Managing Channel Conflict: Challenges of Selling Direct and Through Retail
With the dramatic growth of online sales, channel conflict is inevitable. Most manufacturers grew their business through traditional brick and mortar retailers, then their online counterparts. But, as consumers connect with brands on social media and explore manufacturers’ websites for information, the opportunity exists to begin selling directly to the consumer. This can create instant channel conflict.
Inaction Is Not An Option
Though just selecting a single channel and avoiding the conflict can be tempting, the reality is that most brands need some balance between retail sales and direct sales. A consumer will purchase a product for one of two reasons: they are interested in a product category, or they are interested in your product specifically.
Many times consumers are interested in a particular product category. Here, retailers play a major role by offering a variety of options for the consumer to choose from. A good relationship with your channel partners and strong marketing support programs can help enhance your visibility, create demand and encourage sales. For other brands, the opportunity to allow the consumer to explore the product, experience the brand and make the immediate sale is invaluable.
Brands certainly don’t want to undermine their retail and distribution partners, but at the same time need to directly address the consumer demand to streamline the purchase process. By not making it easier for a consumer to purchase their product, you are opening the door for competitors to better service the needs of your audience.
Although channel conflict may seem inevitable, there are ways of managing channel conflict that can result in solutions that are a win-win for all parties.
Channel Conflict Solutions
As you might expect, adding a direct sales channel could put stress on the relationship with your retailers. After all, they have enough competition with other retailers; they don’t want more from their manufacturers. The solution is finding a good middle ground. There are certain tactics that if built into your multi-channel strategy will help.
- Maintain your price points. Don’t underprice your retail channel. Maintain the same pricing online that exist in store.
- Consider channel-exclusive products. Explore your product portfolio. What products provide your retailers and distributors the most value? Consider providing them exclusively at retail.
- Online fulfillment partnerships. Explore working with your retail partners to distribute your direct sales. This could take the form of in-store pick-ups, or shipping fulfillment of online sales.
- Geographic exclusivity. Provide retail partners with geographic exclusivity. This could include not just the retailers’ sales, but also a portion of direct online sales within their geographic area.
Regardless of your solution to channel conflict, success will come from maintaining an open dialogue with your retailer and distribution partners. Explain your strategy and how it will affect them. Done properly, a well thought through multi-channel strategy can help get your brand into the hands of more consumers, increasing the user base, while at the same time solidifying the brand/customer relationship and enhancing brand loyalty.