Channel conflict
Channel conflict
Maximize Revenue Growth with Analytics and Data Strategy
Managing relationships between channel partners, distributors, and digital platforms can be challenging for businesses. With the constantly changing online landscape and growth of B2B sector, this task becomes even more difficult, especially for manufacturers used to traditional distribution channels. It requires careful balancing and adaptability in order to succeed in this competitive environment.
Here, we reveal smart ways to avoid these conflicts while taking advantage of the endless possibilities of the digital world.
What is Channel conflict?
Channel conflict happens when people who sell things online don’t agree. It can happen between anyone in the supply chain. A channel is a way to sell things, like a website or a store. If different people in the selling process don’t get along, that’s a channel conflict.
What are the different types of channel conflict?
Vertical channel conflict
often happens between different levels in the supply chain. For instance, if a manufacturer lets too many retailers sell their products, it can cause problems because there are too many options for customers. Also, if a retailer sells a cheaper copy of a product without permission from the original manufacturer, it can cause issues too. These are both examples of vertical channel conflict.
Horizontal channel conflict
usually involves a competition between retailers to lower prices. This can lead to products being seen as less valuable, which can make consumers less interested. When people realize they can get the same product for less money, they may return the items they bought. The entire supply chain can be disrupted when two retailers at the same level compete with each other.
Multiple channel conflicts
occur when there is intense competition between different sales channels. For instance, online marketplaces may offer better deals like free shipping and special services, which can make it harder for a brand’s direct-to-consumer channel to sell products. This type of conflict, while not as common, can be really intimidating. After all, no one wants to compete with a giant like Amazon.
What causes channel conflict?
- Partners' goals may change over time, leading to incompatible strategies
- Unclear communication, especially regarding contracts and policies, can cause issues
- Different marketing objectives may exist between partners, even for the same product
- One partner may outgrow the other, who is unwilling or unable to adapt
CHANNEL PRICING STRATEGY
Integrate cross-channel data
You will receive varying datasets from different channels, each tracking different metrics and not easily comparable. Establish your own criteria for the essential information needed from each channel. This will help determine the most successful channels in actual performance and prevent conflicts where high-performing channels face stock shortages while slower-moving ones have excess inventory.
Strengthen your brand
If your direct-to-consumer brand is overshadowed by the platforms you utilize for sales, you risk being overwhelmed and encountering conflicts. Ensure that your brand is as marketable as your products to strengthen your position during contract negotiations with new channels.
Invest in creating recognizable and engaging marketing content. Provide exclusive products solely through your direct-to-consumer platform to differentiate yourself. These strategies can help prevent conflicts stemming from brand imbalances.
Don’t go all in right away
You don’t have to allocate all your resources to a new channel right away. Beware of anyone who seeks such a significant upfront commitment. Instead, adopt a phased approach to entering a new channel.
Conduct smaller pilot launches to test each marketplace and resolve any conflicts without heavily investing resources in a potentially risky outcome. If you find that a channel is not suitable for your business, it is easier to disengage.
Avoid over-discounting
During slower sales periods, many marketplaces may suggest lowering prices as a quick fix. While this benefits the marketplaces, constant discounting can diminish the value of your products and brand in the eyes of customers.
Instead of relying solely on discounts, incentivize sales by offering bonus products or discounts on related items. This approach benefits both you and the marketplace. Including restrictions on excessive discounting in contracts can prevent conflicts, and negotiating these terms is more manageable when you have the leverage of a strong brand.
How can channel conflict hurt an eCommerce brand?
-Lower profit margins:
Splitting sales between competing platforms can lead to price compromises or loss of direct-to-consumer sales.
-Wasted setup costs:
Setting up on a new platform may be futile if it does not yield results.
-Retailer-friendly contracts:
Agreements that prioritize distributors' and sellers' interests over your own.
-Added logistics:
Expanding to a new channel may result in added logistics without a healthy return on investment.
-Fragmented data:
Data compiled and stored differently from multiple sources can hinder gaining insights into customers.
-Inconsistent customer experience:
Conflicting parties may lead to inconsistency in the customer experience.
CHANNEL PRICING STRATEGY
Establish a minimum advertised price
Ambiguous pricing often causes conflicts between channels. Setting a minimum advertised price is a good way to prevent these conflicts. Distributors will be happy knowing you won’t undercut them by selling products online. Using your brand, you can enforce this minimum price in all the markets where your company works. This will help create trust and consistency among your channel partners.
Reduce your distribution channels
Once you have set consistent prices, it’s important to manage how your products are distributed. While it may seem like a good idea to have many distributors, this can make it harder to control partnerships and impact your supply chain. Having fewer distribution partners, enough to cover the market, allows for better control and reduces the chances of conflicts between channels.
Control your supply chain
Limiting your supply chain to authorized distributors is an effective strategy for controlling channel conflicts. If your supply chain is unregulated, unauthorized distributors may sell your products. Having only authorized distributors sell your company’s products reduces competition among the company’s partners and decreases the likelihood of channel conflicts.
Strengthen your brand by offering exclusive products
By building a strong brand for your employer’s company, you can lower the risk of channel conflicts. An effective approach is to introduce exclusive products on your e-commerce platform without competing with your distribution partners. This strategy enhances your brand and prevents conflicts as you are offering different products from what your partners sell.
