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CHANNEL CONFLICT: BATTLE ROYALE OR TEMPEST IN A TEAPOT? IT ALL DEPENDS.

CHANNEL CONFLICT: BATTLE ROYALE OR TEMPEST IN A TEAPOT? IT ALL DEPENDS.

Conflict is on the rise in commerce today – and I am referring to a particularly pernicious type that sows confusion and strains sales: Channel conflict. Paths to purchase are increasingly multi-directional. Goods can be bought online, picked up in stores, acquired over marketplaces, purchased through dealers, sold directly to consumers. The possibilities are endless. But to their detriment – perhaps even downfall ─ not all brands have adapted to this new buyer-driven, technology-centric landscape.

How can brands adapt? What are the new rules of engagement to eliminate conflict and drive more sales across a wider landscape of opportunity?

Some answers lie in this anecdote. Imagine a high-end kitchenware brand that sells through dealers, exclusively. No branded web store is available for consumers to buy direct. Online marketplaces aren’t an option either. Why? The brand is afraid to disrupt the revenue stream flowing through its dealer network or cannibalize its ecosystem by going direct to consumers. Yet, it’s willing to walk away from millions in sales along with the opportunity to expand into new markets, ultimately putting the brand’s longevity at risk.

Today, though, distribution is not an either-or proposition. Direct and indirect channels can co-exist peacefully. In a worldwide survey of retail professionals earlier this year, 65% of respondents said that they use Amazon as a channel to increase sales (eMarketer). In fact, variable routes to market are essential to brand health. Choice and access are everything today. The trick is to identify unique value propositions that differentiate each channel and keep brand identity intact.

Direct and Indirect in Harmony

Many manufacturers struggle with channel conflict. This is especially true today as brands move to a hybrid model of sales and distribution. The good news is that it’s relatively easy to eliminate friction. Say a consumer buys a television online and picks it up through click-and-connect at a local store. A percentage of margin can be guaranteed to the physical retailer and they also can benefit from foot traffic that leads to extra in-store purchases. From the manufacturer’s point of view, products are more accessible. The way consumers see it they have a choice on how and where to buy.

The same manufacturer could reserve inventory to sell online exclusively through its web store and deliver a different customer experience from its channel partners – higher cost, for instance, but access to white glove services. Alternatively, all fulfillment could be pushed to the channel. The key is to identify the lanes to stay in and offer pricing protection – effectively agreeing that you will sell at a certain price and avoid undercutting the channel.

B2B Goes Direct

More B2B brands are going direct to business buyers through online initiatives. Replicating the B2C experience and empowering buyers is the new imperative in B2B selling. In a recent survey of B2B sellers, for instance, 73% of brands queried in the UK, US, Australia, and New Zealand said that eCommerce is vital to their company’s digital transformation.

In the not too distant past, though, the primary route to market for B2B companies was through a direct sales team and third parties. The consumerization of B2B upended this model. But, again, going direct to consumers doesn’t have to be a threat. As with B2C, a sound strategy and underlying commerce technology can drive revenue for channel partners. The right commerce platform, for instance, enables flexible pricing that empowers channel partners to sell at a lower price, offering discounts or custom pricing.

Eliminate Internal Conflict

A true digital-age conflict is the battle between online and physical channels. The key to resolving this clash is to identify ways to share revenue and reward performance. According to an eMarketer survey, more than 67% of retail sites surveyed in the UK offer buy online and pickup in store services (compared with roughly 29% in the US). Ideally, revenue touched by both channels can be shared. Use your commerce platform to enable consumers to select their favourite local store, so that revenue attribution is simple. Identify ways you can share revenue with the store.

The third leg on the stool is internal sales teams – and this is often more of an issue in B2B transactions. Empower your sales teams with technology tools that help them sell more and use eCommerce capabilities to manage their customers more effectively. Not only will transaction costs go down, but market reach can be extended, and conversions increased.

Elevate Your Brand

Eliminating channel conflict elevates your brand and gives you greater control over your identity. Nike, for instance, forged a partnership with Amazon earlier this year. Immediately, Amazon barred its other merchants from selling certain Nike products (no doubt a list defined by Nike). Selling directly through Amazon not only reduces the sale of counterfeit Nike goods on the marketplace, but will also drive between $300 to $500 million in additional revenue for Nike. This is a powerful example of the control a brand can exert in a channel relationship. Admittedly they’re two titans, but with the right technology and relationships in place you can retain control of your brand and extend it in profitable ways.

Top Five Takeaways

  • Identify unique value propositions that differentiate each channel and keep brand identity intact
  • Collaborate with the channel – create a cohesive channel strategy
  • Elevate and control your brand – that’s where your equity resides
  • Agree upon pricing structure with the channel – don’t do it yourself; get buy in from your partners
  • Push leads to the channel, foot traffic to the store and empower internal sales teams with technology to sell more

This is post is the final chapter in a three-part thought leadership series by Paul Lynch. Also read The Magic Behind Click and Connect and Creating A Single View of the Customer.

Paul Lynch

With over 25 years of experience working in the IT industry as a technical architect, pre-sales consultant, and Sales Director, Paul Lynch has considerable experience working with top brands to help them meet their commerce objectives. He is deeply passionate about delivering innovative technology that enables customers to succeed in new ways.