It’s an odd trend that’s been emerging in the newsagency channel. More and more, we’re seeing new owners take over established newsagencies and, against all logic, introduce tobacco products. This is puzzling, to say the least.
The profit margins on tobacco are slim. The pool of tobacco-buying customers in Australia is shrinking. And let’s not forget the association with crime, with tobacco outlets becoming targets for attacks. It’s a category that doesn’t sit well with other, more desirable products like high-end gifts, toys, and greeting cards. Plus, the retail fixtures needed for tobacco take up valuable space that could be used for higher-margin items.
I understand that newsagents with a long history of selling tobacco, who’ve built a solid business around it, may choose to continue. But I’m particularly intrigued by those who are new to the industry and are actively adding tobacco to their mix.
Back in the late 1990s, when supermarkets started ramping up their tobacco sales, many newsagents saw the writing on the wall and made the decision to quit. I was one of them. In 1997, we chose to focus on more meaningful products and free up valuable counter space.
Today, I estimate that less than 20% of newsagencies still sell tobacco. However, I’ve noticed a recent uptick in the number of outlets that have added this category. It’s a baffling trend, especially when you consider the negative aspects.
Just the other day, I drove past a newsagency that had recently changed hands. The new owner had removed stationery and gifts and replaced them with tobacco products. This, despite the fact that there are four other tobacco outlets within a short distance. It just doesn’t make sense.
Ultimately, retailers are free to run their businesses as they see fit. But I can’t help but wonder if there’s a strategic reason behind this trend that I’m missing. Perhaps there’s a short-term gain that outweighs the long-term costs.
I believe there are far more positive and profitable product categories that can help newsagents differentiate themselves and attract new customers. Categories that complement lucrative items like greeting cards.
So, why are newsagents adding tobacco to their shops? It’s a question that continues to puzzle me.