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.

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

The cellular Apple Watch.

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