Maintaining multiple sales channels empowers eCommerce brands to maximize their distribution potential.
But at times, those channels bump into each other.
On the other hand, multichannel distribution lets businesses:
- access different audiences
- provide buyers convenient shopping experiences
- communicate credibility to shoppers, and
- scale revenue.
For example, Marquis Matson from RugPadUSA has explained how selling in-store and on eCommerce platforms like Amazon expose small businesses to massive traffic and sales.
Despite these benefits, most managers agree that eCommerce channel conflict drains their sales performance.
For instance, 59% of participants in a BCG study said that their annual revenue would increase by 11% to over 20% if channel conflict weren’t a thing.
The data explains why nearly 40% of eCommerce managers say tackling conflicting commerce channels is their number one business concern.
However, savvy brands have found ways to turn channel conflict in eCommerce into tremendous sales opportunities.
You’ll discover how in a bit.
12 effective channel conflict management strategies from Top Brands
Two-thirds of the survey respondents reported avoiding some sales channels to prevent disrupting sales in others.
Fifty-three percent of eCommerce channel managers said they had experienced tensions between the in-house sales team and DTC channels.
And sadly, 44% believe channel conflicts in marketing will increase in the future.
Now, at this point, you’d ask, “What strategies can resolve conflicts in channel management?”
To answer your question, we studied what eCommerce brands do behind the scenes to manage channel conflicts effectively.
Here are a few relevant examples, backed by what they did right.
1. Tortuga Backpacks beat channel conflict with its pricing strategy
The benefits of expanding marketing across different channels are too good to pass up.
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, Tortugabackpacks.com.
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 products.
Here, you can see the Tortuga Backpack for men on Amazon has a lower price.
The same strategy also applies to Tortuga backpacks for women.
The strategy lets the brand prevent direct competition of the same SKUs.
It also helps them cater to their penny-pinching customer segment.
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 channel conflict.
2. Harry’s managed channel conflict by harmonizing prices
Unless you wish to clear specific inventory, selling at the same prices across all the channels helps avoid unnecessary channel conflicts.
A men’s grooming eCommerce brand, Harry’s disrupted the $17 billion men care industry with its vertical integration—designing, manufacturing, and distributing its products online.
Harry’s started by selling online with an inventory of 10,000 razor handles in 2013 and sold out in a few days.
The company expanded into other channels like Target, Amazon, and Walmart, perhaps, to maximize its reach and drive additional sales from unexplored spaces.
It avoided channel conflict by selling at the same price across all the channels.
Harry’s move allowed it to circumvent price competition with and between its marketplace retailers.
Key takeaway: Harry’s avoided channel competition by adopting one pricing.
Hey, have you seen this? Pick the right product price: 8 eCommerce pricing best practices
3. Nike beats channel conflict and cannibalization through DTC efforts
Several eCommerce businesses pursue omnichannel strategies to ramp up capacity and grab more market shares.
While this expectation could turn out positively for many, creating additional consumer channels might cannibalize revenue for other retailers.
This cannibalization occurs when an existing store loses sales to a new channel or nearby store.
It could be due to brick-and-mortar store customers shopping at the new online store or wholesale outlet or vice versa.
Of course, this channel conflict hurts sales performance, defeating the omnichannel intent.
Sadly, there’s no one-size-fits-all approach for dealing with cannibalization. But let’s see how Nike dealt with channel cannibalization.
How Nike captured lost sales from Amazon channel conflict and cannibalization
Nike declined to sell and distribute apparel and footwear on Amazon for several years, perhaps to control brand messaging and enjoy higher profit margins.
But all the while, consumers still buy Nike products on Amazon—thanks to third-party distributors that acquire the products at wholesale prices to resale on Amazon and other DTC channels, cannibalizing sales at Nike retail outlets.
In 2017, against its earlier stance, Nike announced its partnership with Amazon to recover sales from Amazon channel conflict.
According to the source, “Nike finally acknowledged that third-party sellers are cannibalizing its direct revenues and is counting on recapturing lost sales by selling products directly on Amazon.”
CNBC also reported Nike would sell to Amazon in exchange for stricter policing of counterfeits and restrictions on unsanctioned sales of its products.
But fast forward to 2019, Nike dumped Amazon to focus on its distinctive DTC efforts.
The sports brand saw that selling to Amazon through Vendor Central didn’t align with their Direct to Customer (DTC) goals, so they pivoted.
The brand now maintains a Nike store on Amazon’s Seller Central as a merchant to drive more DTC sales.
Screenshot from Nike.com
DTC sales are Nike’s highest-earning channel, so they’re doubling down on what’s working for them.
Key takeaway: Nike negotiated its differences with Amazon and found a way to sell through the platform without the threat of third-party sellers.
How Nike.com turned store channel conflict to an advantage
Nike also used channel conflict to its advantage when it started selling online.
Its brick-and-mortar partners felt Nike was cannibalizing their revenue through Nike.com.
But the company took the position that they were “expanding the pie” and not taking market share away from their retailers.
Nike’s CEO at the time, Mary Kate Buckley, saw their brick-and-mortar partners as strategic to their growth.
Buckley felt those physical stores allowed Nike.com shoppers to touch and feel the product—an experience they would never have online.
So the brand addressed its inter-type channel conflict—channel conflict within its organization.
The company allowed departments outside its Nike.com project to contribute ideas and resources to the project.
Key takeaway: Nike bridged the gap between its online and brick-and-mortar partners to leverage their combined selling strength.
4. WheelerShip adopts omnichannel to boost brand authority
While several businesses rely on multi-sales channels to scale operations, WheelerShip's channel expansion shows a clear-cut omnichannel strategy can also boost brand authority.
The brand started as a family shop in 2010, operating in an industry that lacks customer and consumer confidence.
However, to strengthen its brand authority and build customers’ confidence in its products, WheelerShip has added several channels—Amazon, eBay, online wholesalers, dropshipping, and its eCommerce site —to reach customers through their preferred options.
Channel expansion has allowed the brand to meet their customers where they are, enabling them to shop in ways they feel comfortable.
Besides strengthening their marketplace presence, Kate Cannova, WheelerShip’s Chief Business Officer, has explained how investing in DTC and brand integrity has also positively affected the B2B side of their business.
Key takeaway: WheelerShip expanded its online presence to build the brand’s authority.
5. Three Ships launched on Target while avoiding channel conflict on their stores
Three Ships, a natural skincare brand, started in Canada in 2017 in an apartment kitchen with a chemical engineer and business graduate.
The brand was selling through its retail outlet without much success.
Conni Lo Notes, the co-founder, explained that raising broad US awareness was a major challenge.
Consequently, the brand launched on an online marketplace to expand its reach.
Of course, this kind of expansion typically leads to multi-channel conflict, but the brand was strategic with the marketplace it adds to its sales channel to avoid creating conflict.
Lo explained their choice of Target was contingent on the retailer’s broad reach and customer base, which also aligns with their shopping demographics, meaning “exposure and instant recognition” from a high-reaching audience.
Instead of channel conflict, the launch made Three Ships experience the halo effect.
According to Lo, “We’ve had many mass retailers reach out after discovering us at Target, which has greatly benefited our distribution rollouts.”
Key takeaway: By adding a sales channel that matches its customer demographics (Target), Three Ships reached more Americans without hurting existing channels.
6. Beardbrand boosts sales by 20% by dropping Amazon
Brands like Nike navigated channel conflict by expanding into Amazon, but the Beardbrand experience proves there’s no one-size-fits-all solution to channel conflict management.
Albeit the American men’s grooming brand was generating up to 10% of its revenue from Amazon, when it realized selling on the platform prevented it from maximizing its DTC channel.
So, the brand pivoted to focus on selling through its website and other channels to safely navigate the Amazon channel conflict.
And this seemingly suicidal move boosted sales by over 20%.
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 other channels.
Screenshot from Beardbrand.com
Beardbrand found this channel conflict resolution approach effective for their brand.
Its founder, Eric Bandholz, believes Amazon doesn’t fit businesses that heavily rely on branding and customer experience to sell their products.
He explained that selling on the platform slows them from delivering a “class-leading experience” to customers.
Key takeaway: Beardbeard navigated the Amazon channel conflict by stopping sales in the marketplace.
7. Apple manages channel conflict through its controversial but successful move to DTC
Apple was leading the personal computer market in the 1990s, relying on authorized resellers and large retailers to push its Mac range of computers to the consumers.
But the brand had to adopt DTC sales after inter-type channel conflict made it lose its leading market share.
According to the IBS Center for Management Research, “To regain its market share, Apple started selling online (1997) and through company-owned retail stores (2001).”
Notably, it severed relationships with Sears and Best Buy due to poor sales support.
In their place, the brand opened a 24-hour eComm store, the Apple Store Online, to increase its market share and sales.
Screenshot from Apple Store
However, Apple carried its channel expansion physically, opening several retail outlets to reduce middlemen’s involvement, incurring their ire.
The authorized resellers alleged Apple prioritizes its retail stores during shipments.
One of the store owners explained that Apple wants to sell everything by itself.
“They keep opening more and more retail locations. They want to drive business to their own stores. They offer deals there that they don’t extend to (the channel). Every time they open another store, they are potentially putting a solution provider out of business.”
So they sued the company in 2003.
But Apple continued expanding its DTC strategies, generating close to $1 billion in sales from its 185 retail stores as of July 2007.
And it continued to grow the outlets by 33% yearly.
Additionally, Apple maintains a store on Amazon as a direct-to-customer seller.
Key takeaway: Apple mitigated inter-type channel conflict through aggressive online and offline DTC expansion to cut down middlemen involvement.
8. Skinny & Co and Apple prevent channel conflict by eliminating discounts
A study found that nearly 60% of consumers search for promo codes before buying online, making it effective for driving sales.
But a downside is that it undercuts retailers, especially for brands that rely on third-party retailers to push their products to the consumers.
This is known to drive an unnecessary wedge between retailers or the DTC channel and the retailers’ network.
Without a doubt, a typical consumer is a value maximizer.
Thus they’ll generally prefer to shop with retailers or channels offering lesser prices on the same product.
Of course, this effort could drive short-term revenue.
However, it undermines the omnichannel network, stealing sales or cannibalizing other channels.
Apple and its retailers prevent this from happening by incentivizing purchases with product giveaways or gift cards instead of using discounts.
And you could see this strategy on their website.
Screenshot from Apple Store
Product bundling is another way to offer value to shoppers without discounting,
Besides delighting customers, boosting sales, and improving the average order value (AOV), it provides another option to manage inter-type channel conflict.
Skinny & Co, an organic cosmetics brand, nails product bundling.
It bundles different organic body care products into a travel kit rather than selling them individually to promote a chemical-free lifestyle to travelers.
The bundling provides shoppers extra value without cannibalizing sales or shortchanging any channel.
Key takeaway: By dropping discounts for product giveaways, gift cards, and highlighting bundled products, Skinny & Co., Apple, and Apple’s distributors incentivize purchases.
9. Nike offers in-store-only unique products to navigate channel conflict
Offering exclusive products on a channel prevents competition with other sales channels or undercutting retailers on price.
Additionally, it creates buzz and builds demand for products, which could snowball into a halo effect on other products.
But the resource that goes into creating custom products makes this channel conflict resolution strategy not widely spread.
However, Nike is an excellent example of the few brands doing it well.
Screenshot from Nike.com
The company offers unique products that only Nike.com provides, preventing conflict with other channels where those products are not available.
Its Nike By You (formerly, NikeiD) online service allows customers to personalize and design their iconic Nike merchandise.
Key takeaway: Nike curbed channel conflict by introducing unique offerings for in-store experiences, instead of competing on price.
10. Nike tested the waters before committing big to a new channel
Nike prevents creating channel conflicts by testing the waters before committing big to a new channel.
For example, before selling online through Nike.com, they tested the site with a few products and then committed more resources when they experienced reliable performance.
But the brand withdrew from the program to focus on their DTC strategies after selling on Amazon through their Vendor Central program for two years —2017 to 2019.
Nike saw the partnership with Amazon as a pilot.
“As part of Nike’s focus on elevating consumer experiences through more direct, personal relationships, we have made the decision to complete our current pilot with Amazon Retail,” a Nike spokeswoman told CNBC.
Key takeaway: Nike avoided conflict by introducing their Nike.com channel gradually, learning from each move they made, and adjusting quickly before it hurt their brand and sales.
11. Nike, Beardbrand, and Three Ships beat channel conflict by doing more of what works
Nike, Beardbrand, and Three Ships channel conflict resolution strategies reveal that doing more of what works for you remains the best way to navigate channel conflicts.
Nike.com helped Nike reunite with their traditional way of selling their products—right out of Phil Knight’s car directly to the buyer.
Phil built the brand on DTC and found success with it.
In 2019, Nike generated $11.8 billion from DTC sales.
In addition, they saw a 35% boost in online sales and a 6% increase in same-store sales, confirming upward trending DTC sales for the brand.
Also, Beardbrand understands the channel that works for them and sticks to it.
The company moved its products from Amazon to focus on its best-performing channels, boosting sales by over 20%.
Like Nike and Beardbrand, Three Ships was strategic with its sales channel choice.
It opted for a marketplace with a customer base that aligns with its shopping demographics, enabling it to gain instant exposure and recognition from a highly qualified audience.
Key takeaway: Sometimes the best way to stay away from channel conflict is to stay with what’s working already. Nike and Beardbrand exemplify this point by sticking to channels that have worked for them.
12. Braas Monier manages channel conflict by launching a new brand
Of course, adding channels to reach new customers risks alienating existing resellers.
But Braas Monier, a German roofing material maker relying heavily on distributors to push its products, avoided this friction when expanding its online DTC channel by establishing a new brand with its separate entity and website.
The new brand, MeinDach (My Roof), connects roofers with homeowners, allowing the latter to manage the process of repairing or replacing a roof faster than usual, in an industry where high demand and short supply results in a long wait time even up to a year.
Screenshot from MeinDach.de
Setting up MeinDach as a separate brand made it work faster than if it had been part of Brass Monier, and this approach paid off.
Within 12 months of its launch, MeinDach support boosted sales about five times the annual average for a typical German roofer.
Additionally, the number of roofers interested in partnering with the company jumped from 12 to 500 in just a year.
Also, the company’s customer acquisition costs dropped from hundreds of euros per homeowner to about €20.
Key takeaway: By launching a new and distinct brand, Brass Monier prevented channel conflict when it expanded to DTC.
Channel conflict FAQs you ought to know
Let's quickly look at some of the questions people frequently ask on eCommerce channel conflicts and conflict resolution strategies.
What is channel conflict in eCommerce?
eCommerce channel conflict occurs when sales channels or partners in a sales channel oppose each other.
This conflict usually happens when a brand sells directly to its customers online or via retail outlets to capture additional sales.
The move causes existing channels to compete against each other for available customers.
What is an example of a channel conflict?
Here are some real-life examples of channel conflict:
- Beardbrand moved to Amazon to expand its eCommerce presence but found that selling on the marketplace prevents it from maximizing its best-performing channels.
- Apple’s aggressive DTC expansion in mid-1997 placed it on a collision course with its distributors, who sued the company for allegedly stealing their business share.
- Nike’s initial reluctance to sell on Amazon prompted third-party retailers to exploit the void to resell its merchandise, resulting in sales cannibalization.
What are the different types of channel conflict?
Three types of channel conflicts commonly exist, and they are:
- Vertical channel conflict
- Horizontal channel conflict
- Multichannel conflict
What are the causes for channel conflict?
Some of the things that could cause eCommerce channel conflict include:
- Expanding into additional channels to reach new customers.
- Selling on a channel that’s not suitable for the product may give rise to conflict.
For instance, using Amazon for B2B products might cause friction with the in-house sales team.
- Selling at different prices across the channels can cannibalize revenue.
- Offering online shoppers discounts undermines the retail outlets.
- Allowing third-party retailers unfettered access to buy at lower prices to resell on various channels.
How do I reduce channel conflict?
Here are some tips to resolve sales channel conflicts:
- Use uniform retail pricing to avoid undercutting existing channel partners.
- Only expand into channels that are appropriate for the products.
- Offer exclusive or unique products on a specific channel to prevent unnecessary competition with other channels.
- Remove channels that fail to meet expectations or undermine maximizing your best-performing channels.
- Recover lost sales from unauthorized third-party retailers by launching on all the marketplaces they use.
If you don’t find it tenable selling on the platforms, then make it clear to customers that you don’t sell there.
- Avoid the herd mentality. Stick to what works for you.
For instance, if selling on Amazon pays you more than a DTC channel, then ramp up your Amazon marketing efforts
- Add several channels to strengthen the brand authority and build customers' confidence if you operate in a skeptical or less-trusting industry.
What are some foundational ways to manage or contain channel conflict?
While reducing channel conflict right away can be tough at any given point in time, you could look at taking steps to manage or contain it.
Here are some ways that can be good-to-do even otherwise - even better when there’s channel conflict.
- Study customer segments thoroughly. This can reveal newer insights on how, where and why customers are preferring to buy.
- Match segments with channels. This can not only help businesses figure out the right pricing strategy to avoid channel conflict but also to introduce incentives for individual segments across matched channels.
- Decide on product mix based on findings. This would include which products you’d float through which channels, if you’d talk about the same product in the same way across channels etc.
For example if you create wholesale and retail versions of the same product, you would certainly need to float them through different channels and perhaps even communicate about them differently.
- Align channel and customer journey. This will prevent you from wrongly putting out products, offers and innovations that customers won’t buy into.
The more aligned a customer’s journey is with a channel’s inherent nature, the less likely it is for channel conflicts to start and stay unresolved.
Are all channel conflicts bad?
Channel conflict provides a huge opportunity for brands to review existing channels and maximize on what's working successfully.
For instance, resolving the Amazon channel conflict helped Nike generate $11.8 billion from DTC sales, while Beardbrand boosted sales by over 20% by maximizing what works for them.
What are some of the ill-effects of channel conflict?
While channel conflict can potentially lead to the discovery of better possibilities around research, innovation and sales, in a more immediate way, it has undeniable ill-effects.
- Dipping sales volumes
- Unsatisfied customers
- Competitors leveraging the situation to win over a brand’s existing customers
- Flailing and unstable brand image
What is vertical channel conflict?
Vertical channel conflict occurs between players within different distribution channel levels.
It’s typically between a retailer and a distributor or the manufacturer and a distributor.
What is a vertical conflict example?
An excellent real-life example of vertical channel conflict is Apple’s controversial move to DTC.
In a bid to regain its leading market shares, Apple started selling online and through numerous company-owned retail stores.
Apple’s aggressive DTC expansion puts it at loggerhead with several distributors who accused the brand of sabotage, consequently suing the company in 2003.
What is horizontal channel conflict?
Horizontal channel conflict occurs between players within the same distribution channel levels, such as retailers or distributors.
What causes horizontal conflict?
The primary cause of horizontal channel conflict is when the channel players try to undercut each other to drive more sales.
For example, a retailer might offer a considerable discount to incentivize purchases, thereby driving businesses from other retailers within the area.
What is multi-channel conflict?
When two or more sales channels for the same product begin to compete fiercely, it can be termed as multi-channel conflict.
For example, when a product exists both on an eCommerce marketplace and a DTC channel, the former might attract many more customers thanks to deeply slashed prices, regular offers etc.
This will present a multi-channel conflict scenario.
What is the first step in managing channel conflicts?
The first step in managing channel conflicts is understanding the source.
Beardbrand expanded into Amazon to maximize its reach.
But with time, the brand realized that selling on Amazon limits it from maximizing the other channels.
Despite driving ten percent of its revenue, the eCommerce brand pivoted from the platform to selling through its best-performing channels.
As a result, it boosted revenue by over 20%.
What is intertype channel conflict?
Intertype channel conflict is sales channel conflict within an organization.
An example of this conflict is when a brand’s online DTC channel expansion affects the company-owned brick-and-mortar stores’ sales performances.
For instance, Nike’s physical stores, at a point, felt the company was cannibalizing their revenue through Nike.com—the online DTC channel.
However, Nike managed the tension successfully, turning the store conflict into an advantage.
What is channel conflict and how is it managed?
As explained earlier, channel conflict is when partners in a sales channel oppose each other. The best approach to resolving channel conflict depends on its source.
- If you are losing sales to marketplace resellers, you might want to expand into that platform like Nike did or drive negative sentiment against the resellers like Beardbrand.
- If physical store retailers fail to provide expected sales support to your customers, then follow in Apple’s footsteps by expanding your retail outlets.
- Use strong contract terms to prevent retailers from undercutting each other.
How do you resolve a multi-channel conflict?
Multichannel conflict occurs between a company’s two or more sales channels.
It usually occurs when a brand targets the same audience. So the best approach to resolving a multichannel conflict is customer segmentation.
What is channel conflict management?
Channel conflict management is a systematic approach to resolve frictions between sales channels.
It enables businesses to transform channel conflict into sales opportunities.
How can channel conflict be turned into opportunity?
While there’s no one answer to this, there are a few steps you may want to explore to clean up the mess left behind by channel conflict and convert it into an opportunity:
- Consider creating private labels. This can potentially help you sell the same product across channels without conflict.
- Think of a multi-brand alignment with various channels. If you have products across a number of categories, consider dividing them into different smaller brands based on price points and ingredient/material/process exclusivity. This will prevent in-fighting.
Wrapping It Up
Channel conflict is an inevitable reality of running an eCommerce business.
Though it could be lethal to your sales, it provides opportunities for brands to maximize their other channels, enabling them to drive thousands of dollars from unexplored or unexpected spaces.
Regardless of the industry or channel conflict type, the tips in this article provide a definitive approach to mitigating sales channel conflict.
Action them to transform your channel frictions into sales opportunities.