but that doesn't represent cannibalization, they didn't introduce a product that competes in that niche you're talking about

but if you're going to carry a phone anyway, like digital handheld cameras, you don't need an extra device on top of your phone

For the ones that used later gen Nanos (same form factor as early Shuffles) as music devices during running/jogging, the Watch supplanted that role with the added benefit of combining the Nano and fitness bands (GPS, heart rate).

I agree, a full phone was annoying large and hard to carry (tried forearm straps at one point) and often ran without one. Though I know people who still ran with a phone anyways.

I bought specific athletic shorts or shirts (cycling jerseys with back pockets did great) so that I could run with my phone. Stopped working so well when the iPhone 6 Plus came out.

The cellular Apple Watch.

The Nano doesn't drain its battery every 18 hours.