This amounts to promotion of a lottery. The Gambling Act 2005 provides:
14(1) For the purposes of this Act an arrangement is a lottery,
irrespective of how it is described, if it satisfies one of the
descriptions of lottery in subsections (2) and (3).
14(2) An arrangement is a simple lottery if (a) persons are required
to pay in order to participate in the arrangement, (b) in the course
of the arrangement one or more prizes are allocated to one or more
members of a class, and (c) the prizes are allocated by a process
which relies wholly on chance.
252(1) For the purposes of this Act a person promotes a lottery if he
makes or participates in making the arrangements for a lottery.
252(2) In particular, a person promotes a lottery if he (a) makes
arrangements for the printing of lottery tickets, (b) makes
arrangements for the printing of promotional material, (c) arranges
for the distribution or publication of promotional material, (d)
possesses promotional material with a view to its distribution or
publication, (e) makes other arrangements to advertise a lottery, (f)
invites a person to participate in a lottery, (g) sells or supplies a
lottery ticket, (h) offers to sell or supply a lottery ticket, (i)
possesses a lottery ticket with a view to its sale or supply, (j) does
or offers to do anything by virtue of which a person becomes a member
of a class among whom prizes in a lottery are to be allocated, or (k)
uses premises for the purpose of allocating prizes or for any other
purpose connected with the administration of a lottery.
Promoting a lottery is lawful if licensed by the Gambling Commission or if it is an exempt lottery and in all other cases is an offence:
258(1) A person commits an offence if he promotes a lottery unless (a)
the exception in subsection (2) or (3) applies, or (b) the lottery is
an exempt lottery.
258(2) This section does not apply to activity by a person if (a) he
holds an operating licence authorising the activity, and (b) he acts
in accordance with the terms and conditions of the licence.
258(3) This section does not apply to activity by a person if (a) he
acts, otherwise than as an external lottery manager, on behalf of a
person who holds an operating licence authorising the activity, and
(b) the activity is carried on in accordance with the terms and
conditions of the licence.
258(5) In this Act “exempt lottery” means a lottery which is exempt by
virtue of a provision of Schedule 11.
Schedule 11 contains the list of exempt lotteries, none of which cover for-profit lotteries of the type you are describing.
As for whether or not your winning participant is receiving a prize, I think you are going to struggle to argue in court that selling something below market value doesn't count as an "item of value". If it were so simple, we could foresee lotteries which circumvent the law by offering a prize in which you are given an option to purchase a large bar of gold for £1. I can't see any court permitting that as it would effectively legalise unlicensed gambling and make a nonsense of the Act.
For completeness, while the Act doesn't define exactly what a prize is, it does set out a non-exhaustive list of things which do constitute a prize:
14(4) In this Act “prize” in relation to lotteries includes any money,
articles or services (a) whether or not described as a prize, and (b)
whether or not consisting wholly or partly of money paid, or articles
or services provided, by the members of the class among whom the prize