Imagine you work for a widely distributed brand and you’ve been tasked with launching your brand on Amazon.
You set up a relationship with Amazon, identify your highest volume keywords, set up advertising, and you go to work. Amazon continues to source your products, your rankings improve on important search terms and your return on advertising is high.
What you don’t know is that you’ve very likely created a problem that could cost your brand a lot more than the revenue you’ve generated. You have created channel conflict.
What is channel conflict?
The Investors Book defines channel conflict as “any dispute, difference, or discord arising between two or more channel partners, where one partner’s activities or operations affect the business, sales, profitability, market share, or similar goal accomplishment of the other channel partner.”
Using our above example, Amazon’s dynamic pricing system very likely causes the online price of their product to drop below the cost of the product in brick and mortar stores from time to time. A conflict then arises between the brand’s own efforts to sell their products directly to the consumer and their trusted retail partners.
What are the effects of channel conflict?
Ecommerce is expected to reach 12.4% of total retail sales in the U.S. That doesn’t make ecommerce insignificant—many brands are making hundreds of millions of dollars selling their products online.
However, what happens when your 12.4% of ecommerce sales begin to destroy your other 87.6% of sales? Returning to our example, if customers use your brick and mortar retailers as a showroom for your products, most often because the product is cheaper online, you may very quickly find your relationship with that retailer ending as your ecommerce sales reduce sales volume at their store.
Channel conflict also creates confusion among consumers. Tools out there such as PriceBlink allow consumers to easily compare prices across marketplaces. Different pricing may lead consumers to wonder if they are being overcharged when prices are high, and whether they are receiving authentic products when prices are low.
Solutions to channel conflict
Omnichannel selling doesn’t have to be synonymous with channel conflict. There are a number of ways you can work to make sure your channels live in harmony with each other:
Establish MAP pricing: Creating a MAP policy tells your distributors the price they should be selling at and also assures them that you will not be undercutting their prices online. Your brand can enforce your MAP policy across marketplaces with the help of a legal partner.
Clean up your supply chain: Leaky supply chains often result in unauthorized distributors selling your product. Their goal is obviously to sell their stock, and as they are likely unaware and probably don’t care about your MAP policy, pricing will be all over the place.
Establish your brand across marketplaces: If your brand is widely distributed, odds are someone is selling it on Amazon, or eBay, Walmart.com, or any number of specialized ecommerce sites such as Houzz or Newegg. While managing multiple ecommerce channels can be difficult, by selling products yourself on these marketplaces where people are already searching for your products you can play defense for your brand. You can make sure your customers have nearly the same product experience across marketplaces as they do in other retail channels.
These are just some of the ways that Pattern brand partners have found success in eliminating channel conflict. It requires continuous effort, but the reward is happy retail partners and a seamless customer experience wherever customers want to find your product.
Product Case Study - Thorne Research Vitamin D-5000
Consistent product experience across the top two U.S. ecommerce marketplaces have lead to price parity with Thorne’s own DTC Site:
PriceBlink results showing price parity across retailers:
Want to know how you can grow your brand online while maintaining strong relationships across your distribution network? Reach out to Pattern by filling out the form below, emailing email@example.com, or calling 888-881-7576.