Channel conflict: How to identify, manage and prevent it

The world of commerce is greatly benefiting from new technologies and digital transformation opportunities. The solutions to sell online have never been so numerous and migrating one's activity online is now simple and accessible to all businesses. While the obsession with omnichannel sales is opening up all sales channels, it is also accelerating online sales capabilities.

This evolution, which is beneficial for all brands, manufacturers and retailers (B2C and B2B alike), nevertheless hides risks. One such risk is that of the so-called channel conflict (also known as “channel cannibalization”), which is increasingly observed. Channel conflict, if poorly managed, can become a serious downside of the capabilities offered by an omnichannel approach.

Below, we’ll deep-dive into the notion of channel conflict and into channel conflict management strategies.

What is channel conflict?

Channel conflict occurs when two or more sales channels and/or partners disagree. Traditionally, companies have four main channels at their disposal to sell to their customers. They can address consumers directly via an ecommerce site (i.e. their own or even a third-party online marketplace) or via a physical store, or establish a partnership with physical or online distributors.

When the decisions and actions of one partner affect the business objectives of another, channel conflict arises. There are three types of channel conflict: vertical conflict, horizontal conflict and multi-channel conflict. We shall analyze them one by one. 

1. Vertical channel conflict refers to a disagreement between two parties at different levels of the distribution chain. For example, when a retailer decides to stop a distribution agreement to sell directly to consumers or when too many distribution partners sell the same products, creating counterproductive competition and price wars between them.

1. One of the major sources of conflict is ambiguous pricing. Establishing a minimum advertised price is a critical first step in creating a sense of consistency and trust between partners.

A new approach to channel management

For the last 15 years, the traditional commerce scheme has been based on strategies and platforms dedicated to each channel, each trying to address the end-customer in its own distinct and separate way. Today, an open approach is predominant. Each partner must be considered as an inherent part of the strategy with its own value. Additionally, each partner must be able to communicate freely with the brand to address the customer in the most coherent way possible.

New global approaches are emerging, in contrast to the model that consisted until now of intertwining technological layers. In these new approaches, technology plays the role of facilitator and enables the creation of a single buying journey, across multiple channels, that meets the expectations of the shopper, be it an individual in B2C settings or a business in B2B environments. 

Above all, these integrate seamlessly into the ecosystem of each stakeholder in the supply chain (i.e. manufacturer, distributor or brand). Their common denominator is their ability to independently activate the complete management of each sales channel by integrating ecommerce, OMS (Order Management System) and marketplace tools into a single solution. This is how any form of channel conflict can be quickly identified and reconciled.