Channel Conflict

Channel conflict refers to a conflict that can exist between two channels. For example, a manufacturing company may have a large, established dealer network. The channel conflict exists, when the companies tries to open another channel, such as an online store where customers can purchase goods directly from the company. This may alienate existing dealers, since they may feel that they are bypassed.

There are various models that can be used to handle channel conflict. One of the most common ones is procrastination. Some companies simply do nothing, in order to avoid a channel conflict. Another approach is complete channel destruction. The company could sack the entire distributor base and continue to only deal with customers through online channels. While this may resolve the channel conflict, it may not be the best thing to do, since alienated distributors may simply switch to sell a competitor’s brand. Also, existing distributors may be providing services to customers and customers may feel alienated if the channel conflict is resolved in this way.

Another way to resolve a channel conflict would be for a manufacturer to sell directly over the Internet, but keep old channel partners in the loop financially and logistically. For example, a local distributor could be responsible for product delivery and receive a commission payment. This could reduce the channel conflict. Another strategy may be to make available sites that can be co-branded by channel partners. This means that they can display their own brand on the site along your own brand.