MEANING OF DISTRIBUTION CHANNEL
TYPES OF CONFLICT
MAJOR SOURCES OF CONFLICT
Perceptions of Reality
Conflict Resolution Strategies
3. What are Distribution
Distribution channels are the methods by which companies deliver products and
services to customers and end users. Some businesses sell directly to their
customers, while others might use a retailer or wholesaler to serve as an intermediary.
Companies may also use agents or brokers to facilitate the movement of products to
distributors that sell those wares to the customer.
5. TYPES OF CONFLICT
•Latent conflict describes the inevitable collision between channel members that pursue
their own separate goals, strive to maintain their autonomy, and compete for limited
•Perceived conflict arises as soon as a member senses any opposition: viewpoints,
perceptions, sentiments, interests, or intentions.
•Felt (or affective) conflict arises as when emotions enter the picture and can escalate into
manifest conflict. Individual players start mentioning conflict in the channel, as a result of
negative emotions they experience (tension, anxiety, anger, frustration, and hostility).
Organizational members personalize their differences (i.e. “That company is so rude. It
does not care how I feel.”)
•Manifest conflict is expressed visibly through behaviors (i.e. blocking each other’s
initiatives or goal achievement, withdrawing support)
6. MAJOR SOURCES OF CONFLICT
Channel members’ goals
Each channel member has a set of goals and objectives that differ from the goals and
objectives of other channel members
The inherent difference in what they want to achieve and what they value causes
principals to seek ways to monitor and motivate agents
Tension arises from perceptions of goal divergence
Example: Nike and Foot Locker
Wants supplier to:
•Accept lower gross margins
•Hold more inventory
•Spend more to support the product line
•Get by without allowances
•Achieve higher gross margins per unit
•Receive higher allowances
7. Perceptions of Reality
Distinct perceptions of reality induce conflict, because they imply the likelihood of divergent responses
to the same situation.
Perceptions differ even in relation to seemingly basic questions such as
# What are the attributes of the product/service?
# What applications does the product/service support, and for which segments?
# Who is the competition?
Misperceptions are so common due to focus
The supplier focuses on its products and its processes
Downstream channel members focus on its functions and customers
In domestic markets, channel members disagree in their views of the situation; in international settings,
cultural differences exacerbate the problem
Coca-Cola: In the 1980s, Coca-Cola introduced a
new formula for its signature soda, which it claimed
had a "bolder, smoother taste."
However, customers had a different perception of
the new formula, and many preferred the original
taste. This led to a significant backlash, with
customers protesting and stock prices plummeting.
The company eventually had to reintroduce the
original formula as "Coca-Cola Classic."
9. 7/29/20XX Employee orientation 9
INTRACHANNEL CONFLICT INTERCHANNEL CONFLICT
•Suppliers may sense conflict if their downstream
partners represent their competitors
•Agents and resellers rely on this tactic to provide
high coverage and lower prices
•Intrachannel competition can spark disputes,
especially if the downstream agent appears
insufficiently dedicated to meeting its responsibilities
to the supplier
Interchannel conflict, also known as channel conflict,
refers to disagreements or tensions that arise between
different channels of distribution. This can occur when
different channels compete for sales, or when one
channel feels that another channel is not following the
rules or is receiving preferential treatment.
Amazon: Amazon has faced intrachannel conflict with
some of its third-party sellers, who have accused the
company of using its size and power to dominate the
market and manipulate prices. In 2019, a group of
independent sellers in the US filed a lawsuit against
Amazon, alleging that it was engaging in anti-
competitive practices and unfairly competing against
its own sellers. The sellers claimed that Amazon was
using its data and algorithms to favor its own products
and push independent sellers out of the market.
Unilever: Unilever has faced interchannel conflict with
some of its distributors, who have accused the
company of favoring its larger partners and ignoring
smaller ones. In 2020, a group of independent
distributors in India filed a complaint with the
country's antitrust regulator, alleging that Unilever was
engaging in anti-competitive practices and violating
fair trade regulations. The distributors claimed that
Unilever was giving preferential treatment to its larger
partners and using its size and power to dominate the
10. MULTICHANNEL CONFLICT
•Multiple channels do not automatically compete. Different channels can serve distinct
•segments and perform different tasks.
•Channel members may assume they are serving the same customersThese owners will bundle
business operations to reduce channel conflict such as a corporate accountant to allocate costs
or revenues and a human resources manager to administer compensation.
•When channels are not independent, it is not as easy to settle disputes
•Identifying multi-channel conflict requires a clear recognition of the various benefits of the
multiple channels to the supplier
•Better coverage is an obvious benefit
•One channel might help the supplier manage another
Example – Coca Cola
Faced opposition in Japan after
installing vending machines, yet
market research revealed that
consumers used vending
machines on different occasions
and obtained different value than
they would from a retail setting.
•India’s E-commerce giants (such as
Flipkart, Snapdeal, and Amazon) are
challenging these offline-stores by
offering competitive pricing
•Manufacturers such as Canon and
Lenovo sought To undercut
Retailers by offering longer
warranties for purchases through
traditional “authorized “channels
11. Conflict Resolution Strategies
1. Forestalling Conflict through
Policies become institutionalized
when channel members institute
policies to address conflicts in early
stages, or even before it arises
•e.g. joint memberships in trade
associations, distributor councils,
•Some channels rely on built-in
appeals to third parties such as
boards of arbitration or mediation (as
is particularly popular in Europe)
•These channels serve subtle conflict
2. Information- Intensive Mechanisms
Heads off conflict by creating a better means to
can be risky and expensive since both sides
divulge sensitive information and must devote
resources to communicating
Trust and cooperation help to make conflict
Joint membership in trade associations allows
members to contain conflict through an
e.g. Walmart and Procter and Gamble’s close
connections are facilitated their personnel
exchanges, which require clear guidelines.
Participants have the opportunity to meet with
channel counterparts with similar tasks
responsibilities, professions, and interests
12. Conflict Resolution Strategies
Mediation and arbitration, the most widely used third-party mechanism, introduce third
parties that are not involved in the channel
•Mediation is the process whereby a third party attempts to settle a dispute by persuading
the parties to continue their negotiations or consider the mediator’s procedural or
•Neither party is obliged to accept the recommendations
•Arbitration allows the third party to make the decision, and both parties state in advance
that they will honor the final and binding decision.
•In compulsory arbitration, the parties are required by law to submit their dispute to a third
•In voluntary arbitration, the parties voluntarily submit their dispute, such that reneging on
the decision represents a major breach of confidence
•Arbitration offers all the benefits of mediation, plus the advantage that disputants can
blame the arbitrator is their constituents object to the settlement
•Some firms practice sequences of mediation and arbitration
13. Conflict Resolution Strategies
4. Building Relational Norms
Relational norms these preceding mechanisms are policies that can be
proactively devised, consciously put into place, and continually maintained by
management to forestall conflict or address it once it occur.
In a channel, norms entail expectations about behavior, shared by all members.
In alliance channels, common norms include:
•Flexibility: Channel members expect each other to adapt readily to changing
circumstances, with a minimum of obstruction and negotiation.
•Information exchange: Channel members share all pertinent information – no
matter how sensitive – freely, frequently, quickly, and thoroughly.
•Solidarity: Everyone works for mutual, not just one-sided, benefits.
14. Conflict Resolution Strategies
5. Using Incentives to Resolve Conflicts
Economic incentives work well, almost universally, regardless of their personalities,
players, or history of the relationship.
•Appealing to economic self-interest is a highly effective way to settle disputes
•Good negotiators base their arguments on economics, then combine them with a
strong program of communications in a good interpersonal working relationship
•e.g. manufacturer-sponsored promotions aimed at retailers
Manufacturers accuse retailers of taking promotion money (for point-of-purchase
advertising and displays for in-store use) and not mounting it. Retailed accuse
manufacturers for not fulfilling promised shares of promotion allowance.
This can be resolved if the manufacturer combines appealing economic incentives that
encourage participation in a pay-for-performance system that pays the retailer for the
items sold on promotion.
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NOW WE HAVE TAKEN ONE BRAND AND ANALYZE ITS DISTRIBUTION CHANNELS AND CONFLICTS
HAPPENED AND HOW IT RESOLVED IT.
•Beard brand is a men's grooming brand that specializes in beard care and grooming
products. The company was founded in 2012 by Eric Bandholz and is based in
•Beardbrand's distribution channels include its own website, which accounts for the
majority of its sales, as well as various brick-and-mortar retailers and a few online
marketplaces such as Huckberry and Urban Outfitters.
•In 2018, Beardbrand experienced a conflict with Amazon over the unauthorized sale
of its products by third-party sellers on the Amazon platform. The third-party sellers
were selling counterfeit products, which were of inferior quality and damaged the
•Beardbrand took action against the unauthorized sellers by filing a lawsuit against
them and also requested Amazon to take action against the sellers. Amazon
responded by taking down the infringing product listings and also collaborated with
Beardbrand to implement new policies and systems to prevent counterfeit products
from being sold on its platform. However, despite the resolution of the conflict,
•Beardbrand ultimately decided to drop Amazon as a distribution channel in 2019.
This decision was based on the company's desire to have more control over the
customer experience, as well as concerns over the impact of Amazon's dominance
on small businesses and the negative impact on the brand caused by the
unauthorized sales of counterfeit products on the platform.
16. After dropping Amazon, Beardbrand focused on
expanding its direct-to-consumer sales through its
own website and other select online marketplaces.
This strategy paid off, as the company saw a 20%
increase in sales in the year following the decision to
Beardbrand's success without Amazon demonstrates
the importance of having control over distribution
channels and the benefits of a strong direct-to-
consumer strategy. However, the company didn’t just
move out; it made shoppers aware it wouldn't sell on
Amazon again, perhaps, to prevent third-party
retailers eyeing the void to cannabalize sales.
So, if you search for “Beardbrand + Amazon” on
Google, you’ll find this result
Beardbrand dedicated a page to its Amazon exit and
optimized it to rank in search results.
The page explained that any products on Amazon are
counterfeit, stolen, or any arbitrage play (buying from
Beardbrand.com or Target and reselling on Amazon)
to sway buyers from its their channels.
NOW WE HAVE TAKEN ONE BRAND AND ANALYZE ITS DISTRIBUTION CHANNELS AND CONFLICTS
HAPPENED AND HOW IT RESOLVED IT.
Tortuga Backpacks beat channel conflict with its pricing strategy
The benefits of expanding marketing across different channels are too good to pass
For example, it can help you:
- open up multiple touchpoints to connect with shoppers
- drive new demand, and
- give customers the flexibility to self-direct their conversion paths.
But failing to harmonize prices across the channels could cause major conflicts.
For instance, selling a product at $25 in-store and offering the same product for $15
online could steal sales from the retail outlets, significantly impacting offline demand.
Of course, a brand has to choose between harmonizing the price or discontinuing one
of the channels to resolve this conflict.
Unfortunately, the first option will cut into their profit margin, while the alternative
shouldn't even be up for discussion.
Tortuga Backpacks, an online travel backpack retailer, however outmaneuvered this
quagmire by pricing intelligently across its channels.
Let’s see what we can learn from them.
The brand sells the most expensive version of its products on the eCommerce website,
18. Screenshot from Tortugabackpacks.com
But on Amazon, the company lists the older
version of an item, targeted at specific
demographics for a lower price to move
remaining inventory for discontinued or older
Here, you can see the Tortuga Backpack for en
on Amazon has a lower price.
The strategy lets the brand prevent direct
competition of the same SKUs.
It also helps them cater to their penny-pinching
Tortuga Backpacks’ CEO, Fred Perrotta, has
explained how they email the Amazon links to
people asking for discounts or saying they
can’t afford the product.
Key takeaway: By pricing intelligently across
existing channels, Tortuga Backpacks was able
to drive demands and move inventory without