Channel Conflict Cures

Contentious Channel Conflict Cures

by Jared Asher

Possible Cures
Suggestions From ASRs
Our Challenge

Channel conflicts are never fun. They occur whenever the market changes or companies experience declines in the profitability of their traditional distribution channels.

Today we are faced with monumental changes in sales and distribution chains. Catalog sales are now approaching $100 billion per year. Internet sales are experiencing an extremely steep growth curve and will reach $100 billion very soon. Compared to the $2 trillion retail market, these figures seem insignificant. Nonetheless, if we look at their rates of growth, we can see these channels are changing the way consumers buy products.

Corporate View must aggressively exploit these new channels and pull its share of the profits from them. Business people in traditional channels, of course, will naturally feel threatened by the catalog and Internet channels, or any other channel they perceive as competition.

No reliable research suggests traditional retail channels will be dramatically affected by these new channels. Perhaps we are looking at a simple case of an expanding retail pie creating more opportunity for everybody—ecommerce and brick-and-mortar stores alike. Then again, ecommerce companies like Amazon.com could be killing their brick-and-mortar competition.

The truth is, we don't know to what extent ecommerce will affect retail merchants. In any case, our retail and wholesale channel partners continue to be very apprehensive. We must communicate with them and make sure they know we too want to resolve these channel conflicts. They need to know we are listening to them and will address their concerns.

Possible Cures

Research suggests that ecommerce customers are more loyal to their favorite ecommerce sites than they are to brick-and-mortar stores. If this is the case, why can't promotions at our ecommerce site entice customers to visit our brick-and-mortar partners? This could present a great cross-marketing opportunity!

For example, we are creating an ecommerce site to promote and sell the AltaView mountain bike on the Web. Why not feature each independent bicycle dealer (IBD) and Corporate View Lodge store on the Web site? We can create links to IBD Web sites or provide exciting Web pages for each IBD highlighting its helpful service department, experienced service technicians, great selection of merchandise, and convenient location. We can post biographies of the staff members. We can even provide custom, computer-generated maps at the ecommerce site showing customers how to drive from their houses to the nearest IBD. Here are some other ideas:

We can place downloadable discount coupons on the Web site that can be redeemed only at IBDs or Corporate View Lodge locations.
We can collect email addresses, sort them by location, and send special promotional announcements on behalf of our IBDs directly to ecommerce customers living in each IBD's local market area. This way, email can be an effective tool to promote both our IBDs and Corporate View stores.
At the ecommerce site we can announce we will give away spiffs and premiums to customers who visit an IBD or Lodge store during a certain period of time. We can announce in-store specials the same way.
We can promote "free rental" days, allowing ecommerce customers to schedule a mountain bike for the day directly on the ecommerce site. On the scheduled day, they pick up their bikes from their local IBDs. The IBDs will love this opportunity to bring new customers into their stores, especially as it's on our nickel.

This mix of ideas takes advantage of the marketing layer of the ecommerce Web site and pulls the IBDs into the sales chain. These strategies could help customers feel the same loyalty for our stores as they do for our ecommerce site. After all, with a product like a mountain bike, wouldn't you want to ride it first before you buy it? Only the IBDs can provide a hands-on experience with the bike.

Suggestions From ASRs

Many more ideas remain to be explored regarding the merging of ecommerce with brick-and-mortar stores. I emailed all our area sales representatives (ASRs) and received suggestions from them. These ideas could help us resolve some of our perplexing channel conflicts.

"Develop a system of code numbers to track and reward those who do the marketing and those who complete the transaction. For example, codes for catalogs distributed in the Western Region could start with WR and a portion of the sale can be credited to the sales team providing the initial marketing, even when the sale was finalized in a different region." ShaneJ@corpview.com
"Product registration, serial numbers, or SKU (stock-keeping unit) numbers can be used to track the channel through which a purchase is made. If another channel is used later for customer support for the product, then credits can be given to that channel. For example, if someone buys a mountain bike online but goes to an IBD retailer for repairs, then allowances must be made." CoryB@corpview.com
"Corporate View can maintain separate brands for our ecommerce and catalog sales. This would mean maintaining the RetailView brand for traditional channel partners, and creating a new brand for other channels." MariaT@corpview.com
"Separate Web sites could be developed to supply channel partners with the information they need to reach their customers in pre-selling and post-selling activities." FranklinB@corpview.com
"The advertising mix must be devised to benefit all channel partners with which Corporate View works. Co-advertising and co-promotional events can be sponsored with traditional channel partners to reinforce their success with RetailView products." HuffS@corpview.com
"Channel partners developing their own ecommerce Web sites can be allowed to sell RetailView products there." SilviaC@corpview.com
"Pricing can be adjusted so traditional channel partners will be able to compete on price. For example, if Corporate View adopts a policy of maintaining a strict MSRP for its ecommerce and catalog sales, traditional wholesale and retail channels who wish to offer deeper discounts can do so. This leaves the true bargains in the hands of local brick-and-mortar distributors." StephenJ@corpview.com
"At some point or another, ineffective channels should be closed and effective channels should be opened. Corporate View should not be afraid to make this kind of strategic business decision." MiguelS@corpview.com
"Corporate View must be proactive and communicate directly with channel partners. We must obtain their feedback and their ideas on how channels can be streamlined and made more effective for the benefit of all concerned. Communication with channel partners is always in the best interest of all parties." HowardB@corpview.com

Our Challenge

We need to be optimistic about the future! I think these new channels can actually help our traditional channels in the pre-selling, selling, and post-selling phases of the sales process. My guess is traditional retail brick-and-mortar stores will continue to flourish and will benefit from the added marketing the Web, telemarketing, catalog, and direct marketing campaigns can provide. These new channels can actually bring more customers into traditional stores if the advertising mix is focused correctly.

Our challenge is to sell this optimistic vision of the future to our traditional channel partners. If you have any additional suggestions, email me at JAsher@corpview.com.