We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Marketing

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

In Business, what is Cannibalization?

By Sara Melone
Updated: May 16, 2024
Views: 20,396
Share

Cannibalization in business refers to the practice of competing with an already established business model by creating a sales volume reduction or a reduction in the total market share. The cannibalizing that's going on is usually focused on attracting clients or customers. One practice cannibalizes the market that another practice is also focused on. Also known as market cannibalization, it can occur within a single business which provides two or more competing products or services, or it can occur among multiple competing industries. It may also take place between numerous chains of the same business or between companion product lines which have similar offerings.

Often, the phenomena of cannibalization occurs when a company's marketing strategy is based solely or partially on the assumption that a given marketplace is able to support multiple stores or multiple products. A good example would be if a retail store operation has a particular store that is doing extremely well in a specific area. The company might choose to open a second location within the same area assuming that the proven sales at the first store would support an additional store even if both locations do slightly less business than the existing single location. Just as a cannibal is known for eating the flesh of another, business cannibalization suggests that the new store might feed off the finite success of the first location. If cannibalization were to take effect, the first store would begin to see a market share reduction as the second store began to take away some of the sales revenue and thereby reduce the primary location's total sales figures. This, of course, assumes a finite customer base that wouldn't increase by virtue of the increased locations.

Although business cannibalization may seem inherently negative, it can be a positive thing. It sometimes involves a carefully planned strategy, and it also forces a company to think outside the box in order to evolve with the changing needs of both the marketplace and the consumer. In the world of e-commerce for example, some companies intentionally cannibalize their retail sales through lower prices on their online product offerings. Even though their in-store sales might decline, the company may see overall positive gains. While the retailer saves money on the operational costs of of a bricks and mortar location, the consumer automatically benefits from the retailer's cannibalization through a lower cost of goods.

Share
SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Discussion Comments
By anon216800 — On Sep 22, 2011

@ anon76554: Can you rephrase the post or say it in a different and clearer way?

By anon76554 — On Apr 10, 2010

suppose your elasticity of demand for your packing lot spaces is -0.5,and price is $20 per day. If your MC is zero, and your capacity at 9 a.m. is 96 percent full over the last month, are you optimizing?

Share
https://www.smartcapitalmind.com/in-business-what-is-cannibalization.htm
Copy this link
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.