The number that flatters
A new line sells well in its first quarter and is judged a success. Whether the category grew is a separate question, and frequently nobody asks it.
If the new product took most of its sales from products you already sold, the business gained little and possibly lost - a new line carries development, listing, stock and space costs that the incumbent did not.
Measure the category, not the product
- Define the affected set - products a customer might buy instead. Usually broader than the same subcategory.
- Establish what the set was doing before, allowing for trend and seasonality.
- Find a comparison - stores or regions without the launch, or a comparable category that did not change.
- Compare the change in the affected set against the comparison.
- The difference is the incremental effect; the new product's own sales minus that is cannibalisation.
The comparison group is what makes this credible. Without one, a category that grew because of seasonality gets credited to the launch.
Cannibalisation is not automatically bad
| Situation | Reading |
|---|---|
| New line takes sales from a lower-margin product | Likely positive, check total margin |
| New line defends against a competitor launch | Acceptable - the alternative was losing the sale |
| New line takes from an identical own product | Questionable - why carry both |
| Category grows and the new line holds | Genuine incremental gain |
| Category flat, new line selling well | Pure substitution - reconsider |
The defensive case is real and frequently ignored. If customers were going to switch to a competitor's product, a new line that keeps them is worth having even with complete cannibalisation.
Space and attention are part of the cost
In physical retail, a new product displaces something. The full cost includes what the displaced product would have contributed, not only the new line's own costs.
Online the constraint is attention rather than space, but it still exists - a larger range makes everything harder to find, and there is a real cost to a catalogue growing indefinitely because nothing is ever delisted.
Plan the measurement before the launch
This analysis is much harder retrospectively. Deciding in advance what the affected set is, what the comparison group will be, and over what window makes the answer credible.
Deciding afterwards invites choosing whichever comparison supports the conclusion people already reached, usually without anyone intending to. Writing it down first is what prevents that.
A launch that sells well while the category stays flat has moved sales, not created them.