In retail, more choices don’t always mean more sales.

One of the biggest pitfalls in demand forecasting is product cannibalization—when the success of a new item simply eats into the sales of existing products in the same category. You launch what seems like a winning product, but instead of growing total sales, it just reshuffles them.

As retailers lean heavily on frequent product introductions to stay competitive, this challenge becomes even more critical—and more costly if overlooked.

Here are three practical ways to spot and minimize cannibalization distortions in your forecasts:

1. Balance Top-Down Forecasting with Bottom-Up Insights
While aggregated (top-down) forecasts offer stability, they often mask store-level realities like cannibalization. For each category, pinpoint stores where expanding the assortment won’t drive incremental sales. These are your high-risk zones where more products could actually mean fewer total sales.

2. Measure “Effective Assortment” to Identify Saturation Points
Not every store benefits from a broader assortment. Calculate the effective assortment—the threshold where adding more SKUs stops boosting sales. Ranking stores by this metric helps highlight locations that are likely oversaturated and vulnerable to cannibalization.

3. Dive Deeper into Low Effective Assortment Stores
Stores showing low effective assortment deserve extra attention.

• Check if your bestsellers are fully stocked and performing—gaps here can distort demand signals.

• Benchmark the category’s performance against similar ones to spot anomalies.

• Layer in external factors like shopper demographics, foot traffic, or even weather trends to uncover hidden demand constraints.

Product innovation shouldn’t come at the cost of total sales. By refining forecasting methods to account for cannibalization, retailers can make smarter assortment decisions—maximizing both variety and profitability.

If you’re looking to move beyond static forecasts and gain dynamic, store-level insights, it might be time to rethink your approach.

About the Author

Onebeat co-founder and CEO, Yishai Ashlag, is an economist, author, and globally recognized authority in Theory of Constraints (TOC) methodology. A former partner and founding member of Goldratt Group and post-doctoral fellow at the Wharton School of Business, Ashlag brings academic acumen and decades of experience in management consulting to leading operational excellence and sustainable growth through innovation for Onebeat and retail at large. Ashlag holds a Ph.D. in Economics from Bar Ilan University and is the author of acclaimed fiction and non-fiction titles on the topic of managing uncertainty, TOC, and more.