Vape profits eclipse tobacco in convenience stores as footfall and margins decline: study

Small convenience stores are selling less tobacco, and the tobacco products they do sell are much less profitable to them than vaping products, according to new analysis from the University of Edinburgh.

Profit margins from vapes were far higher than those of tobacco products, with an average of 37.1 per cent for vape products compared to 8.5 per cent for tobacco products in September 2022. For comparison, profit margins were, on average, 21.0 per cent across all product types.

Footfall from tobacco sales has decreased by nearly 40 per cent in small retail outlets compared to less than a decade ago. In 2015, when Action on Smoking and Health (ASH) conducted a similar analysis, 21 per cent of transactions included tobacco, in 2022 University of Edinburgh researchers found 12.8 per cent included tobacco.

Meanwhile, the average weekly number of transactions per store which included vapes rose sharply from 10 in 2019 to 93 in 2022 – a nine-fold increase in three years. Although there were considerably fewer transactions including vapes than tobacco, gross profits per store from vape sales were equivalent to 73.4 per cent of the value of tobacco profits, as a consequence of vapes’ high profit margins.

The analysis highlights the potential benefits to small retailers of existing smokers switching to vaping and shows that tobacco sales are becoming increasingly unimportant for business.

“Our analysis shows that convenience stores now make only 10 per cent of their profits from tobacco and if their customers were buying products other than tobacco stores would benefit from this. Sometimes business and public health interests align – we would all be better off if fewer people bought tobacco,” Professor Jamie Pearce, professor of health geography at the University of Edinburgh, said.

ASH said the profitability of vapes underscores the need for a retail licensing scheme to crack down on irresponsible sellers and protect legitimate retailers.

“Tobacco is yesterday’s product. The reduction in sales benefits both the nation’s health and convenience stores who make dwindling profits from selling tobacco. At the same time vape sales have surged, and this is much more profitable for retailers,” Hazel Cheeseman, chief executive of ASH, said.

“Responsible retailers who are already profiting from vapes should welcome regulations to improve the market, reduce appeal to children and drive out rogue traders.”

While vapes are a useful quitting aid for smokers and far less harmful than tobacco, they are not risk-free and there are concerns about vapes being sold to children. The new Tobacco and Vapes Bill will bring in strict new measures, including a retail licensing scheme and tough marketing restrictions.

In a separate study last year, ASH surveyed small convenience store owners to understand their views further regulations. The survey found that:

• 51 per cent support raising the age of sale one year every year (26 per cent oppose).
• 71 per cent support mandatory age verification (20 per cent oppose).
• 65 per cent support creating a smokefree generation (17 per cent oppose).
• 79 per cent support fixed penalty notices for breaches of age of sale regulations (13 per cent oppose).

The University of Edinburgh analysed data from 1,503 convenience stores using data from electronic point of sale supplied by The Retail Data Partnership. The analysis focuses upon comparison of data from the weeks 7-13 September 2019 and 7-13 September 2022.