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How amazon forced cvs to stop selling cigarettes

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How Amazon Forced CVS to Stop Selling Cigarettes

By Marcus Wohlsen
02.06.14
1 48 PM
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Photo Kristoffer Tripplaar/Sipa USA/AP

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 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.

Amazon Flow. Photo Ariel Zambelich/WIRED

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.

Marcus Wohlsen is a staff writer for Wired Business and the author of Biopunk DIY Scientists Hack the Software of Life