Today we posted on our Facebook Page an article about how CVS has decided to stop sales of cigarettes in stores starting October 1 (http://www.businessweek.com/articles/2014-02-05/the-strategy-behind-cvss-no-smoking-campaign?google_editors_picks=true). I figured since we posted it on the site and since it’s been in the news the past day I’d weigh in with my opinion from a business perspective.
For starters let me say that I am not nor have I ever been a smoker. I am writing this opinion strictly from a business standpoint and I know there are people (specifically the management of CVS) that will disagree with me here. I believe this decision is a huge misstep on the part of CVS management. I admire them taking the stand and I think the fewer people that smoke the better we all are. But let’s be honest, CVS stopping the sale of cigarettes will not cause people to suddenly stop smoking. Therefore they will begin to go elsewhere to buy their cigarettes. CVS estimates they do about $2 billion in sales of cigarettes a year. Now while this seems like a huge number, it actually only equates to about 2% of their overall sales. My thought however is that when a person comes into a CVS to buy their cigarettes they more often than not pick up other items when they are there. Those lost sales need to be factored in here as well. Conversely, I find it hard to believe that they will gain many new customers that are willing to drive further (otherwise they would already be going there) to give CVS their business just because they don’t sell cigarettes. This isn’t like going to a bar or a restaurant that is smoke free when all others are not. For this decision to pay off, CVS needs to attract new people to their stores because they do not sell cigarettes there.
Essentially CVS just got a free ad campaign to advertise they are a health conscious company putting their money where their mouth is. The $2 billion question….did they make the right decision? Time will tell but I think this decision will hurt them on the bottom line even though it will definitely help them in the PR department and we are all better off if less people smoke.
What do you think?