Question

What is channel conflict?

Provide one example each of 1) vertical channel conflict and 2) horizontal channel conflict

Answer 1

Channel conflict is a situation when the channel partners (thru whcih sales happen) are in conflict with the manufacturing vendor or in conflict with one another. The channel partners believes actions of each other or the manufacturer hinder them in achieving their goals /sales target.

The first situation arises when a manufaturer bypasses the middle-men (Distributior, Wholesaler, Retailer) and starts selling directly to customers through its owned retail outlets, sales team or over the internet. The second situation arises when two channel partners at same level in value chain impede each other's sales.

Vertical conflict - When partners are at two different levels.

Example - The manufacturer X produces smart-phones and distributes in CIty Y thru distriubtor Z. The city has high-demand for X's smart phones and X decides to open its own store in City Y and starts selling directly to customer at a lower cost (as there are no intermediaries, savings passed to customers). There is a conflict between X & Z because actions of X are hitting the sales and profits for its own distributor Z.

Horizontal conflict - When partners are at same levels.

Example - The manufacturer X produces smart-phones and distributes in City Y thru distributor A & B. Each distributor is assigned their terrritory in the city. The sales by distributor A have been more and it starts expanding in the city Y. A is doing aggresive promotion and starts distributing to retailers in territory of B. B perceives these as negative actions by A and are hitting sales of B. This is a horizontal conflict.