I think each Southern state should have a referendum concerning its use on public buildings. A wide debate on it should be had, before people are asked to make up their minds. I fear that simply proscribing something, in response to a terrible crime, would lead many people who had felt that flag was part of their identity to consider themselves to be criminalised to some extent.
I really don't think individuals should be banned from flying it themselves. That would empower the flag too much, as a symbol of defiance, among the wrong kind of people.
As for retailers withdrawing products that feature it: that's up to them. Those who are offended by the decision can buy their groceries elsewhere.