Case Study
World-Class Tire Manufacturer

Challenge

Our client, a tire manufacturer, currently distributes its products via independent stores and large chains (ex.: Costco, Wal-Mart, Canadian Tire). It obtained the opportunity to distribute its products through another retailer network, which ran the risk of competing directly with its current retailers. The challenge consisted in analyzing the risk of cannibalization between the two networks and identifying future retailers that showed a high distribution potential (large number of clients) without much risk of cannibalization with the existing retail network.


Solution

• Obtain cartographic visualization of retailers belonging to both distribution networks subjected to analysis.
• Associate a market area with each retailer by taking market realities into account (consumption area, geographical barrier, population concentration, regions, etc.).
• Extract socio-demographic data (population, age, average income, etc.) for each market area identified.
• Determine each area’s market potential for each retailer belonging to both networks.
• Estimate retailers’ market shares.
• Identify overlaps between a future retailer’s market areas and current stores’. Evaluate these areas’ potentials and the cannibalization percentage.
• Identify the cannibalization risk for each future retailer with existing ones in the network.
• Make recommendations concerning retailers that can complement the network and those that present an excessive risk because of proximity to an existing retailer.


Results

Before this study was conducted, our client wondered whether it should distribute its products across the entire future retailer network or only in select stores showing a high distribution rate and low cannibalization risks. This study allowed our client to make strategic choices regarding manufacturer distribution network orientation, notably to conduct insightful, clear-cut negotiations with its potential partner by compromising in a first phase concerning high-potential stores and selecting among the second group those stores that showed the lowest cannibalization rates.