Crossing the channel: Will customer migration from retail to online remain long after Covid-19?

Flutter Entertainment, in its financial results for last year, found that online revenue had climbed by a significant 34% in comparison to 2019. Proceeds sourced from online customers reached £5bn overall, accounting for 96% of the total group revenue and highlighting the acceleration of online participation in gambling.

In the UK and Ireland, the migration of retail customers to online is playing to Flutter’s strengths. Its financial report revealed that in the second half of last year over 40% of those who switched from the high street to online chose either Paddy Power, Sky Betting and Gaming or Betfair as their main online account.

When factoring in that only 5% of the UK’s betting shops belong to Paddy Power, it’s a statistic that grows in significance, underlining the digital gains that Flutter has made since the first lockdown on 23 March. Its total share of online revenue in the UK market was 28%, with a 42% share in sports and 19% in gaming, with overall 55% of online sports bettors engaged with one of Flutter’s products in the final quarter of last year, a rise of 8% year-on-year.

The online market in Australia has also hugely benefited from the relative exodus of retail customers to online, as Flutter gained 675,000 customers from closures of land-based venues. Flutter’s number of players increased by 26% on an average monthly basis, with retail shops closed and racing going ahead behind closed doors.

Yet it was a strong performance that was underpinned by structural changes to its business Down Under, with BetEasy, acquired through the merger with The Stars Group, absorbed into the Sportsbet brand.

Pandemic-proof

As gambling has become so increasingly accessible and convenient on mobile phones and the internet in general, it wasn’t as if online gambling was unheard of pre-pandemic.

Warwick Bartlett, chief executive of the Global Betting and Gaming Consultants (GBGC), reflects on recent patterns: “The migration to online was well underway before the pandemic. The UK companies have been and always are early adopters of all things tech. The bookmakers led the way followed by casino and the National Lottery,” he adds.

“Those operators that already had an internet solution and built up a good customer base to hit the ground running during the pandemic were able to capitalise on people staying at home with nothing much to do except binge on Netflix. Just look at the numbers: 888 up 56% year-on-year, Flutter in UK and Ireland up 41%, and William Hill in the final quarter of last year up by 30%.”

Meanwhile, Rank Group brand Mecca Bingo saw a huge surge in online customers since the first lockdown, initially during the first weekend of the restrictions in March 2020 and the weeks that followed. Up to that point, it would be fair to say that many bingo players would not be interested in playing online.

Mecca also found that there was a migration of club bingo players who suddenly were looking to play in the digital realm so it set up 82 free bingo sessions each week in response to the demand. This was one for each club so that its customers still had an avenue to keep in contact with friends and staff from their local outlet.

Rank Group had a pre-pandemic focus that surrounded the development of its omni-channel offering. “We know that omni-channel customers are more loyal to our brand than single-channel customers, so this was the focus. It’s more nuanced than ‘migration’ and involves improving the product offering that we can give to customers,” enthuses David Williams, director of public affairs at the Rank Group.

“Obviously for vast parts of the 12 months our venues have been closed so it’s hardly surprising that customers who were missing their casino or bingo visits switched to use digital platforms, sometimes for the first time.”

During the lockdowns, Mecca looked to capitalise on a migration of club bingo players to the digital realm

Popular slots

So now that online gambling markets have surged since the beginning of the pandemic, which online markets have especially benefited from the migration to online participation?

Bartlett of the GBGC outlined which markets made the biggest gains: “Without a doubt slots, helped not only by the pandemic but also the restrictions imposed prior to the pandemic on fixed-odds betting terminals in betting shops.

“Slots enjoyed continuous play throughout, whereas sports betting was hit by the stop to horseracing and football. Stopping and starting on sports is unsettling for gamblers, they lose the form lines and have to start over again. Indeed, the sports results following resumption for the sportsbooks have been excellent. It seems the home advantage for football teams without the home supporters has disappeared,” he continues.

According to GBGC’s forecasts, the standout national market performer for online gambling this year is going to be Italy. When compared to the market in 2019, the Italian online gambling presence is set to be over 100% bigger. One of the main reasons why is that Italy has been a slow internet adopter but has caught up rapidly during lockdowns, creating a bullish market.

As per GBGC, Germany’s online gambling sector is set to grow by 30%, whereas Spain and Sweden are primed to accelerate by between 23% and 25%. Meanwhile, the mature markets of the UK and Ireland are both forecast to grow at around 10%.

GBGC also believes that online gambling will continue to be strong, with one major reason being there could be further lockdowns in 2022 from January through to March in any country, even if it has a successful vaccine programme. As there is vaccine reticence among people under 40, the virus could outstay its welcome for longer than hoped.

Under protection

A further challenge presented by the migration from retail to online gambling is whether there will be an increase in regulation to accompany the trend. It’s an issue that Mecca Bingo has already turned its thoughts to. As more of its players gambled online, its focus became increasingly on how to ensure the new digital clients had the best experience, and also that they could play safely.

New checks and play limits were introduced almost immediately after the first lockdown, as people were becoming more financially vulnerable due to the fear of the unknown and a higher risk of eventual job losses.

Of course, the review of the Gambling Act 2005 is still underway, after the government committed itself to re-examine the legislation and to upgrade it to the digital age. All aspects of online gambling are expected to be appraised to ensure protection, including the innovation of online services, product design and advertising. Illegal gambling is another feature of the industry that needs to be forensically reviewed, as the internet is likely to provide unlawful opportunities, and the potential manipulation of vulnerable groups such as addicts.

It might have been a long time since the UK has experienced any kind of major problem with illegal gambling. Yet fines that have been imposed on gambling companies have caused them to close VIP accounts, and customers have switched to unlicensed operators, the GBGC has found.

Williams reflects on the Gambling Act 2005 review: “The UK government is in the midst of a once-in-a-generation review of gambling legislation. It’s an opportunity that the industry should embrace, on the proviso that any changes are led by evidence, and not political and media campaigns. There is a chance, through proportionate legislation, to draw a clear line in the sand and avoid the worst excesses of regulatory creep, that haven’t always helped get the right balance between player protection and consumer freedom.

“There is likely to be a net tightening of regulations for online operators, but it has to be proportionate. If it is overly restrictive, many customers – for whom gambling-related harm is not an issue – will be turned off and turned away from their legitimate and highly regulated pastime.”

Looking further ahead, it remains to be seen whether the migration from retail to online gambling is now an irreversible pattern. It is an unanswered question of just whether gambling companies will be able to entice their traditional customer base back to land-based betting shops and bingo halls on a permanent basis. Or whether that would be the preferred choice of the gambling sector, and the pandemic has resulted in operators now having a greater focus on the online side of their business models.

The decline in the volume of betting shops could mean for many that betting online is the only way to gamble or partake in gaming. Let’s not forget that before the pandemic, retail bookmakers took a hit with the £2 stake limit cap on B2 gaming machines (FOBTs) in April 2019, only 11 months before Covid-19 swept the UK hard enough to force a lockdown.

At large the retail sector is facing huge organisational changes, with stores that have been part of the high street for years such as Debenhams now an online store only. Generally, the attraction of walking into town and city centres could become less alluring. The high street will be forced into rethinking what its purpose is and what it has to offer, leaving gambling companies needing to change locations and the layout of its premises.

Yet the Rank Group does not believe that customers won’t return to venues. In fact, the operator has been working hard to ensure that its customers in land-based outlets in both Mecca and Grosvenor will come flowing back through their open doors. Its casinos are undergoing a relatively modest modernisation programme, which can be enacted by the government as part of its current review. If this is permitted, it can give a new lease of life to around 125 casinos in the UK.

Williams explains: “In bingo, we also have a loyal customer base with highly valued community links. I think it’s misleading to support a narrative which sounds the death knell for land-based gambling.”

If the current plans from Rank Group can get it right over what is offered and provide value and entertainment, then it feels there are several reasons to have every confidence in the future of land-based gambling. Overall, it’s an exciting prospect that its customer base now has a greater grasp of what online gambling and its platforms have to offer, alongside returning to its more traditional venues.

Yet, according to the GBGC, last year online gambling accounted for 40% of the total market, and the expectation is that the growth is here to stay in the longer term, as it offers the customer more value and convenience, so what is there not to like?

Hopefully lockdowns are now a thing of the past with the UK undergoing a successful vaccine rollout and other countries catching up, and then only time will tell if the patterns of the Covid-19 pandemic have now become ingrained in operators’ customer base and will continue.