Four powerful strategies for dealing
with channel conflict in ecommerce:
a guide for consumer brand manufacturers.
Contents
Channel Conflict Strategies
1. Don’t compete; collaborate
collaborate.
2. Cross-promote.
channel value
value.
3. Generate cross-channel
4. Price right.
Introduction
As if your competitors didn’t create enough complications,
technology has splintered the marketplace for manufacturers
into online and offline channels, plus retail partners.
In fact, most consumer brand manufacturers rely on multiple
channels to move their products and invest significant resources
to cultivate
e them. So when they want to start selling directly
online, or beef up their web store, they risk alienating their most
valuable sources of sales.
Fortunately, a few solid strategies can benefit both
manufacturers and retailers. Direct web sales can even help
forge new partnerships, as one tools manufacturer discovered
when their ecommerce
ommerce store caught Home Depot’s attention.
This paper will explore the many ways in which, as
a John Rogers,
VP of Global E-Commerce
Commerce for Under Armour, says: “A
“ rising
1
harbor lifts all ships.”
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Don’t compete; collaborate.
If you want channel harmony with your offline sales operations and your retail
partnerships, it’s axiomatic that you must not cannibalize their sales.
But what’s the point of selling online at all if you’re just going to let everyone
else have their piece of the pie first?
In practice, though, that metaphor doesn’t truly fit: this isn’t a pie where
everyone gets their slice, leaving you staring at an empty plate. Instead,
manufacturers must recognize that they are engines that can successfully fuel
multiple distribution channels.
“We’ve found that there are more opportunities
to generate sales and product awareness through
multiple channels, than there are conflicts.”
Debra Clark
Sr. VP of marketing at Lafayette 148, a maker of designer apparel for women2
To make different channels align takes collaboration, not competition. The
question is how much your online ecommerce efforts can boost sales across
all channels, including your own ecommerce portal.
“Online we focus on
telling the innovation
and leadership
product stories that
create strong desire
for our products
across all of our
distribution channels.”
- John Rogers, VP of Global
3
E-Commerce, Under Armour
Suppliers, manufacturers and retailers form an intimate community whose
business models increasingly rely on a dangerous combination of automation
and brand secrecy. Most channel conflict arises because one party or channel
steps on partners’ toes – without even realizing it.
Communicating online strategy to channel partners is a courtesy that can go a
long way toward finessing potential friction. For example, it’s common for
manufacturers to use their web store differently from the retailers; for
example, they can provide a comprehensive informational catalog of goods
unavailable elsewhere. It can help reassure skittish retailers to know that the
manufacturer is pursuing a top-level goal of boosting sales across all channels.
In fact, the goal of collaboration is so foundational to channel harmony that
each of the three following strategies assumes it implicitly.
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Cross-promote.
Nothing will convince channel partners that you’re focused on mutual success
more than giving them free publicity and marketing. Remember, the key to
channel harmony is collaboration.
And as the consumer brand manufacturer, you have another natural
advantage here: access to those customers who come to you for information
about your products, including where they can find them.
This is an excellent opportunity to boost both your own brand and your
channel partners’ success.
“Manufacturers have to understand where they
can add value with their own ecommerce site …
among existing channels.”
David Williams
Europe online manager at Deckers Europe, manufacturer of Ugg brand boots 4
Examples of cross-promotion include:
Case In Point:
Lafayette 148 uses its online
store to point consumers to
retail locations where lead
designer Edward Wilkerson
makes appearances.
That kind of crosspromotion keeps people
attuned to the online store
while pushing business to
retail partners. Both
channels can be used to
stimulate interest and
encourage purchases.5




Offer a store finder
Promote in-person store events
Give retail partners advertising space
Reward high-performance retailers with prominent listings on your site
Cross-promotion efforts can sometimes prove to be a delicate balance of
give-and-take, but it’s never necessary to shy away from online direct sales.
Tailor your promotional efforts to align with the natural strengths of buying
direct versus via a channel or retail partner.
For example, Under Armour integrates a robust store finder into their
website, where consumers can discover retailers selling Under Armour brand
garments. Given the nature of the product, many consumers want tactile
access before making a purchase. However, existing customers can order
more easily online, or customers seeking special deals can take advantage of
Under Amour’s online outlet, which can then be used to clear out inventory.
Such an approach not only pushes business to the channel best suited for it, it
also serves the customers better by letting them choose where to purchase
according to their own, individual priorities.
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Generate cross-channel value.
It isn’t always about the immediate sales.
Sometimes it’s about procuring valuable business insight and intelligence
which brand manufacturers can employ to improve their products and sell
them more strategically.
And they can deliver that insight to their offline and retail partners.
For example, manufacturers might test different approaches to sales and
marketing to identify the tactics that yield the most business.
“Brands can learn a lot about their customers by
having their own online store. It opens up
enormous possibilities for data mining.”
Carsten Kraus
Chief Executive and Founder of FACTFinder.com 6
Examples of insight online stores can produce include:




What products do customers click before they buy other items?
What product details do they seek out?
Which visuals/messaging approaches lead to sales; and which don’t?
What naming/branding protocols are successful?
Additionally, manufacturers can extrapolate more actionable data from
metrics generated by their online store.
Case In Point:
JELD-WEN used its site
analytics to test and identify
customer-friendly tools and
guided approaches to selling
that boosted sales.
Sharing this data with Home
Depot led to a partnership.7




Spot trends
Identify the most lucrative search terms
Evaluate the most highly desired product lines
Assess shoppers’ decision-making process
Smart ecommerce retailers regularly run tests where they compare
performance. This kind of information can be immediately implemented onsite to boost direct revenue, as well as shared with other channels to support
their efforts as well.
“The insight gained will help manufacturers stay in tune with their
customers,” says David Williams of Deckers Europe, “and this in turn can be
used to inform retailers.”8
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Price right.
You have the power destroy your retail partners’ ability to compete.
They have to mark up prices to make a profit, after all.
But you don’t. And they’re terrified you won’t.
Call it the Amazon Effect: Amazon’s willingness to take a loss or only break
even, while plying its supply chain mastery, has helped the giant edge out
competition in multiple business segments. In some cases, like e-books and
bookstores, they’ve hastened the demise of an entire offline segment.
“Evidence suggests that price is the single issue
over which the most channel conflict is
generated.”
Dr. Vasanth Kiran, Dr. Mousumi Majumdar & Dr. Krisha Kishore
Vanguard Business School9
Case In Point:
Or you can reassure skittish partners that you want to boost everyone’s
bottom line, in line with Strategy 2. Consider the following specific pricing
strategies that can yield mutual benefit.
1. Price “just above.”
You could stick to list or recommended retail pricing, which would leave your
prices higher than everyone else’s. Consequence: low conversion rates. Or
you could match or beat retail pricing, only to start the very channel conflict
you want to avoid. We recommend: find a happy middle ground.
Outside of free shipping,
The North Face does not
typically discount prices.
They realize that a certain
core group of customers will
be willing to pay a premium
to purchase direct from the
manufacturer—and enjoy
the exceptional level of
service they have come to
expect from the brand.10
If you think pricing higher at all will automatically lose business, hold on:
many consumers want to buy from the brand source and will pay a premium
for it. You can leverage brand loyalty without threatening channel partners.
2. Dynamically adjust prices to accommodate change.
So you’ve opted to price “just above” retail and offline partners. What
happens when their prices suddenly shift? Unfortunately, this strategy takes
inordinate time and resources to manage, though your ecommerce solution
might offer “Dynamic Pricing.” This feature automates the process of
adjusting product prices against a pool of retailers with whom manufacturers
are partnering.
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3. Focus on promotions and other aspects of the transaction.
Manufacturers may have greater freedom to compete in other areas than
price. For example, a manufacturer can offer special configurations
unavailable elsewhere. That makes direct Web sales compelling while still
giving partners room to maneuver.
4. Set u
up direct selling relationships.
Whether you’re selling directly to in
in-house
house marketing and sales B2C lists, or
cultivating direct sales relationships with large organizations, you can remove
special deals from public view entirely, and focus your ecommerce efforts to
serve a niche market that would other elude or be underserved by channel
partners.
Particularly in the case of direct selling to large organizations, you might find
that you can create an agreement that leverages the advantages of both
offline and online channels, giving your customers total flexibility to access
your goods in whatever w
way is most convenient to them.
Meridian EEcommerce is a global provider of complete, outsourced
ecommerce
commerce solutions to manufacturers, distributors and retailers in a variety
of different industries. We provide an extremely reliable, high-quality
high
alternative to in
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esources by running an online ecommerce
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that includes web development, tran
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saction management, fulfillment services,
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hannel marketing. We are well-resourced
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provide customized solutions to meet clients' needs as well as a state-of-thestate
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How can ecommerce
unlock better opportunities for
your company?
Contact us for expert guidance,
or to request a demo,
and discover why
our partners love us.
Representative Clients
Partners
(855) 632-3266
www.MeridianEcommerce.com
©2013 Meridian Ecommerce | 6
____________________________
1
Brohan, Mark. "A conflicted group: Top
op 500 manufacturers need to address channel conflict and speed up online productivity."
InternetRetailer.com. 1 June 2012. Retrieved from http://www.internetretailer.com/2012/06/01/top
http://www.internetretailer.com/2012/06/01/top-500-manufacturers
manufacturers-need-address-channelconflict.
2
Love, Jon. "All dressed up: Well-positioned
positioned in the social media era, apparel makers grow faster than other brand manufacturers."
InternetRetailer.com. 3 June 2013. Retrieved from http://
http://www.internetretailer.com/2013/06/03/all-dressed.
3
Brohan, Mark. “"A conflicted group: Top
op 500 manufacturers need to address channel conflict and speed up online productivity."
4
"Blurring the Lines." InternetRetailing.net. July 2011. Retrieved from http://internetretailing.net/magazine/archive/july-2011/blurring-the-lines/.
http://internetretailing.net/magazine/archive/july
5
Love, Jon. "All dressed up: Well-positioned
positioned in the social media era, apparel makers grow ffaster
aster than other brand manufacturers."
6
"Blurring the Lines." InternetRetailing.net. July 2011.
7
Lanigan, Amy. “Six models for tackling channel conflict.” The Fluid Weblog. 17 Oct 2012. Retrieved from http://www.fluidhttp://www.fluid
blog.com/2012/10/17/six-models-for-tackling-channel
channel-conflict/.
8
"Blurring the Lines." InternetRetailing.net. July 2011.
9
Kiran, Vasanth; Majumdar,, Mousumi; & Kishore,Krishna. “Distribution channels conflict and management.” Journal of Business Management &
Social Sciences Research.. Vol 1, No. 1: Oct 2012, pp. 48
48-57.
10
Lanigan, Amy. “Six models for tackling channel conflict.”
www.meridianecommerce.com
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