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What Is Channel Conflict?

Simply put, 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 each other. A perfect example is the computer industry. A decade ago, it was foolhardy for a computer manufacturer such as IBM, Apple, or Hewlett-Packard to sell computer products direct to the end user; by doing so, they risked losing the retailers who bought their products either directly from them or from distributors. If the manufacturers sold their wares directly to consumers, retailers would see the computer companies as direct competitors.

For years, manufacturers of products—just about any type of product—would not sell direct to consumer, competing with retailers and risking the loss of an important distribution channel. Cutting out the middle man was not an option. But then the Internet arrived, and businesses saw the potential of eCommerce. Once, a manufacturer or distributor would find it difficult to sell direct to consumers in existing distribution channels; but now the Internet made it easier to market and sell products direct. Manufacturers are chomping at the bit to sell online, but concerned with the problem of channel conflict.

But there are ways to work with channel partners in which all parties can win. The secret is to collaborate with existing channels of distribution, not cannibalize them. Each member of the distribution chain—manufacturer, distributor, retailer—must understand that the goal is to serve the customer, not the channel. Channel cooperation is the solution to channel conflict.

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