Channel Conflict: What Is It and How Can You Manage It?
Channel Conflict: What Is It and How Can You Manage It?
A big eCommerce business typically deals with hundreds, even thousands of people every day. That’s before you factor in the customers themselves. How do you ensure all those interests are best served, so your brand can add value at every step of the supply chain? In other words: how do you manage channel conflict?
What is channel conflict in eCommerce?
Channel conflict is a disagreement between parties involved in selling products online. Anyone involved in the supply chain can potentially come into conflict with anyone else, for any number of reasons.
Any outlet you use to sell your products is a channel. It could be your own website, a brick-and-mortar store or a marketplace, like Amazon and eBay.
Multiple parties are involved in that selling process: manufacturers, retailers, resellers, the marketplaces and even consumers themselves.
When two or more of these parties are at odds with one another, that’s a channel conflict.
What are the different types of channel conflict?
In eCommerce, channel conflict is likely to show up in one of three ways:
- Vertical conflict between two parties at different stages of the supply chain
- Horizontal conflict between two parties at the same stage of the supply chain
- Multiple channel conflicts between two sales platforms
Vertical channel conflict may well be the most common because it can arise from any two points in your supply chain. When a manufacturer allows too many retailers to sell their products, it oversaturates the market and retailers struggle. When a retailer sells a cheaper knock-off version of a manufacturer’s product without approval, the manufacturer loses out. Both are examples of vertical channel conflict.
Horizontal channel conflict often takes the form of a price war between retailers. Products become devalued and consumers lose interest. Returns also go up once people realize they can get the same product cheaper. The whole supply chain gets disrupted when two equal parties butt heads.
Multiple channel conflicts happen when competition between two sales channels gets too fierce. eCommerce marketplaces can subtly undercut a brand’s direct to consumer (DTC) channel with the lure of free shipping and premium services, for example. While not the most common type, it might be the scariest. After all, who wants to get into a fight with Amazon?
What causes channel conflict?
Nobody intentionally tries to cause a sales channel conflict, but they can happen due to different parties’ competing interests:
- Two partners’ goals might evolve differently over time, making their strategies incompatible.
- Communication can be vague or unclear, particularly concerning contracts and policy.
- Marketing objectives might be different between two parties (even for the same product).
- One party might outgrow a partner who is unwilling or unable to change.
How can channel conflict hurt an eCommerce brand?
Even if you manage to resolve it quickly, channel conflict can harm a business in a number of ways:
- Lower profit margins are an obvious risk; splitting sales between competing platforms often means compromising on price or losing out on DTC sales.
- Wasted setup costs are another potential problem. If you go to the trouble of setting up on a new platform, your effort might be in vain if the platform can’t work for you.
- Retailer-friendly contracts are common, agreements which prioritise distributors’ and sellers’ interests over your own.
- Added logistics can be a headache when expanding to a new channel, especially if they’re not giving you a healthy ROI.
- Fragmented data from multiple sources, often compiled and stored differently, can make it hard to gain insight into your customer.
- An inconsistent customer experience can come about from people being caught between conflicting parties.
So, should you sell multichannel at all?
With all those risks to consider, you might wonder if it’s worth expanding your business onto new channels. Well, while sales channel conflict can be tricky to manage, the rewards for doing so properly can far outweigh the headaches:
- You unlock faster growth by opening yourself up to new audiences and partnerships.
- Your brand can bask in the trust that consumers place in big marketplaces like Amazon and eBay.
- Customers don’t only use one channel to shop; expanding helps you match their behaviour.
- Brand recognition gets reinforced every time a customer sees your product somewhere new.
The art of eCommerce lies in picking the right channels that work for you and helping them coexist in harmony.
How to avoid channel conflict
Sometimes you can anticipate a conflict and nip it in the bud. Other times, you simply don’t see it coming. But by building a few core principles into your multi-channel sales strategy, you can cut the risk of unexpected disagreements.
Synthesise cross-channel data
You’ll be getting different bodies of data from different channels, not all of it will be tracking the same metrics or be easy to compare side by side. Develop your own standards for what you need to know from each channel.
That lets you know which channels perform best in real terms. It’ll avoid conflicts where high-sales channels run out of stock, while slower-moving ones sit with excess stock on the shelves. Tools like our Where to Buy solution can track data between channels and make your life easier here.
Strengthen your brand
If your own DTC brand is eclipsed by the platforms you use to sell, you’re opening yourself up to conflicts where you’re simply overpowered. Take time to ensure that your brand is as much a marketable commodity as your products. That means a stronger position when it’s time to negotiate contracts with new channels.
Invest in recognisable, engaging marketing content. Offer exclusive products via your own DTC platform and nowhere else. Moves like this will avoid conflicts based on brand imbalance.
Don’t go all in right away
Nobody says you have to commit all available resources to a new channel from day one. You should be wary of anyone who demands that kind of upfront commitment. Instead, take a staggered approach to expanding to a new channel.
These smaller pilot launches let you test each marketplace and iron out any conflicts without large quantities of resource riding on a successful outcome. And if you decide that a channel simply isn’t right for your business, it’s easier to walk away.
Many marketplaces’ go-to solution for periods of slower sales is to simply lower prices. This is great for the marketplaces but only ok-ish for you. Too much discounting can devalue your products and even your brand in customers’ eyes.
Instead, incentivise sales by offering bonus products or discounts on related products. By doing that, both you and the marketplace win. Restrictions on over-discounting can be factored into contracts to avoid conflicts, but that’s a lot easier to negotiate when you have the leverage of a strong brand.
What should you consider before selling on a new channel?
Your multi-channel (or, ideally, omnichannel) strategy should include your own criteria for expanding to new sale platforms. But when you’re specifically thinking about dodging channel conflict, ask yourself:
What are your current objectives? Are you trying to boost the quality or quantity of your traffic? Are you trying to build brand recognition or drive raw sales? Critically: is the nature of the platform you’re considering suited to meeting those goals?
Is your audience active there? Today’s consumer journey covers plenty of touchpoints, but assess whether your specific target audience is actually using this particular touchpoint at this time.
Can you adapt your marketing? You wouldn’t market on social media the same way you do on your DTC store or via email. When a new channel shows up, think about what it would cost to re-angle your message to the nuances of that particular platform.
What does the platform want? This one might be the most important in avoiding channel conflict: what are the new channel’s interests and do they align with yours? Premium brands might be devalued by selling on platforms that prioritise price and fast sales. Make sure you’re working with channels whose ethos matches your own.
If you’re selling multi-channel, you’re going to encounter channel conflict sooner or later. It’s always better to anticipate its root causes and tackle them proactively. By emphasising clear, frequent communication with partners, you give everyone the best possible chance to succeed together.