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How “cannibalization” impact should be analyzed?

What is “Cannibalization”?

When a new store location candidate site is discovered in the neighborhood of an existing store, “cannibalization” issue is almost always discussed within the company.

“Cannibalization” literally means eating the sales and the customers of own company. However, this “cannibalization” discussion is often troublesome as the reality of “cannibalization” is not yet clear. Therefore, it is often observed that Store Development team (who want to open the new store) and Store Operation team (who need to take responsibility of sales and profit of the new store after opening) discuss on different planes that never get to anywhere, ending up arguing emotionally and illogically

When a brand opens 2 stores closely together, it might be difficult for the company to double the sales. Given that, how much negative impact should an existing store expect in terms of the individual store sales? We would like to introduce you below the way to think about such an issue.

What determines the magnitude of “cannibalization”?

When we think about “cannibalization” of Store A and Store B, the following should be checked.

  • The size of the market where Store A and Store B are located (day / night time population, total commercial sales turnover, etc.)
  • Size of Store A and Store B
  • Locations of Store A and Store B
  • Sizes of landlords’ commercial facilities of Store A and B
  • Locations of landlord’s commercial facilities of Store A and B

(continue to the next article)