Cannibalization
Cannibalization
Cannibalization analysis estimates how much a new location's trade area overlaps with your existing stores. When trade areas overlap, some customers who would have visited your current locations may shift to the new site—transferring sales rather than generating purely incremental revenue.
Understanding cannibalization helps you evaluate the true net contribution of a new site and protect your existing portfolio.
How Cannibalization Is Calculated
Cannibalization measures trade area overlap between the searched site and your existing stores.
The Methodology
Define trade areas: Both the proposed site and each existing store have defined trade areas based on your selected configuration (drive time, radius, or foot traffic zone).
Identify overlap: The platform calculates where these trade areas intersect geographically.
Estimate customer impact: Based on the overlap area and the customer distribution within it, the model estimates what percentage of the existing store's customers fall within the new site's trade area.
Express as percentage: The result is shown as an overlap percentage—the portion of the existing store's trade area customers who could potentially shift to the new location.
What the Percentage Means
A 25% cannibalization estimate means approximately 25% of the existing store's trade area overlaps with the proposed site. Customers in that overlap zone may choose the new, closer location instead of continuing to visit the existing store.
This doesn't mean 25% of sales will transfer—actual customer behavior depends on many factors—but it quantifies the geographic exposure.
Reading the Cannibalization Card
When you search a site near existing stores, the Cannibalization section appears in the results panel.
What's Displayed
Each potentially impacted store shows:
Address
The street address of the existing store
City, State
Location identifier
Percentage
Estimated trade area overlap
Risk Level
Categorized impact (Low, Medium, High)
Risk Levels
Risk levels provide a quick assessment framework:
Low
Below 15%
Minimal overlap; limited transfer risk
Medium
15–25%
Moderate overlap; some customers may shift
High
Above 25%
Significant overlap; material impact likely
These thresholds are guidelines. Your organization may have different tolerances based on store density strategy and concept characteristics.
Multiple Store Impact
If the proposed site overlaps with several existing stores, each is listed separately. Total network impact may exceed any single store's percentage—a new site cannibalizing 15% from three nearby stores has broader portfolio implications than one cannibalizing 25% from a single store.
Cannibalization Map Layer
Enable the Cannibalization layer from the Layers panel to visualize trade area overlaps on the map.
How It Displays
When enabled, the map shows:
Existing store trade areas: Shaded regions around your current locations that fall within range of the searched site
Overlap zones: Areas where the proposed site's trade area intersects with existing store trade areas
Color intensity: Darker or more saturated colors may indicate higher overlap concentration
Reading the Visualization
The map helps you understand the geographic relationship between locations:
How close are the trade areas? Adjacent but non-overlapping trade areas pose no cannibalization risk
Where does overlap occur? Is it in a dense population center or a sparse edge of the trade area?
Which direction does overlap extend? A new site might cannibalize customers from the east while leaving western customers unaffected
Adjusting Trade Areas
Cannibalization calculations depend on your trade area settings. Try different configurations to understand sensitivity:
A 10-minute drive time might show no overlap
A 15-minute drive time might show moderate overlap
A 20-minute drive time might show significant overlap
This helps you understand at what customer travel threshold the stores begin competing for the same shoppers.
Cannibalization and Sales Projections
Sales projections in GrowthFactor are presented as uncannibalized—the revenue the new site would generate in isolation, without accounting for overlap with existing stores.
Why Uncannibalized?
Separating the projection from cannibalization allows you to:
Assess standalone potential: Understand what the site could achieve on its own merits
Evaluate cannibalization independently: Make a separate judgment about acceptable overlap
Calculate net contribution: Combine both analyses to estimate true incremental value
Calculating Net Revenue
To estimate net new revenue contribution:
Example:
Proposed site projects $2,000,000 in sales
Site cannibalizes 20% from Store A (which does $1,500,000)
Cannibalized sales = $1,500,000 × 20% = $300,000
Net contribution = $2,000,000 − $300,000 = $1,700,000
This simplified calculation assumes cannibalized customers fully transfer. In practice, some customers in overlap zones may continue visiting their original store, split visits between locations, or increase overall spending with your brand due to added convenience.
Portfolio Perspective
Consider cannibalization from a total portfolio view:
Single store impact: How much does each existing store lose?
Network impact: What's the total sales transfer across all affected stores?
Net growth: Does total brand revenue increase, decrease, or stay flat?
A new store might cannibalize existing locations but still grow total brand revenue if it also captures customers who weren't previously shopping with you.
When Cannibalization Is Acceptable
Cannibalization isn't inherently bad. Strategic reasons to accept overlap include:
Defensive Positioning
Opening in a market before competitors do—even with some self-cannibalization—may be preferable to ceding the location to a rival.
Market Saturation Strategy
Some brands intentionally cluster stores to dominate a market, accepting internal overlap to maximize brand presence and convenience.
Replacing Underperformers
A new, better-positioned store might cannibalize a struggling existing location that you plan to close or relocate.
Customer Convenience
Adding locations reduces customer travel time, potentially increasing visit frequency and loyalty—even if individual store sales decline.
Growing the Pie
In some cases, a new store in an overlap zone serves customers who weren't making the trip to the existing location, resulting in net new transactions for the brand.
When Cannibalization Is Problematic
High cannibalization raises concerns when:
No Net Growth
The new store merely redistributes existing sales without capturing new customers—you've added operating costs with no revenue gain.
Existing Store Viability
If cannibalization pushes an existing store below profitability thresholds, you may face a forced closure or underperforming asset.
Lease Obligations
Cannibalizing a store with a long remaining lease term creates financial exposure—you're paying rent on a location you've undermined.
Franchisee Conflicts
For franchise systems, encroaching on existing franchisee territories creates relationship and legal complications.
Interpreting Cannibalization Results
Low Cannibalization (Under 15%)
Typical interpretation: Minimal concern. The stores serve largely distinct customer bases.
Action: Proceed with standard evaluation; cannibalization is unlikely to materially affect the opportunity.
Moderate Cannibalization (15–25%)
Typical interpretation: Noticeable overlap exists. Some sales transfer is likely.
Action: Factor cannibalization into financial modeling. Assess whether net contribution remains attractive. Consider whether the overlap zone is strategically important to defend.
High Cannibalization (Above 25%)
Typical interpretation: Significant overlap. The new store will compete meaningfully with existing locations.
Action: Carefully evaluate strategic rationale. Model net revenue scenarios. Consider whether the existing store should be repositioned, closed, or consolidated. Assess competitive dynamics—would a competitor take this location if you don't?
Using Cannibalization in Decisions
Financial Modeling
Incorporate cannibalization into your pro forma:
Base case: Projected sales minus estimated cannibalization
Downside case: Higher cannibalization assumption (e.g., 1.5× the estimate)
Portfolio case: Model impact on total brand revenue, not just new store performance
Site Comparison
When choosing between multiple opportunities, cannibalization can be a tiebreaker:
Site A: $2M projection, 10% cannibalization → ~$1.85M net
Site B: $2.2M projection, 30% cannibalization → ~$1.75M net
Site A may be more attractive despite the lower gross projection.
Committee Discussions
Present cannibalization transparently:
"This site projects $2.4M in annual sales with 27.79% overlap with our Boston location at 350 Washington St. That store currently does $1.8M. Estimated transfer is approximately $500K, resulting in net new revenue of roughly $1.9M. We believe the location is strategically important to secure before [competitor] expands in this corridor."
Best Practices
Always check cannibalization for sites near existing stores. Even if a site looks strong on standalone metrics, high cannibalization can undermine the investment.
Model multiple scenarios. Cannibalization estimates have uncertainty. Test how the deal looks at 1.5× or 2× the estimated overlap.
Consider the customer perspective. Would customers in the overlap zone genuinely prefer the new location? Is it more convenient, better positioned, or higher quality? Customer preference affects how much theoretical overlap translates to actual transfer.
Look at the existing store's trajectory. A store already declining might see cannibalization as acceleration of an existing trend rather than new damage.
Factor in lease timing. If the existing store's lease expires soon, moderate cannibalization may be acceptable as part of a planned portfolio optimization.
Don't let cannibalization alone kill good sites. A strategically important location with manageable cannibalization is often worth pursuing. The goal is informed decision-making, not zero overlap.
For related analysis, see Sales Projections, Trade Area Analysis, and My Stores.
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