What is a Channel Conflict?

Channel conflict, as the name implies, means that there is some form of conflict in the manner by which a company delivers a value proposition to a customer, client, or end user. It often refers to a situation where a manufacturer bypasses all necessary parties in the chain of production and attends directly to the consumer. In this case, the wholesaler, retailer, and any other party which was initially involved in transferring the products from the manufacturer to the consumer are cut off from the negotiations by the producer. 

Channel Conflicts are usually as a result of internet availability.

Different Types of Channel Conflicts

Horizontal Conflicts 

Here, the conflict occurs between two or more similar parties, serving under the producer or wholesaler. Let us assume that a wholesaler supplies goods to four different retailers based in counties W, X, Y, Z. Now if there is a major agreement between all parties to stick to their counties, a channel conflict can only occur when one retailer decides to sell products in another county. This will surely raise conflicts, and in a case where it cannot be solved, there is a possibility that all parties involved in supplying that product (from the manufacturer down to the retailers) will be affected. It is also possible that consumers might get affected if the products in those counties are only sold by these retailers. 

Vertical Conflicts 

Unlike the horizontal conflict, vertical conflicts occur between two members on a consecutive level, like a wholesaler and a retailer. Assume that a retailer gets products from a wholesaler for $30 each, and happens to sell them at $90 each to consumers. If consumers happen to get to know the actual cost of such a product, they might make a complaint to the manufacturer who in turn might phone the wholesaler. Thus, the wholesaler will have to question the retailer on such actions, especially if it is affecting the demand of such a good in the market. 

Multichannel Conflicts 

This generally refers to conflicts that affect different members of the supply circle without any particular order. Let us assume that a manufacturer happens to own two marketing channels; traditional and online. Now, he supplies products through the traditional channel at the cost of $40, and on the online marketplace at a price of $25. Now, merely looking at this, one can conclude that itll present issues for the retailer of such products. However, let us assume that the wholesaler happens to buy these products at $40 from the producer and aims to sell them at $43 each to the retailer. Since the retailer merely needs a sufficient enough amount of such products, one that is enough to attend to market demands, he decides to buy this product directly from the manufacturer through the online marketplace at $25 each. Now, if he decides to sell such products at $30 each to consumers, hell be able to get more sales compared to when hes buying from the wholesaler, and less sales when hes competing with the manufacturer. From this, we can see that this directly affects all three involved channels. Here, the retailer will lose more because consumers can make use of the online marketplace to get products for $5 less, while hed save $18 compared to buying from the wholesaler. Either way, the wholesaler wont be selling, because there is no retailer to buy at that price, and neither will the retailer be selling as much since there is a cheaper price available through another channel. Here, the manufacturer will have to either resolve the pricing issues, or decide to strike out the traditional sales method. It would be stupidity to choose the latter.

Related Topics

• What Does "Place" or "Placement" Mean?
• What is a Distribution Channel?
• What is Direct Distribution and Indirect Distribution
• What is Multi-Channel Distribution?
• What is a Channel System?
• Vertical Market
• Vertical Integration
• Ideal Market Exposure
• Intensive Distribution
• Selective Distribution
• Exclusive Distribution
• Discrepancy of Assortment
• Discrepancy of Quantity
• Channel Conflict
• Channel Stuffing