, and innovation in general to increase.  That represents a great opportunity for lotteries to carve out a role for itself as trusted partners and resourceful innovators who provide solutions and help them serve and retain their customers. 

The impetus to change and innovate is lowest when everything is going well. So a crisis becomes the catalyst to take more aggressive action, prompting the somewhat cynical refrain that my friend Paul Jason uses: “Never let a crisis go to waste.” We have to figure out how to streamline operations and workflows to adjust to leaner staffs and work-at-home environments.  Sales reps need to service their retailers without visiting the stores, or with fewer in-store visits.  And who knew that so much work could be done so well from home?   One result of these crisis management adjustments is that the freedom – and the requirement – to innovate unlocks the creative energy that leads to new solutions and more efficient and effective ways to operate.  Then, as we return to full-service operations, business processes can be adjusted and fine-tuned, and resources can be re-allocated to deliver a far higher level of quality and service to our retail partners. That leads to more funding for good causes and more value to all our stakeholders.    

At the Tennessee Lottery, we have all found ways to be productive while working at home and staggering shifts so that we have a lower number of staff in the building at any one point in time. My team and I miss working together in person-to-person groups, and I suspect everyone feels the same way.  We need social interaction, and I think the in-person collaboration contributes to the effectiveness of the enterprise. Our WLA and regional association conferences are sorely missed.  Zoom or Microsoft Meetings or conference calls are incredibly helpful, but I still believe that working together in-person provides us with the most meaningful platform to share ideas, learn from each other and come up with the best solutions. It is making those adjustments that can help any organization, but especially a lottery, survive during disruptive times.

I disagree with the premise that lotteries are recession-proof or even less affected by economic downturns than other industries.  If you look at the actual performance of the entire industry in recessions like 2008, you’ll find that sales in roughly half the U.S. lotteries declined and half increased.  That is probably the experience in many sectors.  Some do well because they make the right internal adjustments to respond to adverse conditions. Others do well because their external reality is not as onerous as it is for others, like Wyoming or the Dakotas compared to New York and the lotteries in the northeast U.S. Some lotteries’ enabling legislation may be structured to give them more flexibility to adapt to a changing economic environment.  Others have to budget even detailed line items two years out and are not allowed to adjust when the whole world is sick. Others have an overly politicized management structure that changes too frequently. Multiple factors drive success and even more impede progress and positive action.  The enabling legislation that prescribes the terms and conditions under which the lottery operates can have a profound effect on the ability of the lottery to pivot in times of crisis. 

The source of misconceptions about lotteries being recession-proof may be successful lotteries. They are more likely to promote that fact than unsuccessful ones. I think the truth serves our interests because we have a worthy mission, and we pursue it with integrity and purpose.  Therefore, I think we should disabuse people of the myth that lotteries are somehow recession-proof. 

In our current circumstances, lotteries are performing better than games-of-chance sectors like casinos and sports betting, which have been shut down completely.  We shouldn’t make the leap from that happenstance to being overly confident in our resilience in the face of economic downturn.  We want our audiences –the public as well as lottery players and stakeholders – to know that we stand shoulder to shoulder with them because we are all in this together and that lotteries are not somehow immune to the pain of economic recession. Whatever emerges on the other side will be the “new normal.”    

What will the “new normal” look like?  That will vary widely.  Italy, Spain, New York and some other U.S. states have been so severely impacted that the road to recovery will be arduous. Their “new normal” may be quite different than the pre-COVID environment. Social distancing, increased online purchasing and other lifestyle changes may be a bigger part of their new normal than in jurisdictions where the crisis was not as severe.  If the cautious re-opening being pursued in my state of Tennessee goes according to plan, it is my hope we will return to the shopping and lifestyle behaviors of pre-pandemic days. Outside of that hope, I know all of us at the Tennessee Lottery are focused on what we can do: making the necessary adjustments and innovations so we continue to fulfill our mission and raise money to support higher education for Tennessee students.