The Internet is a huge draw to both manufacturers and distributors and it is easy to understand why – its convenience, ease-of-use and time-saving nature makes it a perfect medium to capture the interest of consumers. However, while the Internet does carry the promise of new customers for distributors and manufacturers, many are slowly awakening to the fact that they have been viewing the promise of selling direct via the Internet, through rose tinted glasses.

A Forrester survey has revealed that 66% of distributors and manufacturers surveyed cite channel conflict as the major obstacle to selling online. Moreover, many of them have also discovered the additional costs of inventory management and logistics that selling direct incurs, which often eats into profit margins that once looked so large.

Channel conflict occurs when a business sells products or services to the same set of customers through a variety of distribution channels that conflict with one another. Many manufacturers are eager to use the power of the Internet to their advantage and sell online, however at the same time, they are wary of creating channel conflict with their middlemen.

Models used to deal with channel conflict include:

The referral model
This model points the consumer from the manufacturer’s or distributor’s site to local retailers in the consumer’s area, through the use of a locator application on the manufacturer’s web site. This assists in brand building for the manufacturer and also gives the consumer the option of product support and acquisition from a local entity.
However, do note that while this option may work well for retailers, the manufacturer is often left with no clue as to whether all the work he has done to sell to the consumer has translated into a bona fide sale.

The collaborative model
Rest assured that there are ways to work with channel parties in which all parties emerge as winners. How? The answer is simple, maybe even obvious – collaborate and cooperate. The secret to avoiding channel conflict is to collaborate with all existing channels of distribution instead of cannibalizing them.

Enter the collaborative model also known as the “share the customer” model. Here, the manufacturer or distributor creates co-branded websites with its retailers. This way, the customer goes to the manufacturer’s website, shops for the product, decides what he wants, then adds it to the shopping cart and then selects a retailer of his choice. The retailer gets the order and arranges for delivery. The collaborative model supplies the much needed services of pre-delivery inspection, customer service, installation and post-sales support.

Creating a successful collaborative model requires the creation of an integrated marketing and sales strategy with a common online infrastructure that integrates the entire distribution channel in a single unified system. A well-thought of and well-designed system gives website visitors access to real-time product information, including pricing and availability through retailers.

The collaborative model is a great channel-conflict solution because it is an efficient way of using the existing distribution chain for order fulfillment. In addition, it also gives the manufacturer a record of an actual sale (unlike the referral model). Another advantage is that both the retailer and manufacturer or distributor, have the contact information of the customer, which can be used for future promotional marketing. The collaborative model allows companies to support the eCommerce initiatives of their resellers, while still maintaining influence over the sales experience and their brand. Above all, keep in mind that your channels partners are partners with you in serving your customers.

With the collaborative model, the whole channel value chain wins.

Here are some more tips to help minimize channel conflict on the Web:
·          Include detailed information of your products/services and how to acquire them.
Ensure the manufacturer’s website provides detailed information about their products/services and               importantly, make it easy for the consumer to create a shopping list to take to the retailer. Just as essential: do not forget to make it obvious how and where to acquire the product/service
·          Allow your retails partners to fulfill orders for the customer.
·          Promote not only your products online but your channel partners too.
·          Encourage your channel partners to also advertise on their own.
They shouldn’t be depending on your advertising alone.
·          Include your channel partners into the decision-making process. Brainstorm with them and take their feedback into account when planning your distribution strategy.
·          Communicate your overall online distribution strategy clearly and precisely.
Ensure your channel partners are always informed about any changes, promotions and new products.