Choosing your best channel to market is tough at the best of times, but the internet has added an extra layer of complexity to the relationship between suppliers, wholesalers and retailers.
Not all customers are the same. While they may face the same problem or need, the way they go about searching for a solution, evaluating the alternatives, selecting a product or service – and buying it – will vary from one group to the next.
What this means for the growth-oriented business is that “one size doesn’t fit all”. You need to find different ways of reaching out to these different segments, and you may have to find different distribution channels to satisfy them.
With the rise of the internet we saw, for the first time, effective disintermediation – the ability to bypass the traditional retail outlets to get directly to the customer. While it took some trials and errors to work out what products suited this new channel, the fact is that a significant amount of business is now done in this manner.
However it came with its challenges for those suppliers who continued to work through wholesale and retail channels. Basically, suppliers found themselves competing with their traditional channels, and this was rarely received in a positive spirit.
Thus a customer could evaluate a product in a store and then go to the internet to find the best price. This channel conflict created significant problems for those suppliers who wanted to take advantage of this new channel.
Some suppliers found themselves in conflict with their own staff. The sales manager who was paid a performance bonus on managing sales through the retail channel now faced the possibility of expending effort on marketing, promotion, sales training and so on, only to find that those resources ended up benefiting the internet channel with no compensation to them.
Imagine the response from franchise outlets that had to go it alone in the face of such erosion.
Multi-channel conflict has always had to be managed between agents, distributors, wholesale and retail, but this could normally be done on a geographic basis. The internet, however, has no such boundaries.
That does no mean to say that the new channel issues cannot be managed or, at least, mitigated. Some supplies simply use the internet for information content, others direct traffic and orders to the closest outlet.
The internet can also be used to provide different forms or quality of a product; thus a discounted or discontinued line could be offered through the internet with new models only available at the outlets. Products can be packaged differently in different channels so that like-for-like cannot be compared for price hunters, or different terms and conditions can be applied to different channels.
Those suppliers who face channel conflict are better to work with their various channels to find solutions that are mutually supportive rather than cannibalistic. Retail outlets might like the advantage of internet exposure if they can limit the loss of business to direct sales.
A company seeking to optimise their spread across multiple channels needs to bring all parties into the planning process so that the conflicts are exposed and discussed, and solutions arrived at that are acceptable to all.
Tom McKaskill is a successful global serial entrepreneur, educator and author who is a world acknowledged authority on exit strategies and the former Richard Pratt Professor of Entrepreneurship, Australian Graduate School of Entrepreneurship, Swinburne University of Technology, Melbourne, Australia.