Core Viewpoint - The lottery industry is experiencing a decline in profitability, leading many companies to close their lottery stores despite initial high expectations for revenue generation from lottery sales [2][5][20]. Sales Performance - In May, the national lottery sales reached 57.036 billion yuan, a year-on-year increase of 9.418 billion yuan, representing a growth of 19.8% [4]. - The sales breakdown for May shows that: - Lotto digital lottery sales were 16.212 billion yuan, up 3.2% year-on-year - Betting lottery sales were 25.752 billion yuan, up 20.4% year-on-year - Instant lottery sales were 11.341 billion yuan, up 67.8% year-on-year [4]. Market Dynamics - The surge in instant lottery sales has attracted numerous individuals and companies to open lottery stores, particularly in large shopping malls [5][20]. - However, the profitability of these stores varies significantly due to differences in foot traffic and consumer behavior across different shopping venues [5][20]. Operational Challenges - The operational costs for lottery stores in commercial complexes are high, with monthly rents exceeding 10,000 yuan and initial setup costs around 400,000 yuan [11][13]. - Despite high sales potential, the average monthly sales for these stores are around 300,000 yuan, leading to a commission income of approximately 24,000 yuan, which is insufficient to cover costs [13][21]. Supply Chain Issues - The supply of instant lottery tickets has faced constraints, particularly from April 2024, exacerbating the operational difficulties for lottery stores [15][21]. - Frequent stock shortages have resulted in customer loss and increased operational complexity, with sales dropping by 20% after the Spring Festival in 2025 [16]. Industry Trends - The lottery industry saw a peak in sales around 2023-2024, but many companies began exiting the market after realizing unsatisfactory financial returns and inadequate support from management [20][21]. - The decline in average transaction value per customer has been a significant factor in the decision to close stores, particularly in high-rent areas where foot traffic has decreased [21][22]. Regulatory Environment - Companies face challenges related to compliance with legal and regulatory requirements, which complicates operations and can lead to significant financial losses due to delays in approvals for new sales points [22].

Core Insights - The company decided to close several lottery stores due to continuous losses since last year, with no month showing profitability [2] - The sales of instant lottery tickets, which accounted for 90% of total sales, have been declining since April 2024, despite a temporary spike in May due to base effect [2][11] - The overall lottery sales in May reached 57.036 billion yuan, a year-on-year increase of 19.8%, driven by sports events and low sales in the previous year [2][3] Sales Performance - In May, the sales figures for different lottery types were as follows: - Lotto digital lottery: 16.212 billion yuan, up 3.2% year-on-year - Guessing lottery: 25.752 billion yuan, up 20.4% year-on-year - Instant lottery: 11.341 billion yuan, up 67.8% year-on-year [3] Market Dynamics - The lottery industry saw a surge in new entrants due to the rapid growth of instant lottery sales in previous years, leading to increased competition and store closures [4] - Many businesses viewed lottery stores as fixed-income investments, but the actual revenue from sales commissions (7-8% of sales) proved insufficient to cover operational costs [4][5] Cost Structure - The company invested over one million yuan in store renovations and operations, but revenue could not cover these costs [5] - The average monthly cost per store is approximately 33,000 yuan, while average monthly sales are around 30,000 yuan, leading to a significant shortfall [9] Operational Challenges - High management costs in commercial complexes, including rent over 10,000 yuan/month and renovation costs of 30,000 to 50,000 yuan, further strain profitability [8] - The supply shortage of instant lottery tickets in 2024 exacerbated operational difficulties, leading to a 20% drop in sales [11] Industry Trends - The lottery industry experienced a peak in sales in 2024, but many businesses faced disappointing financial returns and chose to exit the market after a short period [14][15] - The decline in average spending per customer and reduced foot traffic in high-rent areas contributed to the decision to close stores [15][16] Regulatory Issues - The company faced challenges with regulatory approvals, which delayed operations and resulted in significant financial losses [16]