Should Drug Stores Be in the Tobacco Business?

It may seem counterintuitive that many US pharmacy chains, much of whose business involves the treatment of health problems, are also sellers of tobacco, whose detrimental health effects are well-documented. But tobacco products are traditional inventory at many US drug stores, and some are reticent to purge it from their shelves—perhaps for good reason, research suggests. Looking at evidence from markets where all or some pharmacies have stopped selling tobacco, Chicago Booth’s Pradeep K. Chintagunta and Booth PhD candidate Ali Goli find that the move not only eliminates tobacco revenue, it’s also associated with declines in sales for other products as well. What’s more, there’s little evidence such retail decisions change the overall behavior of smokers. So why would a store or chain of stores stop selling tobacco if it didn’t have to? Ceasing the sale of tobacco leads more nonsmoking households to frequent a store—and may provide a reputational boost that could pay off down the road.