Example of how you avoid cannibalization

Larkhill.com gets many more hits on its website compared to the small stores carrying the product - however Larkhill does not sell its clothing online

• by not selling online you avoid the hassles of dealing direct with the public
• you do not have to worry about payment systems
• your retail customers do not see you as competition

"There's a reason that retailers are so hesitant to push their online channels. They're worried about cannibalizing their existing store traffic. And it's no small concern. To the consumer, a dollar spent at a Web store is the same as a dollar spent at the traditional store. But the retail community isn't ready to see it that way. Many retailers -- and their employees -- see even their own Web sites as new competition. "Retailer CEOs have to cope with the fact that their downtown store may take a hit when the online store opens,... Many companies, even as they forge ahead online, are clearly treading lightly to avoid this problem. Home Depot's relaunch of its Web site is designed to "drive traffic into our stores," execs say."

written by ellen_neuborne@ebiz.businessweek.com
 

Akshay began by saying "I was very interested with the concept of Cannibalization and chose to do some research in my own time in regards to the topic. 

Akshay explains I came across some examples such as when Coke introduced Diet Coke, which at first lowered sales of the originial coke, however, it opened up an entirely new diet soft drinks market.

WTGR replies
I think that is a good point Akshay, and also illustrates how something that could be construed as a negative, turned out later to be a positive for the originator.

Akshay wrote I then came across this great article in the Wall Street Journal about how the Italian fashion brand Dolce and Gabbana had decided to fold their D&G line because they wanted to limit cannibalization between the two lines. 

an example

 
 

Dolce and Gabbana invested nearly $100 million into D&G and initially developed it to provide clothing which was more casual, youthful and less expensive than Dolce and Gabbana. D&G in fact ended up being a vital part of the overall Dolce and Gabbana business, as shown by the 2009 figures. In 2009, D&G accounted for 45% of Dolce and Gabbana's $2.22 billion wholesale revenue. Usually when fashion lines introduce a new, lower priced brand, it is essentially to attract a wider group of consumers. However, it is important to distinguish that second brand from the original and therefore it acts as its own line. 

However, Dolce and Gabbana named their second brand D&G and since the names were fairly similar, many would confuse both brands as the same. The initial investment in D&G by Dolce and Gabbana also resulted in clothing to be a bit more expensive in order to cover costs, so therefore the price points between D&G and Dolce and Gabbana branded clothing were fairly the same. Those two key mistakes (similar name and price points) were poor business decisions by Dolce and Gabbana and therefore they have now chosen to fold the D&G brand and begin making clothing under the Dolce and Gabbana brand line to serve the needs of the consumers of D&G.

the original Wall Street URL was
http://online.wsj.com/article/SB10001424052748704410004576182293196928056.html

WTGR replies
Good story Akshay. Donna Karan was originally a designer of high quality fashion in the 1990's - her products were stylish but expensive. It is alleged by some fashion writers that when she saw people making knock-offs of her designs and other designers, she decided to knock-off her own stuff and created DKNY - a weird example of successful cannabilization.

an example
 
 
 
 
 
 
 
 

an example

Example 1. Wal-Mart

"I work at Wal-Mart and everyone is talking about profit sharing this year. Wal-Mart has a profit sharing program for their  employees and the amount of profit sharing the employees receives depends on  how well the store does at the end of the year. I work at the Wal-Mart  located in South Common and many people are saying that our profit sharing won't be much this year because a new Wal-Mart SuperCenter is recently built in Heartland. The sales in my Wal-Mart have declined because many  customer from the Heartland area that used to shop at my Wal-Mart are  taking their business to the Heartland instead - it much closer.  So, the cannibalization in this example is probably the Wal-Mart  SuperCenter stealing customer from my local Wal-mart."

"I remember reading an article entitle " An online failure  for NBC at the Olympic". This is a time in which NBC is supposed to make  big profit, however that is not the case. NBC ratings for the Olympics were excellent, but the internet revenue has been small with just 5.75  million. This is because many users prefer to experience the Olympics on  television rather then watch web video. The television medium has  stolen the traffic from the NBC internet website. The cannibalization  in this example is probably the television rating for the Olympics  compared to the web video."

"If I was the Heinz rep to that store I'd definitely consider this cannibalization and worry that such a marketing tactic would cause a decline in sales of the Heinz brand - even if Heinz is also producing the "President's Choice" ketchup brand for Loblaws to sell."