New INFORMS magazine Marketing science Key points of the study:
- The ban on tobacco in pharmacies leads to a 4% drop in sales of non-tobacco products.
- Lost sales occur whether the ban is voluntary or imposed by regulation.
- This consequence can be applied to the banning of other unhealthy categories in other stores or retailers.
BALTIMORE, MD, January 26, 2021 – New research in the magazine INFORMS Marketing science shows that doing something positive for public health can be costly. Researchers say banning tobacco products means retailers could see up to a 4% drop in gross sales.
“Our results highlight the role of tobacco as a driver of traffic to physical stores and demonstrate the unintended microeconomic consequences of smoking bans,” says Pradeep Chintagunta of the University of Chicago. “These lost sales occur regardless of whether the ban is voluntary or not.”
The study “What happens when a retailer abandons a product category?” Investigating the Consequences of Ending Tobacco Sales,” is being led by Chintagunta alongside Ali Goli of the University of Washington, who says this impact can also be felt for other bans on unhealthy products.
“On the one hand, the decision, for example, of Dick’s to remove assault weapons from its assortment may affect the customer base of its own stores and its rivals and affect the sales of other categories. On the other hand, a store’s voluntary decision to end, for example, tobacco sales can attract more non-smokers to its stores and offset the losses resulting from abandoning the category,” Chintagunta continues. , Joseph T. and Bernice S. Lewis Distinguished Professor of Marketing. at the University of Chicago. “However, in the case of tobacco, our results show that the short-term gains for retailers from quitting smoking do not appear to outweigh the financial losses associated with these actions.”
Research shows that if customers are loyal to the retailers they shop at, the decision to drop an entire category has had a measurable and significant impact on the revenue generated from other products.
“We also show how the absence of a category in a store can simultaneously make the store less appealing to some customers and more appealing to others,” says Goli, assistant professor of marketing at Foster School of Business. Washington University.
Link to the full study.
About INFORME and Marketing science
Marketing science is a leading, peer-reviewed, research-driven academic marketing journal using quantitative approaches to study all aspects of the consumer-business interface. It is published by INFORMS, the leading international association for decision and data sciences. More information is available at www.informs.org or @informed.
The title of the article
“What happens when a retailer drops a product category? Investigate the consequences of stopping tobacco sales”
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