Retail or market cannibalisation refers to the loss of value as a result of the company’s introduction of a new product, channel or brand with the same focus as its predecessor.
It’s a critical topic for most established businesses. I’m sure many readers have had projects terminated because the leadership team feared of cannibalisation — the idea that a lower-priced product might eat away at the market of a higher-priced one. Margin management is crucial for a sustainable business but in some cases, escaping cannibalism is a matter of time.
If You Don’t Cannibalize Yourself, Someone Else Will.
Steve Jobs
In the last decade, Newspapers have tried to defend their printing businesses but they have clearly been a victim of disruption from digital media. Newspapers first lost their high-value sections such as job boards and real estates to start ups such as Seek and REA (lucky for NewsCorp that they owned the REA), and news readership followed later. Newspapers had the same technology and resources but their fear to let go short-term profits demolished their long-term earnings.
In the retail sector, the Kmart and Target story is often used as a fine example of cannibalism. In 2013, Wesfarmers that owns Kmart as well as Target, revised their fighting brand strategy to compete against their rival Woolworth’s low-priced brand BigW. The strategy involved reviewing Kmart’s catalogue and store locations. Execution of Kmart’s strategy was not only successful against BigW, it also killed its sister-brand Target.
Kmart started to look very similar to Target, the only difference was its pricing. With similar quality offerings at low prices, Target saw its customers switching. For Wesfarmers, it could be argued if they didn’t revamp Kmart, someone else would have snatched that position for them. Unlike newspapers Wesfarmers avoided the ‘Kodak’ moment.
After all, if we don’t serve our customers well, someone else will.
