Friday, May 27, 2022

Is Walmart taking off ciggies in a few US stores, a smart business strategy or a stand?

By N Jayalakshmi | March 30, 2022

With shifts in consumer  habits brought on by the pandemic and more and more brands wanting to take a social and ethical stand, the retail  space can well play a crucial role.  

The recent news about Walmart taking cigarettes off its shelves in some US stores has a lot of significance, not only as a retail business strategy, but also in terms of the role retail can play in the overall health and lifestyle eco-system.

Walmart Inc. is reportedly ending cigarette sales in some U.S. stores after years of debate within the retail company’s leadership ranks about the sale of tobacco products.

According to news reports, cigarettes are being removed in various markets, including some stores in California, Florida, Arkansas and New Mexico, according to the people and store visits. Also, Walmart has rolled out a design with more self-checkout registers, as well as other items such as grab-and-go food or candy sold near the front of stores in place of Marlboro, Newport and other tobacco products, says reports.

It has been reported that Walmart, which has more than 4,700 U.S. stores, is removing tobacco products from select locations where the retailer has decided to use the space more efficiently.

The move also reflects a caution business strategy in line with stringent regulations. After all, according to U.S. health officials tobacco products are linked to 480,000 deaths in the country each year. Tobacco products are thus   challenging for big retailers to sell. Also, reportedly at Walmart , sales of cigarettes are less profitable than some other items sold near the front of stores such as candy since tobacco is kept in a locked case and as per FDA rules, it can only be sold by an employee, over a specific age. Reportedly theft is also a common issue here. It is easy to see why stocking these products can be cumbersome affair for retailers. Also, according  to industry analysts, the Walmart move stems from the fact that the retail giant is focusing on enhancing its presence in the healthcare industry.

According to reports, U.S. cigarette sales totaled about $95 billion last year, and most of those purchases occur at gas stations and convenience stores, according to data from Euromonitor International. Walmart supercenters and other mixed retailers accounted for 14% of U.S. cigarette sales volume in 2020, according to Euromonitor.

In India, as per data posted by The Campaign for Tobacco-Free Kids , a non profit, advocacy organization,  there are almost 267 million tobacco users in India and among adults (age 15+), 28.6% of the population currently uses tobacco products (men 42.4%; women 14.2%). For brands in the space, it is obviously a huge market.

According to a Business Line  report last year, the Covid induced shift in consumer-buying patterns saw cigarette companies explore alternative sales channels. These include neighbourhood grocery stores. Quite obviously, with the increased work from home trend, people visited neighbourhood grocery stores more often.  Also, grocery shops were less hit by the Covid restrictions.

In a market like India, radical shifts in retail strategy with regard to certain products might be challenging for brands, considering they can hit the bottom-line. But with perhaps they coudl use the large format retail space as a channel to communicate healthier lifestyle options and reiterate a stand, which can also lead to better consumer loyalty.   A report by Rethink  Retail talks about Starbucks closing  8000 locations after a fight to provide “voluntary racial bias training” and the incident is cited and discussed as an example of retail taking a strong social stand and action.  The need for retail to play that role can increasingly go up in the coming times.



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