Consumers always insist on getting more choices and options concerning where they purchase from and how they buy the good. In this growing digital world, consumers are becoming more digitally connected, and they are getting more inclined and attracted to make purchases outside the traditional channels. Channel conflict is still holding back many businesses from exploring non-traditional sales channels or establishing their own ecommerce storefront.
Traditional Channels of distribution
Since decades, manufacturers have always sold to consumers through their distribution channels or partners. It was never profitable or easy to sell directly to end consumers, bypassing the distribution channels. With the boom in digital technology, there has been tremendous growth in internet usage and online transactions. This has made it very easy and simple for manufacturers to sell their products directly to the end consumer, bypassing the intermediaries. However, with these growing opportunities of providing products and services to the end consumers through two different channels, online and offline, can result in conflicts amongst the channel partners.
When Manufactures start selling their products directly to the end consumers, instead of selling through the traditional distribution channels like dealers or retailers, it results in a Channel conflict. Click To Tweet With the growing number of customers preferring to shop online, manufacturers do not want to miss the bus and want to capture this growing market too. At the same time, they do not want to create conflicts and have issues with their old partners like distributors, dealers, retailers etc.
If you choose to expand your sales through these new upcoming channels like online marketing, it can very well result in estrangement from physical stores, distribution partners, and even the company’s own field sales teams.
However, if handled well and managed correctly, one can grow multiple channels of sales without hampering existing channel relationships. Here are a few methods which can be adopted to avoid channel conflict and grow sales too.
Few Methods to Avoid Channel Conflict:
External Channel Conflict
In this, we will look at how manufacturers can avoid any potential problems externally with their retail partners/distributors while launching a new ecommerce channel selling directly to their end users.
1.Sell at Retail Price
A manufacturer can sell their products at a lower price as compared to their retail partners. However, by selling the products at the same price both online and in stores, through distribution partners, gives the dealers and retailers an opportunity to match with the manufacturers online pricing. This will ensure that they do not lose a sale to the ecommerce channel due to differential pricing. Manufacturers can offer loyalty/spend discounts to the consumers rather than offering price discounts, to avoid a price war with their own channel partners.
Also Read- How to Manage Inventory for E-commerce?
Eg: Winsor & Newton
Winsor & Newton are the manufacturers of Art Materials. When they launched their own ecommerce website, they signed an agreement with their network of resellers and distributors across the world to sell products at the same price. They also assured their channel partners, that they would not offer any additional discounts or offers on their ecommerce site, to avoid channel conflict.
2.Exclusive Products Online
As a manufacturer, you can offer exclusive products on your ecommerce site, products which cannot be offered by any other website or by your channel partners. For example, selling customized shoes or jackets. Products which need to be customized according to the customer’s size or preference and can be purchased only on your website.
Customized products create excitement and have a huge demand for consumers. This method helps in avoiding channel conflict because your products are not competing with the common products and also you are not undercutting their price.
All you are doing is offering an exclusive product to the consumers through your website, but many of your other products are still available to be sold through the distribution network.
Chaco is a sandal manufacturing company. It sells its products through retailers and dealers. However, it also provides an online option to customize your own sandal. Consumers can get sandals made to match their school colors or color combination they want. Offering customized products is not possible for all companies and brands. However, most manufacturers can keep some unique products which are available online on their website only.
3.Less expensive products online
If a manufacturer’s product portfolio is vast and has a variety of products ranging from cheap to expensive products, they can try offering inexpensive products only through their website or online. This will make the consumers visit the company’s website to buy less expensive products, whereas they will have to visit the reseller or dealer for the more expensive ones. This idea is suitable for products which require to be demonstrated or are more technical.
Eg: Bowers & Wilkins
Bowers & Wilkins are the manufacturers of loudspeakers. They have a wide range of speakers and headphones both expensive and cheaper ones. They sell these products online as well as through channel partners. However, their range of professional, studio-quality speakers which are very expensive and cost thousands, are not available on their e-commerce website. These speakers require expert advice and installation help which cannot be provided online. They offer a find a retailer option on their website so that consumers can find retailers in their locality for those premium products. This strategy helps to avoid channel conflict.
4.Use for niche products/product ranges/brands/bundles/spares & accessories
Another strategy of selling products online through e-commerce website without affecting existing channels is by launching sub-brands or bundles of products or accessories which are not available for sale with channel partners. These are those type of products which retailers don’t stock or are new products which the manufacturer wants to make available only on their website. A company can also sell spare parts or accessories of their primary products exclusively through their website only.
Eg: Morphy Richards
Home appliance manufacturer Morphy Richards offers a wide range of spare parts and accessories for both existing and discontinued products on their website.
Manufacturers who only want to establish their online identity but do not want to spoil relations with their traditional distributors can use the online catalog approach. They should remove the ‘add to basket’ button from their e-commerce website, and maintain the website only to display their product range. The website should be built using various e-commerce tools for offering a complete catalog of products, brand information, and regular blogs. This will help in creating a strong online identity for the brand, and will also avoid any kind of channel conflict. It’s wonderful to let the customers know about the history, specialty or story behind the brand and the products.
However, there are chances that the customer may get frustrated if they are unable to buy online and have to visit the retailer or distributor for the same. One can lose such customers to their competitors. This does, however, have the potential to leave customers slightly frustrated if they are unable to buy, and may cause them to purchase from a competitor instead, making it not a very viable solution in the longer run.
6.Redirection of the final orders
To help reduce the possibility of channel conflict, the manufacturer can build an e-commerce store but redirect their orders for fulfillment to their partners or resellers. They can also redirect the complete buying process to a reseller or partners. However, there are chances that conflicts among resellers may arise if one of them is chosen over the other to fulfill the received order.
Internal Channel Conflict
Channel conflict needn’t be limited between a manufacturer and external channels, it can also arise within the same organization between different departments or teams. The different teams like telesales, marketing team, e-commerce division etc. are all trying to achieve sales for the organization and may be interacting with the same customers at various stages of the sales cycle.
1. Omni-channel retailing
With the growing importance of Omni-channel retailing manufacturers are shifting towards offering a single customer view and homogeneous experience across different channels. The purpose is to offer a wonderful experience for customers at any touchpoint in the sales cycle.
There can be no correct or incorrect way of handling Omni-channel retailing, each organization is different and work differently. However, the base rule is that all organizations must ensure that guidelines are understood by all the internal channels, to avoid any kind of internal channel conflict in the longer run.
Eg: Office Outlet
Office outlet has more than 90 retail stores, they offer various services directed towards merging their online and offline channels. Endless Aisle functionality is one of the services, under which the store staff is provided with handy tablet devices, using them they can place online orders for their customer right from the shop itself. Even though these orders are processed through the e-commerce website and is processed by the e-commerce team, the sale would be still accredited to the store. This has been explained to all the departments to avoid any internal channel conflict, ensuring all the store staff proactively use the Endless aisle functionality.
2. Share Data Internally
The information about what their customers search for, what they buy, look at, etc can be obtained from the e-commerce website. This information can be shared with the internal sales and marketing team as a collaborative tool to avoid internal conflict. Also, this is a great opportunity for the sales team to up- and cross-sell the products what users are interested in.
Channel conflict need not be an intimidating issue. If handled correctly, it will result in a number of opportunities for growth and success. In today’s digital world, consumers want to purchase or buy on their own terms, in the most comfortable and rewarding manner. They prefer opting for channels which will serve them the best.
Ascertaining and accepting what customers need, what they expect from their shopping experience is the key to a successful business.
With a number of strategies, demand and sales for offline channels can be driven through E-commerce websites. It is a win-win situation for both online and physical stores as well.
As an organization, the most important point to remember is to deliver exceptional value to the end consumers, by offering them the best of both the offline and online shopping worlds.