and Channel Conflict
|..||This unit is
"Companies that have existing sales outlets and distribution networks often worry that their web sites will take away sales from those outlets"
page 90 Schneider, 3rd Edition
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
- see http://www.larkhill.com/retailers.htm
article in BusinessWeek, July 5, 1999
"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 email@example.com
K. at in MGD415 at UTM in March 2011 emailed some interesting examples
of cannibalization in European clothing.
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.
comments about Cannibalization included his summary of a story about Dolce
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.
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.
original Wall Street URL was
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."
|Example 2. NBA
at the Olympics
"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."
|WTGR notes "In
my local grocery store i noticed a tall display featuring Heinz Ketchup
right beside the Loblaws "President's
Choice" ketchup and the sign above the
display showed the price difference, and begged customers to save money
and buy the cheaper "President's Choice"
"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."
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