As seen in the example above, cannibalization can cost a company a significant amount of revenue. It often happens when the company fails to perform due diligence before launching their new product.
In some instances, the new product does not only hurt a company’s sales volume and revenue. The worst-case scenario is that the original product gets phased out of the market entirely.
However, a business can intentionally cannibalize its existing product with a new one. However, why would a company introduce a new product line knowing very well that it’s going to jeopardize the existing one? As a strategy for growing and expanding its operations.
Assume that ABC, the watch-making company, has been producing luxury watches for a while. However, for some reason, the watches don’t appeal to the intended target audience. Instead of producing a completely new product, the company decides to tweak its existing lux watch. The improvements are meant to attract the same consumers in the market.
In this case, ABC deliberately launches a new line of watches because it aims to retain its current customers, as well as attract new ones
There are certain situations where market cannibalization cannot be avoided. For example, we now see tons of department stores that now operate as online businesses, as well. The store owners already understand the risk that its online sales can jeopardize those of its brick-and-mortar stores.
A good example of a company that uses corporate cannibalization to its advantage is Apple Inc. When the tech giant invents a new iPhone, it doesn’t shy away from releasing it into the market. In fact, it ensures that their newer version is available in all their chain stores.
Obviously, it causes the sales of their older iPhones to drop significantly. However, Apple makes up for this loss by capturing its competitors’ current customers, hence increasing its client base.
In addition to Apple, Amazon is another company that has dealt with cannibalization very smartly. It runs an online retail company where consumers can purchase different goods. However, at the same time, it also runs a chain of stores known as Amazon Go.
Do sales of Amazon’s physical stores cannibalize their online operations? No. That’s because Amazon Go only trades in products that cannot be sold on their site, specifically, freshly-prepared meals.