If you are heading to the casino or have loaded your favourite online gambling platform on your computer, then part of the experience is going to be dealing with the house edge. All gamblers should be aware of it, as it is a profit margin that’s mathematically built into games.
Visit any highly recommended platform from CasinosOnline.ph, a reliable review platform, open any game and the casino edge will be baked into it. This edge can be thought of as something like a retailer’s profit margin. Stores buy things on the cheap at wholesale cost and then sell the items at a higher price for profit.
While they do differ, at the end of the day both models work towards the same goal - profitable income. Margins are not really anything that anyone pays too much attention to, as people are aware that they exist and just accept them. But how similar is the casino house edge to a profit margin in retail?
The House Edge
The house edge is the mathematical advantage that a casino has against players. A simple example is found in roulette. The numbered slots run from 1 to 36, but a single bet is not calculated at 36:1 (a one in 36 chance), instead, it is paid at the lesser quote of 35:1.
But the odds get worse for the players as well because of the single zero in European roulette or the presence of a single and double zero in American roulette. Those mean that there are either 37 or 38 slots on the wheel, so the chance of the player winning is skewed further away.
On an American roulette table, the house edge across most bets is around 5% and on European roulette, it’s a more player-favourable 2.7%. These mathematical advantages lie hidden in all casino games, from slots and baccarat to blackjack and video poker.
Retail Margins
Retail margins are the difference between what something is bought for and how much it sells for. Unlike casino games which have the same odds wherever you play in the world and at whatever online site, margins can vary greatly in retail.
That’s because there are no real limits and no fixed numbers, which is where the retail margin varies quite differently from that of a casino edge. Two stores could be selling the very same item purchased at the same price and one has a 50% margin and the other a 100% profit margin.
What Are Edges and Margins for?
Both the casino edge and the retail margin are for profit. They are intrinsic parts of the system and it’s not there just for pure greed. The running of a store or an online casino costs a lot of money in overheads and risk. So part of the function of margins is to pay overheads like wagers and utilities, as well as being able to reinvest back into the business to grow it.
Risk Factors
The house edge reduces the exposure (i.e. the risk) that a casino has on a game. Or, if looked at another way, it’s the expected long-term profit that a casino expects to make from a game.
For example, the average blackjack house edge is at 2%. So for every $100 a player gambles on it, they will lose $2. But there is also variance in casino games, which makes this house edge a little more difficult to see.
Players can go on a winning streak and beat that 2% average and there will be periods when casinos will win more than 2% on average. Just to highlight the complexity and variability of it all further, the blackjack house edge will change depending on the number of decks being used.
There is a similar thing in retail profit margins as well. The value can change through a special sale, or the cost that the store paid to get the item in the first place fluctuated higher or lower than usual.
Is the Casino House Edge Important?
The edge is important because it gives an idea of the risk that a player undertakes when playing a game. Simply playing on an American roulette table compared to a European table immediately hands the house a better advantage, for example.
Common bets on table games don’t run at particularly a high edge, with anywhere between 0.5% and 2% on blackjack for example. If you look for riskier bets in your strategy, then you are introducing higher margins for yourself.
Essentially, if you intend to play casino games you have to accept them, just as you do the profit margins of the retailers when you buy the next new piece of hardware to play online casino games on.