15 Examples of a Threat Of Substitutes

John Spacey, November 07, 2018

A threat of substitutes is the potential that customers will replace your product or service with something completely different outside your market.

Food & Healthcare

In the long run, healthy food can be a substitute for healthcare. For example, if a nation began to consume less sugar demand for diabetes treatments may drop.

Toothpaste & Dentists

In theory, some leap forward in the effectiveness of toothpaste could cause reduced demand for dentists.

Radio & Television

An improvement in technology that causes a growing market to suddenly contract such as the impact of the television on radio stations in the 1950s whereby TV quickly became the dominant form of home entertainment.

Bicycles & Cars

A culture can shift towards living close to the things people need and travel with bicycles as opposed to cars.

Restaurants & Supermarkets

If people eat out more, supermarket sales go down.

Nightlife & Games

As games become more entertaining people may socialize in virtual worlds as opposed to going out at night.

Video Rentals & Streaming Media

Video rental shops were largely replaced by internet services in the early 2000s. The first wave of this were internet-based mail order rentals with no late fees. Later, these services switched to streaming media.

Long Distance & VOIP

Long distance telephone services were threatened by internet-based substitutes as early as 1995 including email, messaging and voice over IP.

Education & Travel

If college is perceived as overpriced and out-of-touch with real life, people may spend their money on travel experiences.

Flights & Trains

In theory, high speed trains could compete with air travel on many domestic routes when the full round trip time including transit to an airport is considered.

Bottled Water & Tap Water

If people have confidence in the quality of their local water supply they may stop buying as much bottled water.

Software & Outsourcing

Firms can purchase software to automate their processes or they can outsource the entire process.

Hotels & Short-term Rentals

Hotels that face competition from short term rentals of apartments and homes.

Robots & Labor

In the labor market, robots and automation are often perceived as a substitute for the work of employees. Historically, automation has caused a shift in demand for skill sets but not necessarily a drop in the overall employment rate.

Locations & Transport

The only hotel on a prime beach may face declining demand if competing hotels sponsor a convenient and free shuttle service to the beach.

Overview: Threat Of Substitutes
Type	Market Forces
Definition	The potential that customers will replace your product or service with a substitute good.
Related Concepts	Market Forces » High Speed Trains » Robots » Automation » Demand » Substitute Good »