What's channel conflict and what does it have to do with B2B commerce? Find out what you need to do to balance traditional and digital channels with strategies for collaboration, alignment and integration to deliver a customer-centric experience.
Navigating the intricate dance between channel partners, distributors and the dynamic world of digital platforms is akin to walking a tightrope for many businesses. The ever-changing online domain and the thriving B2B sector introduce complexity to an already dynamic and competitive environment, particularly for manufacturers deeply rooted in traditional distribution channels.
In this blog post, we'll embark on a journey through the nuanced world of channel conflict in B2B commerce. We'll dissect commonly utilized channels, probe into the root causes of conflicts and, most crucially, unveil savvy strategies to sidestep these conflicts while fully embracing the boundless opportunities of the digital frontier.
Join us as we uncover the secrets to maintaining harmony in a business ecosystem that straddles the best of both traditional and digital worlds.
What is channel conflict?
In B2B commerce, channel conflict materializes as a complex interplay between various distribution channels within a business ecosystem. This phenomenon occurs when these channels, such as traditional distributors and newer digital platforms, find themselves in competition or disagreement.
The repercussions of channel conflict are far-reaching, ranging from operational inefficiencies and strained interpersonal relationships to, in the gravest scenarios, outright disruptions in business continuity and damaged reputations. Manufacturers, particularly those navigating a landscape that relies on a blend of channel partners and direct sales, are particularly susceptible to the potential pitfalls of channel conflict.
For businesses, understanding that embracing digital channels doesn't necessitate the abandonment of existing distribution networks, this is a pivotal realization. Instead of viewing digital channels as threats to traditional methods, a strategic and forward-thinking approach can reframe them as complementary components. This shift in perspective transforms potential conflicts into collaborative opportunities, where the amalgamation of traditional and digital channels works synergistically.
By doing so, businesses not only safeguard the stability of their existing relationships and downstream supply chains but also fortify their market presence with growing opportunities to connect directly with their end customers. The crux lies in the adept navigation of this delicate balance, wherein both traditional and digital channels contribute to a unified strategy aimed at preventing conflict while elevating the overall customer experience.
What channels do B2Bs most often use?
B2B manufacturers weave their distribution strategies using various channels, each contributing to the overall complexity of the ecosystem. Channel partners, acting as intermediaries between manufacturers and end-users, are a linchpin in this intricate network. These partners often manage relationships, marketing and sales, playing a crucial role in expanding the reach of the manufacturer's products.
Distributors function as wholesalers, acquiring large quantities of products and subsequently delivering them to retailers or directly to consumers. Notably, the key distinction lies in the fact that distributors typically cultivate enduring relationships with manufacturers, actively engaging in sales and marketing endeavors to both promote and distribute the products. On the other hand, wholesalers collaborate with various distributors and manufacturers, lacking brand loyalty and primarily focusing on acquiring products in bulk at lower costs for subsequent resale at higher prices. These dynamics form the foundational pillars of traditional B2B commerce.
The advent of digital platforms, however, introduces new players to this ensemble. Online marketplaces, like Amazon, Alibaba and others, serve as powerful tools for manufacturers to reach a broader audience. While these platforms provide unparalleled visibility, they can also become sources of conflict. The ease of accessibility and the potential to offer products directly to consumers through eCommerce platforms might be at odds with the traditional distributor model.
Additionally, direct sales, especially when manufacturers of CPG/consumer-like products and services, decide to sell directly to customers through their websites, can pose a challenge to channel partners and distributors who have historically played a pivotal role in the sales process.
Striking a balance between these traditional and emerging channels is key to preventing conflicts that could otherwise jeopardize the harmonious functioning of the entire B2B ecosystem. By recognizing the potential points of friction between these channels, businesses can implement proactive strategies to ensure a seamless integration that maximizes the strengths of each channel.
What causes channel conflict for B2Bs?
The emergence of channel conflict in B2B commerce often stems from the disruption caused by powerful online giants, such as Amazon, entering the competitive arena. Fear often lurks within businesses, fueled by concerns of brand dilution and the perceived threat to the carefully crafted image they have maintained through traditional channels.
The prospect of relinquishing control over pricing and promotions in the seemingly unpredictable domain of eCommerce platforms can be a source of tension. The trepidation that these digital channels might overshadow or even replace the existing distribution networks prompts businesses to question the sustainability of their long-standing strategies.
However, a paradigm shift is essential in the mindset surrounding these digital giants. Rather than viewing them as adversaries, businesses must recognize them as potential allies in the pursuit of a broader market reach. The digital landscape, when harnessed strategically, can serve as an extension of a brand's presence, enhancing visibility and customer engagement.
Chris Baltusnik's insights, as discussed at B2BOnline Florida, underscore the importance of considering Amazon, for instance, not as a threat but as an integral part of the brand strategy. Recognizing that these platforms can enhance current strategies, businesses pave the way for a harmonious coexistence, where traditional and digital channels work in synergy. This approach fosters a resilient and adaptive business model. The emphasis here is on taking ownership of one's presence on these channels, irrespective of personal preferences. Failing to do so may result in others, potentially knockoffs, taking control, posing a more significant threat to the brand.
When I say Amazon, a lot of people in the audience may scoff and say, ‘We don't even want to think about Amazon.’ It's a competitor channel conflict. But I think the importance of developing an Amazon strategy…it's here. It's not going anywhere. Amazon B2B is taking off.
E-Commerce Transformation and Operations Leader, Owens Corning
Embracing this collaborative approach allows businesses to navigate the complexities of the modern marketplace while ensuring that channel conflict doesn't impede progress but rather becomes a catalyst for innovation.
How to avoid B2B channel conflict
In the pursuit of seamless channel integration and collaboration, businesses are pioneering innovative strategies that bridge the traditional and digital realms. Tamron Europe, for instance, pursued a brilliant solution to the challenge of introducing transaction capabilities to their website without alienating a vast network of distributors. This journey exemplifies a thoughtful localization strategy where each distributor gains autonomy with a country-specific storefront, transforming potential conflicts into collaborative opportunities.
As this example shows, when it comes to B2B commerce, successfully sidestepping channel conflict demands a nuanced and collaborative strategy. Businesses poised for resilience and growth recognize that the integration of digital channels doesn't imply forsaking traditional partnerships; instead, it's an artful dance between the old and the new.
A pivotal component of this approach is empowering distributors with cutting-edge tools that facilitate seamless collaboration. The integration of eCommerce tools, like commercetools' Merchant Center, that empower business users and partners through effective and intuitive tooling, is a transformative game-changer. This setup not only facilitates brand manufacturers in retaining control over product data and information but also ensures an environment where business users and partners can actively participate and contribute.
Granting distributors control over their localized storefronts instills a sense of ownership and autonomy, alleviating concerns about disempowerment. In addition to transforming distributors into active contributors to the overall success of the business, this approach opens up opportunities for localization. Distributors can leverage this empowerment to run promotions tailored to their specific markets, enhancing their effectiveness and relevance.
Clear communication and well-defined guidelines emerge as linchpins in the quest to harmonize diverse channels. In the absence of transparent communication, misunderstandings can fester, potentially leading to conflicts that undermine the collaborative spirit. Establishing guidelines that delineate the roles, responsibilities and expectations of each channel ensures a cohesive effort towards a shared goal – delivering an exceptional customer experience.
This strategic alignment transcends the superficial dichotomy of traditional versus digital, encouraging a symbiotic relationship where each channel complements the other. The result is a unified front that maximizes the strengths of both traditional and digital channels, ultimately creating a seamless customer journey that adapts to the evolving expectations of the B2B marketplace.
In essence, the quest to avoid channel conflict goes beyond mitigating tensions; it's about embracing collaboration and leveraging each channel's strengths to deliver an unparalleled customer experience.
Read our guide on Pivotal Trends and Predictions in B2B Digital Commerce in 2024 to discover further B2B insights.
Julia is a Senior B2B Product Expert at commercetools. With over a decade of experience across product and marketing teams in the tech world, she is an expert at creating innovative, customer-first strategies, and excelling in cross-functional growth & GTM initiatives.