Continuing our Guidance Series, this edition of Retail Insights & Pro Tips addresses a blind spot in expansion and network strategy: what internal cannibalisation analysis does not reveal.
This is especially relevant in retail networks, where density, convenience and time friction determine demand allocation.
Retailers carefully model how their own stores compete against each other. But almost none quantify how competitors compete with them. The question is not store count. The question is demand ownership.
External Cannibalisation = the portion of store demand structurally exposed to competitor capture.
It reframes competition from narrative into measurable value at risk at store level.
- Five things most retailers overlook: Internal cannibalisation is visible. External cannibalisation risk is silent and rarely estimated.
- Competitive risk is spatial. Stores do not carry equal exposure to substitution.
- Comparison shopping reallocates economic value. One retailer loses what another captures.
- Some stores operate in near monopoly locations. Others compete in contested zones with leakage risk.
- Portfolio averages hide store level vulnerability and distort capital allocation.
Why this matters
In retail, customers optimise for time, proximity and friction. A 30 second convenience advantage can redirect demand at scale. Stores capturing traffic at its source dominate those reliant on secondary flow.
Two identical formats can produce radically different economic outcomes purely because of location strength. Performance differences that appear operational are often structural.
Ignoring external exposure leads to misread performance, misallocated capital and false narratives about store and management quality.
Rule of thumb
Two stores are better than one only when they increase total demand ownership faster than they increase internal transfer. Dense locations may require defensive investment, speed advantage and experience differentiation.
Why this is practical
• Uses the same spatial tools retailers already apply to internal cannibalisation. • Extends existing trade area modelling to competitor exposure. • Comparable across markets and formats. • Addresses a blind spot most retailers rarely quantify. • Immediately actionable for expansion prioritisation.
Get in touch
If this analysis raises questions or highlights something worth exploring, we would be pleased to discuss it with you. Whether to sense check results or take the analysis further, we offer structured, practical conversations grounded in data and decision discipline.