Facing more than $1 billion in impairments and a further $145 million in restructuring costs, Wesfarmers’ Target is expected to post an end-of-year loss of $50 million.
It is no wonder that Wesfarmers Chief Executive Richard Goyder last week said, “I would not rate this as one of my better days in the group.” However, this will become a great case study in illustrating the risk of a cannibalization strategy.
Does Cannibalization Work?
Cannibalization happens when a company offers a brand, product, or service that competes with another within that same company. When this level of internal competition is directly head-to-head, only the strongest will survive. Shoppers and retail commentators have been seeing this play out across the Australian retail landscape with Kmart and Target. Yet, a limited degree of overlap can be a successful strategy if well implemented and where markets are clearly defined.
