Question

2. How does a producer which depends greatly on the traditional retailers avoid or minimize channel conflict when it plans to use both online channel and physical channel?

Answer 1

A channel conflict occurs when a manufacturer decides to practice disintermediation or in simple terms, bypass the intermediaries and directly sell it to the consumers typically via internet. This results in reduced costs and provides a scope to increase the profit margins for the manufacturer. The conflict here occurs between the traditional physical channel and the online channel in the recent times. So, how do manufacturers counter this? Let's see some of the possible ways for the same:

• Both the channels should be well integrated in order to overcome this conflict. With the manufacturer in this case heavily relying on traditional channel, it is highly recommended that this integration be efficient to ensure that both the channels provide profits. Also this reduces the confusion with the consumers on buying products from retail or online.
• Bringing the channel partners like the retailers into a decision making process. This announces that you as a manufacturer is giving importance to the viewpoints of a retailer who is an integral part of the traditional channel. Keeping your channel partners informed regarding your business strategies further reduces the conflict
• Revamping the pricing structure could be a key in reducing the channel conflict. Give the autonomy to retailers to set the profit maximizing prices given the conditions, and you as a manufacturer already have another channel of selling: Online. The very reason for conflict will be defied in this case, providing incentives in both the channels and thereby reducing channel conflict.

Hope this helps. Do hit the thumbs up. Cheers!