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Understanding why some Australian retailers have stopped selling tobacco, some might and some are unlikely
  1. Christina Watts1,2,
  2. Suzan Burton3,
  3. Fiona Phillips4,
  4. Kelly Kennington4,
  5. Michelle Scollo5,
  6. Kylie Lindorff6,
  7. Sam Egger7
  1. 1 Cancer Prevention and Advocacy Division, Cancer Council New South Wales, Sydney, New South Wales, Australia
  2. 2 Sydney School of Public Health, Prevention Research Collaboration, Charles Perkins Centre, The University of Sydney, Sydney, New South Wales, Australia
  3. 3 School of Business, Western Sydney University, Sydney, New South Wales, Australia
  4. 4 Cancer Prevention and Research Division, Cancer Council Western Australia, Perth, Western Australia, Australia
  5. 5 Centre for Behavioural Research in Cancer, Cancer Council Victoria, Melbourne, Victoria, Australia
  6. 6 Quit Victoria, Cancer Council Victoria, Melbourne, Victoria, Australia
  7. 7 Cancer Research Division, Cancer Council New South Wales, Sydney, New South Wales, Australia
  1. Correspondence to Christina Watts, Cancer Council New South Wales, Sydney, NSW 2011, Australia; christinaw{at}nswcc.org.au

Abstract

Background Widespread availability of tobacco has been shown to contribute to ongoing smoking and make quitting harder. This study investigates why some retailers in three Australian states decided to stop selling tobacco, others might stop selling and why others continue to sell in a declining market.

Methods A telephone survey of 4527 randomly selected retailers was conducted in August 2018 (response rate=72.4%). This study examines responses to open-ended questions in the survey probing retailers’ attitudes and beliefs regarding selling (or not selling) tobacco.

Results 27.3% of the sample sold tobacco, and 13.3% had formerly sold. Outlets that had stopped selling most frequently mentioned minimal profit and/or sales as the reason for stopping selling (27.7% across all states). This was also the most frequent reason why retailers said they might stop selling. Uniquely in Western Australia (the only state in the study with a fee-based licensing scheme), 12.5% of former tobacco retailers named tobacco licensing as the reason for stopping sales—the second most frequent reason in Western Australia. Of current sellers who were unlikely to stop, the potential to lose sales was the most frequently named reason (31.0% across all states).

Conclusion Retailers report being driven by the profitability of tobacco when deciding whether or not to stop selling, although only a small percentage discussed losing incremental sales if they stopped selling. An annual licence fee contributed to some retailers stopping selling, showing that a fee-based tobacco license can contribute to a decline in retail availability of tobacco.

  • prevention
  • public policy
  • tobacco industry

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Introduction

Australia is considered a global leader in tobacco control,1 with policies including plain packaging with graphic health warnings, high tobacco taxes and comprehensive advertising and display bans,2 all of which have contributed to daily smoking rates declining from 24.0% of adults in 1991 to 12.2% in 2016.3 However, despite tobacco use being at an all-time low and smoking now ‘denormalised’,4 tobacco is one of the most widely available consumer goods in Australia.5 It can be sold from a vast range of retailers, including petrol stations, convenience stores, supermarkets, tobacconists, newsagents and alcohol-licensed outlets. The wide availability of tobacco contributes to increased consumption, maintains smoking and undermines smokers’ quit attempts.6 Even in the absence of tobacco point-of-sale displays in Australia, the presence of tobacco retailers can trigger impulse purchases for some smokers and increase smoking frequency.7 Although tobacco control measures such as prohibiting sales-to-minors, banning point-of-sale display of tobacco and requiring health warnings at point-of-sale have been implemented in Australia, a strategy to reduce the availability of tobacco has not been comprehensively explored.

Licensing of tobacco retailers, with an annual licence fee, has been repeatedly recommended as a critically needed policy.8–10 Licensing can be used to restrict the number of retailers within areas, limit the types of outlets that can sell tobacco and/or deter retailers from selling or continuing to sell.8 11 In particular, an increase in the cost of an annual tobacco licence has been shown to be followed by a decrease in the number of retailers.8 However, few countries have implemented tobacco licensing schemes and comprehensive evaluation of licensing remains limited.12 While some Australian states and territories have implemented annual licence fees for tobacco retailers, other states are yet to implement such a policy.

This inconsistency in the licensing of tobacco retailers across Australia has enabled an opportunity to investigate differences in retailers’ attitudes to selling tobacco within contrasting legislative environments. Unlike Western Australia (WA) where retailers are required to pay an annual licence fee ($A283 in 2019),13 both Victoria and New South Wales (NSW) do not have a fee-based licensing scheme. Retailers in NSW are merely required to obtain a retailer identification number by notifying the NSW Ministry of Health if they intend to commence selling tobacco, although they can lose the right to sell,14 in what has been called a negative licensing scheme. This one-off notification scheme does not provide the likely annual reassessment of selling when the licence fee is due, a trigger that has been shown to encourage retailers to stop selling.8 The scheme does, however, provide a list of tobacco retailers (with some error),15 thus facilitating enforcement. In contrast, Victorian retailers can start selling tobacco at their own discretion (and there is thus no register of tobacco retailers), although they can, in theory, lose the right to sell.16 In all three states, tobacco can be sold by any Australian business, with the exclusion of temporary or mobile structures, businesses at public-sporting or arts-related events, and pharmacies.14 16–18

There are, however, important differences in population size between the states, which are likely to impact on the number of tobacco retailers in each state. NSW is Australia’s most populous state, followed by Victoria. The number of tobacco retailers is therefore likely to be highest in NSW, followed by Victoria. There are an estimated 10 000 tobacco retailers in NSW,19 although the one-off notification scheme in that state means that an exact count is not available. The absence of a licensing or notification scheme in Victoria means that there is no data on the number of Victorian tobacco retailers. In contrast, with its annual-based licensing scheme, WA has much more accurate data on the number of tobacco retailers (3648 in 2017–2018).20

Evidence suggests that without an annual licence fee or other supply reduction measures, few retailers stop selling tobacco.21 It is therefore important to understand why some retailers voluntarily stop in different legislative environments in order to understand the role of tobacco licensing in encouraging retailers to stop, as well as any other factors that may influence this decision. While there has been limited investigation of why some retailers stop selling tobacco,12 21 22 this study extends that evidence through a large-scale systematic analysis of current and former tobacco retailers. Likewise, understanding why some retailers are likely to stop selling, and conversely, others are unlikely, provides insight for policy makers and tobacco control advocates to focus attention on specific incentives or disincentives for retailers to stop selling. This study therefore investigates why former retailers in the Australian states of NSW, Victoria and WA decided to stop selling tobacco, why some retailers might stop selling and why others are likely to continue to sell.

Methods

Sample and methodology

The sample was derived from data registry lists for each state of retailer types that typically sell tobacco (eg, convenience and grocery stores, newsagents and alcohol-licensed outlets). While the sample was designed to capture typical tobacco retailers and ex-sellers, there were some exclusions:

  • Large supermarkets and 7-Eleven stores because it was assumed that the decision to sell tobacco would be made at the head-office level.

  • Liquor stores and petrol (gas) stations because these outlet types are dominated by chains, with the decision to sell likely to be made at the head-office level.

  • Roadhouses/grocery outlets within the same building as a petrol station to maintain consistency with the exclusion of petrol stations.

  • Alcohol-licensed premises in NSW due to an earlier extensive study of those outlets.23

After exclusion of non-target business types included on the data registry lists (eg, wholesalers, service businesses), 7271 retailers were retained for possible contact. A market research company phoned randomly selected retailers on those lists in August 2018. Callers asked to speak with the manager or duty manager. Respondents were asked to describe their business type, and interviews with excluded outlet types were terminated. The remaining participants were asked if they sold tobacco, and if not, if they had ever sold. Those who had formerly sold tobacco were asked why they had stopped selling. Those still selling were asked additional questions, including their likelihood of stopping selling, with response categories including ‘Very unlikely’, ‘Quite unlikely’, ‘Neither unlikely or likely’, ‘Quite likely’, to ‘Very likely’ (with the order randomised), along with their reasons for their response. (See online supplementary file for a list of all questions asked.)

Coding

Responses to open-ended questions were manually coded using coding categories defined by author CW. Coding categories were reviewed by coauthor SB, and a sample of responses for each question was dual coded. Differences were discussed and coding categories were further refined before all remaining responses were coded by author CW.

Results

Response rate

The sampling process is summarised in figure 1. After the exclusion of 30 857 businesses of retailer types that were not expected to sell tobacco (eg, wholesalers, service businesses), 7271 potential tobacco retailers remained on the calling list. Of those 7271 retailers, 2744 (37.8%) were not contactable. The remaining 4527 potential tobacco retailers were contacted and 3279 (72.4%) agreed to participate in the survey. Tobacco sell status could not be determined for 24 retailers, which were therefore excluded. A further 327 were found to be not typical tobacco retailers (eg, wholesalers) and were also excluded. After exclusions, the sample included 800 current tobacco sellers (27.3% of outlets), 390 ex-sellers (13.3%) and 1738 never-sellers (59.3%). Table 1 summarises the final sample size by state.

Figure 1

Flow diagram showing outlet sampling process. 1Outlets that said they only sell in attached bottle shop (an excluded category). Interviews with these outlets were terminated after selling status through a bottle shop was established, so it is unknown whether they were ‘ex-sellers’ or ‘never-sellers’ in the main shop, because the ‘ever seller’ question was skipped for them. 2‘Non-typical retailers’ included outlets such as wholesalers, florists and importers. NSW, New South Wales; WA, Western Australia.

Table 1

Final sample size and seller proportions by state

Who stopped selling?

Retailers who had stopped selling were most commonly alcohol-licensed outlets (with 52.7% of ever-sellers (current plus former sellers) having stopped) or newsagents/post offices (with 45.4% having stopped). In contrast, convenience and grocery stores were much less likely to stop selling (10.9% and 9.1% having stopped, respectively).

Why do retailers stop selling?

Financial-related reasons

The reported reasons for stopping selling tobacco by state are shown in table 2, with subcategories of ‘Tobacco legislation’ shown in italic. Financial-related reasons (minimal profits/sales and the high cost of stock) were the most common and third most common reasons (27.7% and 15.6% of respondents across all states, respectively). When discussing the low profits from selling tobacco, a number of retailers discussed diminishing sales over time, thus negatively impacting on profits:

Table 2

Reported reasons for stopping selling (sorted in descending order by the total for all states)

Not worth it…back in the day we used to sell 500 packs a week, now we're lucky if it was five or six. The margins as well…[we’re] barely making any money. (Pub, WA)

Some attributed declining profits to price increases, and others to tobacco taxes:

The price - the cost went up by a huge amount - maybe 20 odd percent. Sales dropped so I stopped selling them. (Newsagent, NSW)

Because the Lotto (a gambling game) took the place of cigarettes. There’s not enough profit, it's all tax. (Newsagent, NSW)

The risk of break-ins and theft of tobacco were the second most common reason for stopping selling in NSW and Victoria (19.8% and 19.4%, respectively). Like minimal profit and the cost of stock, break-ins/theft might be considered a financial-related reason for stopping selling.

Tobacco control legislation

In WA, the only state in the study with a fee-based licensing scheme, the second most common reason for stopping selling was tobacco legislation (19.3%) and in particular, licensing (12.5%). The cost of a licence and the general issues with licensing were frequently mentioned reasons for stopping sales:

Didn't bother getting a licence, it's too expensive. (Pub, WA)

Apart from licensing, a range of tobacco control measures, such as sales-to-minors restrictions, tobacco display bans and tobacco taxes, were also mentioned as reasons for stopping selling tobacco. Complying with relevant legislation was often seen as difficult:

With all the changes in regulations it's just getting too hard. There used to be a vending machine but the legislation made it difficult to maintain it. (Hotel, WA)

We didn't have the room behind the counter and you had to cover them up and it was all too hard. (Newsagent, NSW)

Declining sales and profits were also attributed to tobacco taxation, plain packaging and display bans, making sales insufficiently profitable:

When the plain packaging and new regulations came in our sales dropped and it just wasn't worth it for us. (Newsagent, NSW)

Once we put them in the drawer, the sales dropped off. (After legislation banned the display of tobacco.) (Newsagent, Victoria)

Personal attitudes and health concerns

Personal attitudes to tobacco were also mentioned as reasons for stopping selling. Responses of this nature were the highest in NSW, with 12.1% of ex-sellers mentioning personal reasons for stopping selling, followed by WA (11.4%) and Victoria (5.9%).

Not a good thing…I don't like it. I banned it in my other (business), 6 years before it became law. Dirty habit, smokers don't clean up, they pollute gardens and sea-ways, and I don't like it. (Bar, Victoria)

For religious reasons, it's a sin to sell those products. (Newsagent, NSW)

A lower proportion of ex-sellers reported health concerns as reasons for stopping selling, with 3.4% of NSW ex-sellers, 7.0% of Victorian ex-sellers and 9.1% of WA ex-sellers expressing reasons of this kind.

Why some retailers might stop selling

Across all states, only 7.9% of current sellers (n=63) stated that they were ‘Quite likely’ (4.8%, n=38) or ‘Very likely’ (3.1%, n=25) to stop selling tobacco. Of these 63 current sellers, 59 reported one or more reasons for being likely to stop selling. The reported reasons why these ‘Likely to stop’ retailers might stop selling are shown in table 3.

Table 3

Reported reasons for being likely to stop selling (of respondents who identified one or more reasons for being likely to stop)

Financial-related reasons

Respondents gave a variety of reasons for being likely to stop selling; however, financial-related factors were the primary reasons mentioned, mirroring the predominant reasons why former tobacco retailers stopped selling. As shown in table 3, almost half (49.2%, n=29) of the ‘Likely to stop’ retailers reported minimal profits/sales as a reason to stop. The high cost of stock, which many respondents discussed as contributing to low sales or profits, was also frequently mentioned (by 20.3% of these retailers):

Because of the expense. They could sit there for a few weeks and the time it takes for us to get a return. We also make no money out of them, we may make 30 cents a pack and might as well have that money in the bank. The return on investment is pathetic! (Newsagent, NSW)

Just for the high outlay of money. You've got to pay for them in advance, and it's a low percentage profit. (Newsagent, NSW)

Table 3 also shows that insufficient demand for tobacco was reported as a reason for being likely to stop selling by 18.6% of ‘Likely to stop’ retailers. Some respondents reported that they could not justify continued sales due to the low demand for tobacco and/or that the declining demand may result in them stopping selling in the future:

Because the demand is diminishing. So I'd say what we used to sell five years ago to what we sell now…if that decline continues it would be most likely that we stop. (Newsagent, Victoria)

Tobacco control legislation

Across the three states, tobacco control legislation was reported as a reason for being likely to stop selling by 15.2% of ‘Likely to stop’ retailers. While retailers did not typically link high tobacco taxes to prices, increases in tobacco prices (primarily due to increased taxes) were often discussed as having caused lower sales:

The next price rise will probably kill people. I used to have them all stocked-up, but the price rise made me go back down to only three brands now. (Convenience store, NSW)

Other participants believed that progressive changes in legislation will eventually restrict the sale of tobacco so much that retailers will stop, or tobacco sales will ultimately be prohibited:

I suppose it will just go with the laws, we have a licence with a smoking area. We just go with the laws and I'm guessing the laws will eventually prohibit it. (Pub, WA)

I think at some stage it’ll be banned. (Newsagent, Victoria)

Why some retailers are likely to continue selling

Across all states, 79.6% of sellers (n=635) stated that they were ‘Quite unlikely’ (15.2%, n=121) or ‘Very unlikely’ (64.4%, n=514) to stop selling tobacco. Of these 635 sellers, 613 reported one or more reasons for being unlikely to stop selling (see table 4).

Table 4

Reported reasons for being unlikely to stop selling (of respondents who identified one or more reasons for being unlikely to stop)

Loss of profits/sales

The most frequently stated reason (31.0%) for retailers being unlikely to stop selling was concerns about losing profits/sales (see table 4). Some said that profit from tobacco sales was a large proportion of their income:

Well it's part of our business. It's probably a third of my turnover and I'd lose about a third of my turnover. (Grocery store, Victoria)

Others reported that tobacco sales brought in additional income and were therefore important for the survival of the business:

It's a product line that we've had for a long time and we don't want to reduce our products at this time. We're battling to stay in business as it is. (Newsagent, NSW)

Maintaining foot traffic and incremental sales

Some retailers said that they are unlikely to stop selling because they believed tobacco sales help maintain foot traffic into the store, which they believed results in increased sales from other products:

Ah, because that thing about people grabbing milk while buying their cigarettes, and they'll probably go to the other convenience store down the road. I would lose out on incidental purchases. (Grocery store, WA)

Because it's a drawcard, you want people to come in and buy [cigarettes] and buy something else at the same time. (Convenience store, NSW)

A service to customers

Many retailers said that they were unlikely to stop selling because they do it as a service to customers (23.0%), or because they thought they would lose customers if they stopped selling (9.6%):

Because we're one of two places in our town that sell them, and it's a convenience for the customers. I don't want to cop the abuse for not having them. (Newsagent, Victoria)

Because we’re dependent on customers, we need to satisfy the customers’ needs. Our customers are fickle, if we aren't convenient they may go somewhere else…(Grocery store, NSW)

Some alcohol-licensed outlets said they are unlikely to stop selling tobacco because customers who drink alcohol often want to smoke, and so the retailer needs to sell tobacco to satisfy that demand. Some also discussed the strong association between drinking alcohol and smoking:

I don't think we could stop. The demand is very high here and it seems to me that alcohol and tobacco go hand in hand, so if you sell alcohol you need to sell tobacco. (Supermarket, Victoria)

People like to have a smoke when they have a drink. It's for the customers. We make minimal money from it. (Pub, WA)

Discussion

The study is the first large-scale systematic analysis of why some retailers stop selling tobacco, while others continue to sell in a declining market. The results show that many Australian tobacco retailers report being driven by profits in deciding whether or not to sell tobacco. Other financial-related reasons, such as the high cost of stock and the risk of break-ins and theft of stock, were also frequently named reasons to stop selling. Similarly, retailers who reported being unlikely to stop selling most frequently reported profitability as driving their decision to continue to sell, although providing a service and meeting demands from customers were also frequently reported reasons. Maintaining foot traffic and avoiding the loss of incremental sales, while often mentioned by industry-supported lobby groups as a major reason for opposing tobacco control legislation, were mentioned by only a small proportion of retailers (10.1%).

There was some evidence that tobacco control legislation is encouraging some retailers to stop selling. Although low in absolute terms, nearly one in five ex-sellers in WA (19.3%), the only state in the study with a fee-based licensing scheme, cited legislation as a reason for stopping, including 12.5% who specifically mentioned tobacco licensing, compared with 11.2% of NSW ex-sellers and 9.1% of Victorian ex-sellers who mentioned legislation as a reason for stopping selling. However, although there were (as expected) a higher proportion of ex-sellers in WA (14.1%), that proportion was not substantially higher than in Victoria (13.5%) and NSW (12.6%). This surprising lack of a large difference may be due to state-specific factors: with a vastly larger geographical area and a much smaller population than NSW or Victoria, WA has a much lower population density than those states. That lower population density, with many remote towns, most of which will probably have at least one outlet selling tobacco, is likely to encourage retailers to continue to sell, even if demand is low. In contrast, the higher population density state of Victoria, with easier access to large supermarkets and their lower-cost tobacco, is likely to encourage smaller retailers to stop selling.

So if an annual licence fee encourages some retailers to stop selling, but the available evidence does not show that the current WA licence fee has led to a large difference in the number of retailers who stop selling across states, what role can tobacco licensing play in tobacco control policy? The results from this study are consistent with an earlier, much smaller study, which found that retailers are unlikely to stop selling tobacco unless something changes to prompt them to reassess selling.21 For a state such as WA, which already has an annual licence fee, such a prompt could be provided by a sharp increase in the annual licence fee, like the one-off 15-fold increase in the South Australian licence fee, which resulted in a 23.7% decrease in the number of tobacco retailers in the subsequent 2 years.8 Similarly, for NSW and Victoria, the implementation of a fee-based licensing scheme would constitute a legislative-related prompt to reassess the reason to sell.

An annual licence fee for tobacco retailers is therefore a policy lever to achieve a reduction in the availability of tobacco by encouraging retailers to review their decision to sell each year (ie, when the licence fee is due). A fee-based licence scheme also provides a mechanism for governments to develop and implement a tobacco strategy aimed at retail density. For example, such a scheme allows governments to collect information on the number, location and types of tobacco retailers, which can be used to increase compliance with retailing laws, provide information to help retailers understand the relevant legislation and potentially manage tobacco licences based on retail density. The cost of licence fees can therefore be used to fund the cost of tobacco retail regulation, administration and enforcement, as has been done in the Australian state of Tasmania.24

Any tobacco retail licence fee is likely to have its greatest impact on the large number of retailers who continue to sell tobacco despite low profits from sales.23 For example, New Zealand research has suggested that many retailers have low profit margins from tobacco sales but continue to sell due to the perceived importance of tobacco for enticing customers into the store, and thus (they assume) causing incremental purchases.25 26 As discussed above, while some retailers in this study reported incremental purchases as a reason to continue selling, the percentage who did so was not large, consistent with evidence that few retail transactions include both tobacco and non-tobacco products.27 28 In Australia, newsagents and alcohol-licensed outlets constitute a large proportion of tobacco retailers, despite capturing only a very small proportion of total tobacco sales.21 They are therefore likely to represent the low tobacco sales, low-profit outlets that are most likely to stop selling in response to an annual licence fee. If a licence fee, or an increased licence fee, can encourage more of these retailers to stop selling tobacco, it would decrease the repeated environmental prompt for smokers and attempting quitters to buy and smoke cigarettes.

Finally, personal attitudes towards smoking were also mentioned by some retailers as a reason to stop selling. Those attitudes were often associated with comments by the respondents about not smoking themselves. This finding is consistent with research from the USA, which found health, moral and ethical concerns to be key reasons for some retailers stopping selling tobacco.12 22 As smoking becomes less common, such negative attitudes to smoking may result in an increase in the number of retailers who decide to stop selling.

Strengths and limitations

The study is the first to have analysed reasons for stopping selling from a large sample of tobacco retailers. The retailers sampled were from three jurisdictions with differing tobacco retail licensing schemes, thus allowing analysis of differences between regions with different licensing schemes. The study also provides insight into the mindsets of retailers and the factors that influence their decisions to sell or to stop selling in a declining market. The failure to include alcohol-licensed outlets in NSW presents a limitation, so comparisons across states should be made with caution.

Conclusion

Tobacco retailers in the study often reported being driven by the profitability of tobacco when deciding whether or not to stop selling, although in contrast with industry claims, only a surprisingly small percentage discussed concerns about the potential loss of incremental sales if they stopped selling tobacco. The existence of an annual licence fee in WA appears to have resulted in some retailers deciding to stop selling, although a sharp increase in the size of that licence fee is likely to have a greater impact on reducing the number of tobacco retailers. Similarly, the introduction of an annual licence fee in NSW and Victoria would be likely to contribute to a decline in the retail availability of tobacco, while also providing a mechanism for enforcement of tobacco sales legislation (by providing a list of retailers) and funds to pay for that enforcement (through licence fees).

What this paper adds

  • Tobacco is among the most widely available consumer goods on the market and this wide distribution increases tobacco consumption and contributes to the maintenance of, and relapse to, smoking. An annual fee-based licensing scheme has been proposed as a mechanism to encourage retailers to stop selling tobacco.

  • There is currently only limited evidence as to why retailers continue to sell in a declining market. This is the first large-scale systematic analysis, across areas with varying tobacco sales legislation, of tobacco retailers’ reasons for stopping selling, while other retailers continue to sell tobacco in a declining market.

  • The study suggests that continued legislative changes, such as a fee-based licensing scheme, may encourage some tobacco retailers to stop selling.

References

Footnotes

  • Contributors CW, SB, KK, FP, KL, MS and SE conceptualised and designed the study. CW and SB interpreted and analysed the data. All authors reviewed, contributed to and approved the final manuscript.

  • Funding This study was supported by Cancer Council Victoria, Cancer Council Western Australia and Cancer Council NSW.

  • Competing interests None declared.

  • Patient consent for publication Not required.

  • Provenance and peer review Not commissioned; externally peer reviewed.

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