Thanks to Mediapost , you will be able to learn what cannibalization is in retail and how to avoid it , in this way your business can be safe from this phenomenon. Although, it is worth mentioning that not everything is negative, throughout the article we will see what the positive side of cannibalization is.
What is cannibalization in the context of a physical business?
Cannibalization in the context of a physical band database business refers to the negative effect on your company's sales that can arise when one or more establishments in the same chain are located within the same geographic area, competing with each other.
The coexistence of several outlets under the same brand can result in older stores suffering a decrease in customers, while new stores may not reach the anticipated profitability levels, and costs for rent, supplies, logistics, etc. are doubled by having to maintain two locations open.
In short, you need to properly analyse the context and geographical space in which you want to establish your new business and make sure that there are no potential competitors nearby that could ruin your new opening.
Cannibalization Analysis: Beyond Expansion
Cannibalization analysis is not only useful for expansion strategies; it can also offer solutions to existing situations and help identify cases of cannibalization that may have gone unnoticed.
Pros and cons of cannibalization for your business
One of the main disadvantages of cannibalization is the loss of sales due to the proximity of competitors or due to not having strategically chosen a location where the product is easily sold. However, there are cases in which cannibalization can be beneficial, such as when the objective is to strengthen brand visibility, expand the diffusion of a new product or even dominate the market.
It is also important to consider the impact of proximity on cannibalization, as its effect varies by distance and differs significantly from one sector to another. In areas with a high concentration of businesses, such as shopping malls, it is logical that the cannibalization index based on proximity is higher.
In addition to proximity, other factors influence the analysis of cannibalization, such as the ease of access to commercial locations, the nature of the product or service offered, and the number of competitors present in the selected area.