IMO any "arbitrary" cancel culture response will quickly self-correct, unless the affected party doubles down on their offense and doesn't handle the response well. That's kind of a PR skill and I don't see it as a problem of cancel culture itself, but just a lack of maturity among (mostly) celebrities/influencers in responding to this relatively new form of public expression (see: Andrew Tate)
Glad you mentioned, the whole "JK Rowling is a TERF" scenario is a perfect example of where I think cancel culture is Good Actually. She has a very large and engaging platform that has influenced an entire generation and more. She then chose to align her public opinion ("trans women don't deserve the rights of women") with the basis of an opinion that is the root of much trans violence. I think the response to her proclamation is proportional to the distance she placed herself at to that extremist position — she put herself pretty close, and every time she doubled down on it, she got hit by another "wave of cancellation". She quieted down and improved her PR response (presumably without changing her opinions), and she seems largely unaffected as a civilian or in her income. The cancellation seems to have just been a "regulating" force on the opinion that "trans women aren't women".
But at the end of the day, that's just an approximation of market responses to her brand. She chose to stick to her brand, and the market has responded. She still makes a tidy royalty sum, she isn't under threat of state punishment or sanctioned violence, and the "offended" aren't legally empowered to act in any way specifically against her that they aren't legally allowed to otherwise.
Re: racists, yes, racists believe they are right and justified, and I disagree with them. Still, my hope and trust that society will impose a counteracting force that will cost racists more for that opinion than it gains them, in the long run, not that racists are forbidden (somehow, not sure how) from "cancelling" people they arbitrarily choose to discriminate against.