How Amazon Forced CVS to Stop Selling Cigarettes
By Marcus Wohlsen
Wired.com
02.06.14 1:48 PM
http://www.wired.com/business/2014/02/amazons-new-app-cvs-nixing-cigarettes/
Pharmacy giant CVS is booting cigarettes and other tobacco products from
its stores. The change has earned CVS showers of praise, including from
the White House, but there’s one player not getting the credit it
should: Amazon.
As the pharmacy chain was getting all those plaudits yesterday, Amazon
said that its iOS app would soon let you place an order simply by
pointing your iPhone camera at a product — no barcode scan needed. The
two events seem may seem completely unconnected, but they’re tied
together like — to borrow a phrase from Amazon’s playbook — a gazelle
and a cheetah.
Though the CVS no-tobacco decision seems like good corporate
citizenship, it’s also about staying one step ahead of Amazon’s
relentless campaign to eviscerate brick-and-mortar businesses.
The new Flow feature in Amazon’s mobile app epitomizes just how
aggressively the retail giant is pressing its technological advantage to
win the market for everyday merchandise. Need more ketchup or dish soap?
Just aim your camera at the empty bottle. Suddenly your whole house is
an Amazon showroom.
In a way, Flow is gimmicky: Most of this stuff has barcodes you could
already scan at home, too. But every step Amazon takes to make buying
smoother equals one more reason to skip a trip to the store. Says
WIRED’s Roberto Baldwin: “It’s all part of the company’s goal to take
you from ‘I need that’ to ‘I bought that’ in less than 30 seconds.”
That’s especially threatening to a store like CVS, which sells consumer
packaged goods — commodity products that everyone else stocks, too. CVS
can’t compete with Amazon on selection or price. It can’t even compete
on consumer desire to see and feel before they buy: Do you really need
to hold that tube of toothpaste? The only advantage left is getting
something right when you want it — what retailers call the “top-off.”
The closer Amazon gets to on-demand — imagine combing Flow with same-day
delivery or vending machines — the more CVS loses its last justification
for maintaining physical stores.
A Place for Care, Not Just Stuff
The good news for CVS — and its shareholders — is that management has
recognized this threat and is moving brilliantly to meet it. The
company’s effort to rebrand itself as a one-stop health care
destination, not just a corner store, has long been under way. The
decision to stop selling cigarettes takes that soft launch and turns it
into a loud, clear statement of a new identity: You don’t come here to
buy paper towels, you come here to be well. (And you might pick up some
paper towels while you’re here.)
In its press release announcing the new no-tobacco policy, CVS
executives said all the right things about the ills of tobacco usage and
the importance of promoting better health. But the subtext was all about
how the company wants its customers to view its stores as a new kind of
destination — a place to go to get care, not just stuff.
“Every day, all across the country, customers and patients place their
trust in our 26,000 pharmacists and nurse practitioners to serve their
health care needs,” said Helena B. Foulkes, president of the pharmacy
division of CVS in the release. “Removing tobacco products from our
stores is an important step in helping Americans to quit smoking and get
healthy.”
The company also said it would lose $2 billion in revenue annually due
to the decision not to stock tobacco. That’s already a small percentage
of its business, even more so when you add revenue from its CVS Caremark
prescription drug coverage business. But $2 billion is also a small
price to pay to stay ahead of Amazon. Just ask Borders or Circuit City,
which went from thousands of stores to zero stores in a few short years
after Amazon started chasing their markets. In the world of marketing,
you can’t do much better than the avalanche of positive press CVS is
getting for its anti-tobacco move. If you’re going to take on Amazon,
there’s probably no better place to start than an endorsement by the
President of the United States.
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George Antunes Voice (713) 743-3923
Associate Professor Fax (713) 743-3927
Political Science Mail: antunes at uh dot edu
University of Houston
Houston, TX 77204-3011
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