The great channel battle: overcoming cannibalization

Frederic CLEMENT
June 11, 2024
min read
Retail channels cannibalization

When brands are constantly looking for exciting opportunities to drive incremental growth across channels, they are actually fighting the threat of cannibalization.

The multi-channel commerce landscape has undergone a remarkable transformation in recent years, evolving from a straightforward distribution approach into a complex ecosystem where brands sell their products through various channels, including their own D2C websites, Amazon, other online retailers and marketplaces (and even social networks!). However, beneath the surface of this vast market lies the challenge of cannibalization, where sales channels and marketing efforts may compete against each other.

In this article, we will explore the different areas where cannibalization can occur and discuss strategies to achieve true incrementality, ensuring that new channels and campaigns generate genuine growth rather than simply shifting sales from one place to another.

While Amazon and other major marketplaces have established a strong presence in the online retail space, an increasing number of brands are leveraging their own D2C websites, TikTok Shops..and partnering with a wide range of online retailers. This proliferation provides brands with greater opportunities to reach different consumer segments, but successfully navigating this landscape requires a deep understanding of channel dynamics and a focus on operational efficiency. By identifying key moments in the customer journey and ensuring different channels work together harmoniously, businesses can develop effective strategies that resonate with their target audience.

Let’s consider a skincare brand as an example. They might sell their products on various online retailers, their own D2C site and Amazon. Consumers may simply choose the most convenient or cost-effective option rather than making additional purchases.

Each sales channel and marketplace offers a variety of product listings and promotional formats. From exclusive bundles on a D2C site to competitive pricing on Amazon and special promotions on other online retailers, this diversity of offerings can attract a wide audience. However, it also adds complexity to planning and managing inventory, promotions, and pricing strategies.

While these differentiated offerings may help reduce direct competition, they require careful coordination to ensure they complement each other rather than compete.

Within online advertising channels, there’s a potential for cannibalization between various ad formats, promotional offers, and marketing tactics. A few critical areas where this overlap may occur include:

  1. Paid search ads vs. organic search rankings: investing heavily in paid search ads (ie Amazon PPC, or Google Shopping) can potentially overshadow organic search results, leading to increased costs without a corresponding increase in overall sales. Brands need to find the right balance between their paid and organic strategies to maximize visibility without unnecessary spending..
  2. Sponsored brands vs. sponsored products: sponsored brand ads, which often feature multiple products, can divert attention from individual sponsored products. Strategically placing these ads to enhance overall brand presence without overshadowing specific products is essential.
  3. Display ads vs. sponsored products: while display ads are effective for building brand awareness, they can compete with sponsored products targeted at conversion-ready shoppers. Balancing awareness campaigns with direct conversion efforts helps manage this potential cannibalization.

Managing budgets across multiple channels is another area where cannibalization can occur and where an automation platform can help. Different teams within a brand might control budgets for various channels, potentially leading to conflicts and inefficiencies. For example, digital media teams might focus on off-site advertising while shopper marketing teams handle on-site promotions, each with different objectives and measurement models.

This fragmentation can result in internal competition for the same ad inventory, driving up costs and complicating cross-channel optimization.

More about fragmentation in Retail Media

Brands therefore face several challenges in this complex landscape:

  1. Operational complexity: managing numerous campaigns, platforms, and relationships strains even the resources of large brands. The proliferation of channels and formats makes retail media buying more fragmented compared to consolidated platforms like Google and Meta.
  2. Budget allocation: efficiently allocating budget across a vast array of networks and product choices is challenging. Brands must strike a balance between spending on major players and exploring other opportunities, avoiding the risk of spreading budgets too thin or over-concentrating on a single channel.
  3. Data and measurement differences: consistent data and measurement are crucial for attributing sales to media and optimizing spend. However, varying attribution models, reporting metrics, and data accessibility across retail media ecosystems create friction and hinder optimization efforts.

As the commerce landscape continues to expand, the complexity of managing multiple channels and avoiding cannibalization will only increase. While some consolidation and convergence within the retail media space may occur, brands should prioritize fundamental strategies to navigate the current landscape effectively. By emphasizing strategic alignment, operational efficiency, and data integration, brands can successfully mitigate cannibalization risks and move closer to true incrementality.

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