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Abstract
Background Licensing of tobacco retailers, including high retail licence fees, is one tobacco control measure that may reduce tobacco retail availability. Between 2015 and 2018, the tobacco licence fee in Tasmania, Australia, tripled to $A1132/year. We sought to explore small retailer perspectives on selling tobacco following the tripling of the licence fee.
Methods In-depth semistructured telephone interviews (n=21) were conducted with business owners and managers between March and July 2020. Participants were asked broad questions about their business, attitudes and intentions towards selling tobacco and the perceived importance of tobacco to their business.
Results Participants’ perspectives and decision-making about selling tobacco were influenced by an interplay of factors, including tobacco’s perceived core business value and its waning importance in small retail due to declining demand. Although participants frequently reported tobacco as unprofitable, with many describing it as their least profitable product, most continued selling it. The high tobacco licence fee created a tipping point that challenged the cost-benefit balance previously weighted towards selling tobacco. While the fee, alongside the increasing cost of tobacco itself, pushed some retailers towards a critical decision point to stop selling tobacco, others continued to sell tobacco but appear to be headed in the same direction.
Conclusion A high annual tobacco licence fee serves as a potential mechanism for phasing out the sale of commercial tobacco in small retailers in a jurisdiction with other strong tobacco control measures.
- Public policy
- Advocacy
- End game
- Environment
Data availability statement
All data relevant to the study are included in the article or uploaded as supplementary information.
This is an open access article distributed in accordance with the Creative Commons Attribution Non Commercial (CC BY-NC 4.0) license, which permits others to distribute, remix, adapt, build upon this work non-commercially, and license their derivative works on different terms, provided the original work is properly cited, appropriate credit is given, any changes made indicated, and the use is non-commercial. See: http://creativecommons.org/licenses/by-nc/4.0/.
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WHAT IS ALREADY KNOWN ON THIS TOPIC
There is limited evidence on measures to phase out the sale of commercial tobacco through reducing tobacco’s ubiquitous availability, particularly in the context of endgame-oriented policies like increasing tobacco licence fees. Previous research has explored why retailers stop selling or consider stopping selling, however, there is a lack of studies specifically examining the impact of a substantial tobacco licence fee increase.
WHAT THIS STUDY ADDS
To our knowledge, this is the first qualitative study exploring retailer perspectives on selling tobacco following a substantial tobacco licence fee increase.
HOW THIS STUDY MIGHT AFFECT RESEARCH, PRACTICE OR POLICY
In jurisdictions with strong tobacco control measures, introducing or significantly increasing the tobacco retail licence fee could serve as a mechanism to phase out the sale of commercial tobacco by encouraging small retailers to voluntarily end sales.
A high licence fee may also increase tobacco prices in small retail, a well-established tobacco control measure to prevent and reduce tobacco use, particularly among price-sensitive population subgroups.
Introduction
Since the adoption of the WHO Framework Convention on Tobacco Control (FCTC), countries such as Australia have increasingly hampered the tobacco industry’s ability to market their products through regulation of promotion (eg, advertising and point of sale display bans) and price (eg, tobacco tax excise). However, despite ‘place’ being a core marketing element,1 the retail availability of tobacco is subject to little regulation and such measures are not explicitly included in the FCTC. The greater the retail availability of tobacco, particularly in disadvantaged areas, the higher the smoking rates in adults and young people.2–4
Some countries have implemented retailer-based regulatory interventions, including: tobacco licensing schemes,5 6 capping the number of tobacco retail licences,7 prohibiting the sale of tobacco products in limited geographical areas and close to schools,8 9 banning online sales10 11 and restricting sales to specialist tobacco retailers.12 In 2024, the Netherlands banned tobacco sales in supermarkets and plans to phase out sales in petrol stations and convenience stores from 2030, allowing only specialist tobacco shops.13 14
These policies have been coined ‘endgame-oriented’, as they support a move towards a future free of commercial tobacco.8 In Australia, there has been limited action on endgame-oriented policies, with the exception of increasing tobacco licensing fees.6 15 16 Previous studies have found that increasing licence fees is associated with a reduction in the number, and density, of tobacco retailers.17 18 The impact of tobacco licensing itself has also been cited by retailers as contributing to decisions to stop selling.19–21 Some Australian jurisdictions have a positive licensing scheme, requiring prior approval for selling tobacco and annual renewal with a fee.6 In Tasmania, with over 541 000 people, adult smoking prevalence of 17.6% compared with 15.1% nationally, and high concentration of tobacco retailers, particularly in the state’s north,22–24 all retailers selling smoking products must obtain an annual licence. Between 2015 and 2018, the tobacco licence fee more than tripled from $A360/year to $A1132/year per premise,6 making the licence fee more than three times higher than other Australian jurisdictions. The fee increase aimed to better reflect the costs of administering the scheme and enhance enforcement activities, although full cost recovery was not achieved despite the substantial increase.25
While previous studies have examined the factors influencing retailers’ decisions to stop selling in jurisdictions with a positive licensing scheme,19 20 our study expands on this by exploring retailers’ perspectives and decision-making on selling tobacco, including those continuing to sell, following a substantial tobacco licence fee increase. Our study provides insights for jurisdictions who are considering adopting a licensing scheme or increasing existing fees.
Methods
As detailed in a previous publication,26 we used purposeful sampling to recruit retailers to gain insights on their perspectives of healthy retail environments. Of all (n=365) the tobacco retailers in northern Tasmania, 164 met the following criteria: (1) an owner-operated business with a valid tobacco licence, (2) not part of a limited company or subsidiary and (3) not a large supermarket, specialist tobacconist, or tobacconist in a mixed business. Retailers meeting these criteria were presumed to not sell tobacco as their core business model and have low volume sales.27 Between March and July 2020, ninety retailers were purposively sampled across business types, areas of remoteness and relative socioeconomic advantage/disadvantage and current/ex-tobacco licence holders, including all that had stopped selling tobacco from November 2018 onwards. Many retailers could not be reached (n=37) or declined an interview for reasons including being too busy (n=20) or uninterested (n=12). Only retailers with decision-making authority (owners/managers), who were aged >18 years, were invited to participate.
Data collection
After obtaining verbal consent, 21 semistructured interviews lasting up to 60 min were conducted via telephone by ALS, a public health researcher working for a not-for-profit cancer organisation. Prior to being asked any tobacco-related questions, participants were asked about their business (eg, business type, ownership/operation duration), the products they stocked and their most/least profitable products (refer to online supplemental table S1 for tobacco-related questions). Given the study’s exploratory approach, participants were not directly asked about tobacco licensing or the licence fee to allow free discussion of ideas that were important for them and not anticipated by the researchers.28 All participating retailers continued to operate during the COVID-19 pandemic, minimising pandemic-related impacts on the study. Participants were reimbursed for their time with a $A50 gift certificate.
Supplemental material
Data analysis
Interview data were analysed using Braun and Clarke’s six phases of reflexive thematic analysis, with themes constructed to explore retailers’ perspectives on selling tobacco.29 The interview transcripts were read by ALS several times to become more familiar with the data and gain initial impressions (phase 1). The transcripts were coded line by line, and codes refined, before being grouped into clusters of meaning (phase 2). Initial candidate themes were developed through visually mapping different clusters to see how they fit together (phase 3). The themes and corresponding codes were reviewed and defined to ensure there was a clear concept that was shared across them and further refinements were made (phases 4–6).
Results
Interview participants represented a diverse range of individual and business characteristics, with a mix of owners and managers, ages, business types, geographical locations and current/ex-tobacco licence holders (table 1). Notably, five interviews were conducted with retailers who had stopped selling tobacco. No participants reported selling e-cigarettes.
Characteristics of interview participants and their businesses
Through an interplay of factors influencing participant perspectives and decision-making about selling tobacco, three inter-related overarching themes were developed: ‘tobacco as central to the small retail business model’, ‘tobacco’s fading relevance’ and ‘the tipping point: a high tobacco licence fee’. The first theme centres on retailers’ beliefs about tobacco as a core component of their business. The second theme highlights how external factors such as regulatory measures and declining demand are leading to tobacco’s diminishing role in small retailers. The third theme explores the influence of a high licence fee which serves to diminish the role of tobacco as central to their business model while also contributing to its declining importance in small retailers. Together, the themes help make sense of retailers’ beliefs, intentions and decision-making processes regarding tobacco sales and why some small retailers stop selling, while others are considering it. Figure 1 portrays a conceptual display of the resulting themes.
A visual depiction of the interplay between the overarching themes and subthemes influencing retailer perspectives and decision-making about selling tobacco.
‘Tobacco as central to the small retail business model’
Participants described their business model as centred on customer convenience and satisfying customers. The logic being that this drives foot traffic, attracts new customers, increases customer loyalty and retention, and increases purchases, ultimately driving up revenue and profits.
[…] you always try to hang on to any customer you can keep. And however you keep them, you do what you’ve got to do. (Interviewee 12, co-owner, newsagency, sells tobacco)
Small retail was portrayed as a ‘spider web’, with tobacco as a central element of the business’ value proposition (ie, the unique value offered to customers, so they choose the business over others) creating an interconnected network of benefits such as attracting customers by selling what they want, including stocking particular tobacco products, and facilitating the purchase of other items.
I do carry a Peter Stuyvesant, one of our local police officers likes it and can’t get it at the supermarket. So I get that in for him […] as I say to them, if it’s something I know you’re going to come back and keep buying it, I’ll get it in for you. (Interviewee 7, manager, takeaway store, sells tobacco)
[Tobacco] attracts people into buy and when they’re here buying, they’re also buying other products. (Interviewee 16, owner, mixed business, sells tobacco)
Participants highlighted their value proposition by having extended operating hours, with some retailers opening as early as 02:00 hours and closing late at night. Operating early in the morning and late evening was particularly important for tobacco sales, as most sales occurred during these times. Retailers reported that the advantage of having extended operating hours, often beyond those of major retailers, is that they do not need to compete directly with them.
I get the customer come into my shop because I open 5:30am. By that time, the big supermarket isn’t open […] And then late evening I open until sometimes 8 or 9 o’clock. They don’t want to go to town. (Interviewee 14, owner, general store, sells tobacco)
We have [tobacco] there for those early morning truck drivers and whatever that can’t get them anywhere else at that time of the day. It’s really more of a convenience product for the customers than a profitable product for us. (Interviewee 17, manager, takeaway store, sells tobacco)
One participant reported that local customers can contact him in the middle of the night to purchase tobacco and other products.
Participants described tobacco as being ingrained in their business model and tied up in generally held beliefs about norms in the convenience sector, with many believing that if they stop selling tobacco they would no longer be offering the suite of convenience products customers want.
It’s all about a one-stop shop […] If I don’t have the cigarettes, then I can’t really be a full convenience store. (Interviewee 15, owner, takeaway store, sells tobacco)
Participants described a domino effect if they stopped selling tobacco whereby they risked losing or upsetting customers, consequently affecting the sale of other products.
If they come in and they want a packet of smokes, usually they’ll ask that first […] then they’ll buy their lunch, and then they’ll buy their drinks, and they’ll buy bits and pieces. But if we haven’t got them, we do have another competitor that is five minutes down the road… (Interviewee 6, owner, mixed business, sells tobacco)
Some participants expressed a sense of obligation to sell tobacco due to their long-standing relationships with the community, some of whom rely heavily on them for access to tobacco. Particularly in rural areas where the retailer is the only one available and has a sense of loyalty to locals, they view selling tobacco as a community service.
If we were around town with three or four other shops or outlets with tobacco, it would be a much easier decision for me to say, ‘No, I can’t sell it.’ I’ve got probably four, five, or six local customers, they’re good customers both ways, with tobacco and any other products, but if I said we’re not going to stock tobacco anymore, I wouldn’t like to pressure them too far. (Interviewee 16, owner, mixed business, sells tobacco)
Participants described contradictions where their personal attitudes and beliefs clashed with their decision to sell tobacco, highlighting how deeply tobacco is embedded in their value proposition and business model. For instance, participants framed tobacco as a product they personally preferred not to sell, but continued selling regardless.
It wouldn’t have been a hard personal decision to make because as far as I was concerned, I didn’t really want them here anyway. But you can’t make a decision like that based on your heart, you have to use your head. And when you own a business, you need to be thinking of ways that you can get people through the door and keep turning the till over. (Interviewee 5, co-owner, newsagency, stopped selling)
Additionally, many participants spontaneously reported tobacco as one of their least profitable products, generally attributing this to low profit margins and sales volume.
I guess cigarettes are probably—I mean, we turn them over, but you don’t make much on the cigarettes. (Interviewee 19, owner, general store, sells tobacco)
What would be the least profitable? The cigarettes. Yes, because they’re such a low mark-up on them […] and we don’t sell a huge amount. (Interviewee 12, co-owner, newsagency, sells tobacco)
Participants discussed making stock decisions by considering factors, such as customer demand, inventory turnover and profit margin. If a product performed poorly across these factors, they decided to no longer stock it. However, despite some participants stating tobacco was underperforming across these factors, it was treated as an exception to this usual decision-making process.
When it comes down to it, like I said, the bottom line is you’ve got to make a profit. With tobacco, we do look at that a little differently. We’ve always just looked at that, as I said, once again a convenience. When it comes to everything else, if it’s not making a profit you don’t keep it. (Interviewee 17, manager, takeaway store, sells tobacco)
‘Tobacco’s fading relevance’
Many participants stated that tobacco was less important to their business than in the past and being gradually phased out of small retail over time. Participants explained that their volume of tobacco sales, and range of brands and products, had declined substantially over the years, with some participants attributing this to tobacco control measures driving down community demand and/or losing tobacco-buying customers to supermarkets and tobacconists due to their lower prices.
We don’t have new people buying tobacco. Most of it is our regular customers that have been doing it for years. And like I said, I don’t have a big range, I carry the ones that I know people buy […] a lot of the little places won’t be able to keep going with tobacco. I think it’ll be—the major places, the bigger places. Supermarkets and all that will have it. Because they won’t be able to afford to do it, because people are looking for cheaper options. (Interviewee 21, owner, takeaway store, sells tobacco)
I do expect that in the next few years they would probably be more phased out and we could probably stop getting them completely… (Interviewee 6, owner, mixed business, sells tobacco)
In response to the declining tobacco sales, participants described taking steps to decrease their stock, in some instances replacing it with other product lines.
Our sales had dropped in smokes so much over the last seven years, we used to have a three-bay cigarette cabinet […] we’re actually down to one and instead of having cigarettes there, we’ve got a really nice display of giftware instead. (Interviewee 6, owner, mixed business, sells tobacco)
Participants also described weaker ties to tobacco companies, including no longer being approached by tobacco industry representatives. Some also believed that their small orders were unable to meet industry purchasing requirements.
We used to deal with the tobacco companies, with all three of them […] but we haven’t seen a rep for probably three years since they cut back. (Interviewee 16, owner, mixed business, sells tobacco)
Well we used to do it directly through the company, the manufacturer, but these days we actually buy them from another store that has a wholesale business […] we can just buy the small numbers that we want, because the manufacturers used to want large quantities. You had to purchase a certain amount and we didn’t want to do that. (Interviewee 12, co-owner, newsagency, sells tobacco)
‘The tipping point: a high tobacco licence fee’
While participants were not explicitly asked about the tobacco licence fee, its influence was described as pushing them towards a critical decision point. The high licence fee not only led to some retailers deciding to stop selling tobacco, but for those choosing to continue selling, the fee caused discontent and reflections on whether to continue selling in the future.
Although participants highlighted various reasons behind their decision to stop selling, the tobacco licence fee was reported as the driving force, with benefits of selling tobacco no longer justifying the high cost:
I’ll have to be completely honest, and I’m almost a little bit ashamed, but we actually stopped because the licensing fees just got out of hand. We weren’t making any money on it […] All of a sudden the licence was due and it had gone up again and it was like you know what, we’re just not going to go there. The profit margins were so low anyway […] (Interviewee 3, owner, mixed business, stopped selling)
No margins in it and the price of the licence too, they were big factors [in decision to stop selling tobacco] […] the first year we had the shop it was about $300. And last year, it was about $1400. That’s a big difference. (Interviewee 5, co-owner, newsagency, stopped selling)
For participants continuing to sell tobacco, the high licence fee was described as a key leverage point influencing their perspective, leading some participants to consider ending sales, particularly if the fee was to increase further:
I may even consider not renewing my licence, my tobacco licence. Because every year they just put it up and up and up. And now I’ve got to weigh whether the cost of a licence, which I believe is up to about $1150 a year, for the amount of cigarette products I sell, is it worthwhile. (Interviewee 13, owner, news agency, sells tobacco)
Participants also discussed the financial implications of the licence fee on their business, with some reporting reducing their profits or only breaking even:
Look for the few people that, like I said we don’t buy a lot of tobacco now. But it’s probably costing me money to have it here, to tell you the truth. (Interviewee 21, owner, takeaway store, sells tobacco)
We pretty much make enough to cover the cost of the licence every year […] we pretty much sell it for what we buy it for. (Interviewee 17, manager, takeaway store, sells tobacco)
Some participants reported passing on the full cost to customers by increasing the price of their tobacco products.
And that’s all part of the price of the—I mean, the customers end up paying for that. Like I said, I make no apologies for the price of cigarettes. I shouldn’t have to, you know, these cigarette licences are a joke. (Interviewee 18, owner, general store, sells tobacco)
[…] the boss has it set so that his profit margining incorporates what the licensing costs are. So obviously if it was to hike up then our prices would have to go up. (Interviewee 7, manager, takeaway store, sells tobacco)
Wider implications of the licence fee were also discussed, with participants perceiving that it creates an uneven playing field, allowing big supermarkets to monopolise the market. Participants reported that all businesses, regardless of size, pay the same licence fee, with large supermarkets believed to easily absorb the cost. Whereas small retailers generally increase the price of their tobacco products to accommodate the high licence fee, supermarkets were claimed to be selling tobacco for even less than can be sourced directly through tobacco companies and suppliers.
Supermarkets pay the same [licence] fees […] Sometimes you can get it cheaper at the supermarket than what you can through the tobacco companies and it just shows you what the sort of pull these big supermarkets have got. (Interviewee 18, owner, general store, sells tobacco)
…it was frustrating when the supermarket could sell their cigarettes for cheaper than I could even buy them. (Interviewee 3, owner, mixed business, stopped selling)
Discussion
This is the first study examining retailers’ perspectives of selling tobacco following the tripling of the licence fee in a jurisdiction with a positive licensing scheme. The findings provide further evidence that small retailers consider tobacco not only unprofitable,19 20 30 but for some, also their least profitable product. Surprisingly, profitability was not the only consideration when making stocking decisions in convenience retail. Some retailers treat tobacco differently and do not subject it to the same profit analysis as other products. Despite tobacco being potentially detrimental to their business, retailers continue selling due to an established norm that selling tobacco is both expected and acceptable. Challenging this norm through a communication campaign which points out the disadvantages of selling, alongside the licence renewal process, could be helpful in shifting retailers’ perceptions.26 Nonetheless, participants suggested that tobacco’s overall relevance in small retail is fading, primarily due to tobacco control measures driving down demand. There appears to be a ‘softening’ of retailers’ perspectives, with many being less invested in continuing to sell tobacco and more aware of the changing retail landscape.
Consistent with other studies,16–20 our findings show the important role of regulatory measures, such as a high annual licence fee ($A1132 in Tasmania) to encourage retailers to end tobacco sales. Although previous studies show that lower licence fees (a few hundred dollars) have led some retailers to stop selling,16–18 our findings suggest that the high fee in Tasmania disrupts the cost-benefit balance of selling tobacco. The high fee interferes with small retailers’ profits and drives up the cost of tobacco for customers. Other jurisdictions should consider increasing fees to cover significant administration costs (eg, compliance monitoring). Australian states without a positive licensing scheme, like Victoria and New South Wales, should also consider introducing a scheme with a high annual fee to ensure full cost recovery.
An unintended consequence of the high licence fee was the perception that it creates an uneven playing field between small retailers and large supermarkets, with small retailers impacted through reduced profitability and loss of price-sensitive customers, and supermarkets seen as able to easily absorb the cost and gain market share. Universal, flat tobacco licence fees have been found to disproportionately impact retailers in disadvantaged and rural areas.31 Supermarkets appear to have significant buying power and ability to leverage economies of scale, undercutting the market and selling products for a lower price than retailers can source directly through suppliers. If a high licence fee creates an uneven playing field, it is important to consider what changes could be made to create a more equitable system. In addition to a high fixed licence fee, licensing schemes could be reformed to include a variable fee that reflects the scale of retailers’ tobacco business, whether through factors such as sales volume or store size. This would mean that retailers with a larger scale tobacco business would pay a higher fee. As with any potential policy measure, feasibility, including jurisdictional legislative powers and unintended implications, would need thorough consideration.
Strengths and limitations
The qualitative design and exploratory nature is a notable strength of this study, providing new insights beyond previous studies only assessing licence fee increases by reductions in licence numbers.17 18 We extend the current literature by examining broader implications on retailers’ perspectives, decision-making and, potentially, consumer purchasing behaviour.
A limitation of our study includes potential exposure of all participants to a non-regulatory intervention encouraging them to stop selling tobacco in the 12 months or more preceding their interview.26 The intervention, which included messaging to draw attention to the high licence fee, may have impacted participants’ perspectives on selling compared with retailers not exposed. Characteristics of the interviewer (eg, working for a not-for-profit cancer organisation) may have also influenced participants’ responses about selling tobacco as well as the interpretation of the findings. While our findings reflect the perspectives of small retailers in Tasmania and may not represent those in metropolitan areas, they could be applicable to regional communities or jurisdictions with similar tobacco control measures and smoking rates.
Future research would benefit from recruiting retailers across different geographical areas and business types, including large cities and supermarkets. With supermarkets increasingly responsible for most tobacco retail sales in Australia,27 it is critical to understand what would deter and/or support them to stop selling, as a licence fee of $A1132 is likely to be of little consequence. Regulatory interventions that drive down consumer demand, such as setting minimum tobacco floor prices and reducing the addictiveness of the products, could be considered.
Conclusion
By substantially increasing tobacco licence fees, jurisdictions with strong tobacco control measures and relatively low smoking prevalence can potentially phase out commercial tobacco sales in small retail environments. This approach could reduce tobacco retail density and contribute to greater denormalisation of tobacco sales, which may in turn reduce tobacco uptake and use. While this approach will not eliminate all tobacco retail channels, it could reduce its availability. This reduction would also diminish one of the last remaining channels for the tobacco industry’s marketing and promotion efforts while further advancing the goal of ending general retail supply of tobacco products.32
Data availability statement
All data relevant to the study are included in the article or uploaded as supplementary information.
Ethics statements
Patient consent for publication
Ethics approval
This study involves human participants and was approved by The University of Sydney Human Research Ethics Committee (Reference No 2018/966). Participants gave informed consent to participate in the study before taking part.
Acknowledgments
We thank the small retailers who generously dedicated their time to participate in this study. We also thank the Department of Health Tasmania for providing data from the Smoking Product Sellers Licence database.
References
Supplementary materials
Supplementary Data
This web only file has been produced by the BMJ Publishing Group from an electronic file supplied by the author(s) and has not been edited for content.
Footnotes
X @DrBFreeman
Contributors ALS, BF and SM designed the study. ALS conducted interviews, led the analysis and interpretation of data and wrote the first draft. BF and SM contributed to the interpretation of results. All authors reviewed and contributed to the final manuscript. ALS is the guarantor.
Funding The authors have not declared a specific grant for this research from any funding agency in the public, commercial or not-for-profit sectors.
Competing interests None declared.
Provenance and peer review Not commissioned; externally peer reviewed.
Supplemental material This content has been supplied by the author(s). It has not been vetted by BMJ Publishing Group Limited (BMJ) and may not have been peer-reviewed. Any opinions or recommendations discussed are solely those of the author(s) and are not endorsed by BMJ. BMJ disclaims all liability and responsibility arising from any reliance placed on the content. Where the content includes any translated material, BMJ does not warrant the accuracy and reliability of the translations (including but not limited to local regulations, clinical guidelines, terminology, drug names and drug dosages), and is not responsible for any error and/or omissions arising from translation and adaptation or otherwise.