Expanding your product distribution beyond the brick and mortar and into the omnichannel is an exciting next step for your business with a myriad opportunities for growth. But growing a business does not come without growing pains, and one of the peskiest pains is channel conflict.
According to the Investors Book, channel conflict is “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.”
Essentially, once a manufacturer has moved their products beyond one channel, like their brick and mortar channel, to a more competitive arena like Amazon, it can create friction and issues that negatively impact their relationship with their channel partners and can evolve to hurt their long-term growth.
Channel conflict can happen for a variety of reasons, but there are three main areas of conflict you should know about.
The three types of channel conflict are:
Vertical Conflict: when two parties at different levels of the distribution chain have a dispute. An example of a vertical conflict is when a manufacturer sidesteps retailers to sell direct-to-consumer, making themselves competition for the wholesalers, sales reps, and retail partners who sell their product. Vertical conflict also happens when a manufacturer allows too many retailers to distribute their product, creating fierce competition and ultimately hurting sales.
Horizontal Conflict: when retailers at the same level compete amongst each other. Horizontal conflict happens when a retailer drops their pricing to drive more traffic to their store and then upsells more expensive product to make up the difference on margins, forcing other retailers to drop their own prices to compete. Horizontal conflict also happens when multiple wholesalers or retailers are operating in the same area, creating turf wars.
Multi-channel Conflict: when two or more of a manufacturer’s channels compete against each other to sell in the same market at different prices.
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. But what happens when your 12.4% of ecommerce sales begin to destroy your other 87.6% of sales?
Let’s say customers start using your brick and mortar retailers as showrooms for your product, ~~most often ~~because the price of that product is cheaper online. You may very quickly find your relationship with those brick and mortar retailers ending as your ecommerce sales reduce sales volume at their store.
Channel conflict also creates confusion among consumers. Tools like PriceBlink allow consumers to easily compare prices across marketplaces. If they see different pricing on different channels, consumers may wonder if they’re being overcharged when prices are high, and whether they’re receiving authentic products when prices are low. This causes both your brand and your product to lose its value.
When pricing is different across channels, consumers may delay making a purchase to ensure they get the best deal, or if they do make a purchase, they may regret it after seeing a better price online, and your return rates will go up as a result. Thus, the buying experience is also negatively impacted due to channel conflict.
Omnichannel selling doesn’t have to be synonymous with channel conflict. There are a number of ways to ensure your channels live in harmony with each other:
Creating a MAP policy tells your distributors the price they should be selling at. It also assures them that you won’t undercut their prices online. Your brand can enforce your MAP policy across marketplaces with the help of a legal partner. By doing so, it ensures your other channel partners that you’ll play fair.
Many brands scale their distribution in attempt to grow revenue quickly, but when too many distributors have their hands in the pie, they’re harder to control, and this can destabilize your supply chain.
Leaky supply chains often result in unauthorized distributors selling your product, and unauthorized sellers don’t share the same incentives you do. Their primary goal is to sell their stock, and because they’re likely unaware of or don’t care about your MAP policy, pricing will be all over the place, exacerbating your channel conflict. The more limited your distribution, the more control you have and the less likely leaks and multi-channel conflict is to happen.
If your brand is widely distributed, odds are someone is selling it on Amazon, 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 and homogenize the customer experience across all of your channels so it’s consistent, high quality, and in your control.
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.
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 and find out about our Amazon multi-channel fulfillment capabilities by requesting your demo today.
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Entering the ecommerce landscape is a huge undertaking for any brand—it usually requires a large investment in resources and expertise to really be successful. Any brand can quickly get in over their heads trying to navigate the nuances of SEO, fulfillment and logistics, distribution control, listing optimization, and meeting the numerous other requirements and administrative tasks to show up well on marketplaces.
Unfortunately, because it’s so easy for third party, gray market, and unauthorized sellers to obtain and sell products online, many brands find themselves pressured to execute an ecommerce plan without the right resources to succeed on marketplaces and their other channels.
So, for brands looking to enter the ecommerce space or improve their current and future performance, it makes sense to partner with an ecommerce consultant.
Pattern’s global presence and proven success with hundreds of brands has allowed us to develop highly effective ecommerce consulting services. We can guide your brand to navigate issues both large and small in marketplaces worldwide. To maximize your ecommerce efforts, you’ll need to understand what an ecommerce consultant does and how to select one who drives the right value for your brand and products.
An ecommerce consultant is a specialist in the ecommerce space who can give you personalized guidance on how to market your products and grow their presence on digital marketplaces.
An ecommerce consultant should be able to analyze your brand, audience, category, opportunity, and current roadblocks and help you understand how to utilize your resources (or what resources are missing) to be most effective in capturing your opportunities in the ecommerce space.
Not sure how to evaluate a consultant? Here are 4 key attributes to look for as you make your choice.
At Pattern, we prioritize brand obsession for a reason—we know that a brand-centered mindset makes a crucial difference in the outcomes and results our partners achieve. So in our experience, when you begin your search for an ecommerce consultant, it’s important to look for a partner who is specialized in ecommerce, invested in the product, and passionate about helping brands build and improve their strategies. Typically, this means finding someone that consults exclusively for ecommerce marketplaces, rather than choosing a consultant who offers many different services.
It’s also important to avoid choosing a consulting partner who can’t deliver the right experience for your brand. The best indication of whether your potential consultant can do that is to review their history, data, and results with other brands. Ask if they’ve helped others in your selling category, if they’ve solved specific issues your brand is facing, and why they feel you are a good fit. The key is to leave the conversation feeling confident that you understand your consultants’ capabilities and whether or not they match up with your needs.
It’s best to pick a consultant who knows how to guide a brand onto and through multiple marketplaces worldwide. You’ll want to take a look at your long-term strategy and think about the regions and platforms you’re currently on and where you might want to take your brand in the future. If your consultant is truly great at what they do, they’ll be able to help you perform well enough with your current product roadmap that it’ll be a no-brainer to expand your presence at the right time.
The most effective partnership with an ecommerce consultant will be able to give you both recommendations and point you to solutions for making those changes in your planning, processes, and execution. Your time and money is valuable, so you want to make sure that you’re spending it as efficiently as possible as you follow your consultant’s advice. So, before you commit to an ecommerce consultant, ask about the resources and concrete solutions they typically recommend to the brands they work with.
Finding an ecommerce consultant that checks the boxes can be a difficult task. At Pattern, our entire focus and drive centers around giving brands the tools and resources they need to succeed on domestic and international ecommerce marketplaces.
With over 100 global ecommerce consultants across 10 global offices, we have the right tools to partner with brands across the world to achieve better ecommerce success. We give specialized advice, then make sure our partners have all the adequate SEO, social media, CRM, Amazon multi-channel fulfillment services, and ecommerce outsourcing services they need.
Interested in ecommerce consulting services? Set up a call here to learn what Pattern can do for your brand on global marketplaces.