Establishing the Foundation
As executives in manufacturing companies weigh the potential benefits of integrating B2B eCommerce into their sales strategies, the challenge of channel conflict emerges as a critical concern. Embracing direct eCommerce sales offers promising opportunities for growth and increased market reach, yet it also poses the risk of alienating existing dealers and distributors. By carefully balancing direct customer engagement with the health of traditional distribution channels, manufacturers can ensure a cohesive approach that supports sustained business success and market expansion through eCommerce.
The pivotal concern stems from the risks of adding a direct B2B ecommerce channel alongside existing dealer and distributor relationships. Disjointed pricing, product availability, service levels, and sales policies across channels without thoughtful coordination can undermine crucial business partnerships.
Fortunately, with transparent communication and strategic planning, manufacturers can mitigate most hazards and optimize their sales ecosystems for productivity and profitability. The essential steps involve: transparent communication, channel differentiation, price management, and partner compensation.
Transparent Communication
Forging a manufacturer-direct B2B eCommerce sales path requires openly discussing plans with existing dealers and distributors and getting their input..These relationships form the bedrock for reaching B2B customers, managing inventory, and delivering localized service, so it’s important to be open and honest with them.
In order to build transparent communication, manufacturers must convey their motivations behind this strategic move to building out a B2B eCommerce site, underscoring its complementary role in enhancing the existing offerings of distributors and dealers rather than creating competition.
These may include:
- Targeting specific customer segments or niche markets not adequately served by resellers
- Offering customization or configuration options that require direct interaction with the manufacturer
- Providing a platform for resellers to refer customers seeking direct purchases
- Leveraging direct sales data to identify trends and opportunities that benefit the entire sales ecosystem
Manufacturers can alleviate resellers’ concerns and foster collaboration by framing the direct sales channel as a way to enhance overall market coverage and customer satisfaction.
One of the most impactful ways manufacturers can support their reseller partners is by investing in their digital infrastructure and capabilities. The management and growth of an e-commerce presence involves providing the tools and resources necessary to manage and grow their ecommerce presence effectively.
For example, manufacturers can:
- Provide integration support to send resellers’ accurate inventory management and order information.
- Invest in data analytics and business intelligence tools that help resellers gain deeper insights into customer behavior, preferences, and purchasing patterns.
- Develop digital marketing solutions, such as automated email campaigns, targeted advertising, and social media management tools, to help resellers expand their online reach and engagement…..and apply co-marketing funds to support the channel.
- Provide comprehensive information that dealers can use when helping their customers evaluate the manufacturers’ products.
By equipping resellers with the digital tools and capabilities they need to thrive, manufacturers can accelerate the adoption of ecommerce across their channel ecosystem, driving increased sales, customer satisfaction, and brand loyalty.
Supporting Resellers’ Digital Capabilities
In the digital age, manufacturers must support the ecommerce capabilities of their distributors and dealers. This support can take many forms, such as:
- Providing access to product data, images, and descriptions for resellers to use on their websites
- Offering training and resources to help resellers optimize their online presence and digital marketing efforts
- Developing co-branded landing pages or microsites that showcase the manufacturer’s products and direct customers to reseller partners
- Integrating resellers’ inventory and ordering systems with the manufacturer’s ecommerce platform for seamless fulfillment
Manufacturers can extend their market reach by empowering resellers to succeed digitally and create a cohesive omnichannel customer experience.
A Case Study: The Dell Computer Example: Solving Channel Conflict
In the early days of the personal computer (PC) revolution, Dell Computers pioneered the direct sales model. While many traditional PC manufacturers relied on resellers and distributors to sell their products, Dell sold directly to customers through mail order and later online. This approach allowed Dell to offer lower prices and more customized configurations than its competitors, quickly gaining market share.
However, Dell’s success also raised concerns among its resellers, who wanted to avoid being eliminated. To address these concerns, Dell framed its direct sales channel as complementary to resellers. Dell emphasized that it would continue to work with resellers to sell to customers who preferred to purchase through a traditional retail channel. Dell also offered resellers incentives to refer customers to Dell’s direct sales channel.
By framing its direct sales channel in this way, Dell was able to foster collaboration with its resellers and maintain a strong relationship with them. This collaboration allowed Dell to grow its market share while supporting its reseller partners.
Channel Differentiation
To minimize channel conflict, manufacturers should curate their online product catalogs to complement rather than just duplicate the offerings of their resellers. This involves:
- Focusing on niche or specialty products not widely stocked by distributors and dealers
- Offering exclusive or limited-edition items through the direct channel
- Developing product bundles or kits tailored to specific customer needs or applications
- Providing a platform for customers to configure or customize products, with fulfillment handled by the manufacturer
By differentiating their direct sales assortment, manufacturers can tap into new market segments without cannibalizing resellers’ sales.
Curating Distinct Product Offerings Across Channels
A crucial factor in creating a strategic distinction across distribution channels involves curating specific product assortments tailored to each sales avenue. Manufacturers can showcase unique or specialized items through their direct online catalogs, which distributors or dealers may not extensively stock.
These could include:
- Rare or limited-edition products that appeal to collectors or enthusiasts
- Newly launched products that have yet to be widely distributed
- Value-priced or entry-level product ranges that require minimal pre- or post-sales support
- Highly customizable or configurable products that necessitate direct interaction with the manufacturer
By focusing on these unique product segments, manufacturers can attract customers who may need to be adequately served by the reseller channel while minimizing direct competition with distributors and dealers.
Conversely, resellers can concentrate on offering a curated selection of the manufacturer’s core product lines, particularly those that benefit from hands-on demonstration, local inventory availability, or personalized support. This allows them to cater to customers who value the simplicity and reliability of purchasing through a trusted local partner.
Differentiating Service Offers
Another critical element of channel differentiation is the strategic allocation of service offerings. Manufacturers can utilize their direct channels to provide supplementary self-service resources that empower customers to explore, learn about, and troubleshoot products independently. These could include:
- Comprehensive online knowledge bases with product manuals, FAQs, and how-to guides
- Interactive forums where customers can seek advice from peers and product experts
- Virtual product demonstrations and webinars that showcase key features and use cases
- Chatbots or AI-powered assistants that can answer common inquiries and provide essential support
By offering these self-service options, manufacturers can cater to tech-savvy customers who prefer the convenience and flexibility of finding answers on their terms.
In contrast, dealers and distributors can focus on delivering high-touch, personalized support services that differentiate them from the self-serve approach of the direct channel. This could involve:
- Pre-sales consultation to help customers identify the best products for their specific needs
- On-site product demonstrations, installations, and training sessions
- Customized integration and implementation services to ensure seamless adoption
- Ongoing maintenance, repair, and upgrade support to maximize product uptime and longevity
By specializing in these value-added services, resellers can attract customers who prioritize the peace of mind and tailored attention that comes with working with a dedicated local partner.
Through strategic service differentiation, manufacturers can provide customers with a spectrum of support options that cater to their unique preferences and requirements while highlighting the distinct value propositions of each sales channel.
Segmenting Customer Engagement
A third pillar of channel differentiation involves strategically segmenting customer engagement based on account characteristics and purchasing behaviors. Manufacturers can leverage data analytics to identify customer segments best served through each sales avenue and tailor their engagement strategies accordingly.
For example, resellers often have a competitive advantage when serving mid-market to large enterprise accounts that value the simplicity and efficiency of consolidating their cross-brand purchases, billing, and support through a single local partner. These customers may prioritize factors such as:
- Centralized account management and streamlined procurement processes
- Consolidated invoicing and flexible payment terms
- Integrated support services that span multiple product lines or locations
- Personalized attention and proactive problem-solving from a dedicated account team
- Local delivery (same day delivery) with on-hand inventory
By focusing on these high-touch engagement strategies, resellers can differentiate themselves as trusted advisors and long-term partners for their key accounts.
On the other hand, manufacturers can utilize their direct channels to target smaller businesses or individual buyers who may have unique purchasing preferences, such as:
- Access to a broader selection of products, including niche or customized options
- Self-service ordering and account management tools for greater convenience and control
- Direct access to product experts and support resources for specialized inquiries
By tailoring their engagement approach to these segments, manufacturers can create a differentiated value proposition that resonates with each customer group’s unique needs and expectations.
Ultimately, strategic channel differentiation is not about picking winners and losers but creating a win-win-win scenario for manufacturers, resellers, and customers. By optimizing each channel’s unique strengths and enabling them to work together seamlessly, manufacturers can unlock the full potential of omnichannel commerce and build enduring brand loyalty in the digital age.
Price Management
Consistent pricing across all channels is critical to maintaining strong reseller relationships. Manufacturers should establish clear pricing tiers and enforce them stringently to prevent undercutting and margin erosion for dealers and distributors. This includes:
- Set minimum advertised price (MAP) policies and monitoring compliance
- Offer price parity guarantees to resellers
- Provide transparent, real-time pricing data through dealer portals
- Align promotional discounts and bundles across channels
Manufacturers must ensure that the pricing of products which they sell directly is in line with or higher than those offered through traditional channels. Selling at a lower price than dealers and distributors is a guaranteed way to cause channel conflict. By safeguarding pricing integrity, manufacturers demonstrate their commitment to fair competition and the long-term viability of their reseller network.
Partner Compensation
Manufacturers should further implement incentive programs to strengthen reseller relationships and reward distributors and dealers for contributing to the commercial landscape. This can involve:
- Sharing leads generated through the manufacturer’s ecommerce platform with relevant resellers
- Allocating a percentage of revenue from manufacturer-direct sales to resellers operating within the same territory
- Offering volume-based rebates or discounts to incentivize resellers to drive sales
- Providing co-op funds for resellers to invest in marketing and promotional activities
These incentives compensate resellers for potential sales lost to the direct channel and motivate them to promote the manufacturer’s products actively.
Another critical area where manufacturers can optimize their channel investments is by leveraging the unique regional presence and customer relationships of their distributor and dealer partners. Resellers often have deep roots in their markets, with intimate knowledge of the market dynamics, customer needs, and competitive landscape. Manufacturers can tap into this localized expertise by:
- Collaborating with resellers to develop targeted, community-based marketing campaigns that resonate with local customers and address their unique pain points
- Co-funding or subsidizing community events, such as product demonstrations, training sessions, or customer appreciation initiatives, to build brand awareness and loyalty at the local level
- Providing resellers with localized content assets, such as product descriptions, images, and videos, that can be easily customized and deployed across their digital channels
- Partnering with resellers to create co-branded landing pages, microsites, or social media accounts that showcase the combined value of the manufacturer’s products and the reseller’s regional expertise and support
By empowering resellers to be the face of the brand in their regional markets, manufacturers can create a more authentic and engaging customer experience that drives increased trust, loyalty, and advocacy.
Investing in your Partners
Providing the tools, resources, and support necessary to succeed in the digital age, manufacturers can help their partners unlock new opportunities for customer acquisition, expansion, and retention.
This requires a strategic and data-driven approach to channel investment, focused on:
- Identifying the key drivers of reseller success, such as digital marketing effectiveness, sales productivity, or customer satisfaction, and allocating resources accordingly
- Establishing clear performance metrics and incentive structures that reward resellers for driving incremental revenue, market share, and customer lifetime value
- They continuously monitor and optimize channel investments based on real-time data and feedback, ensuring that resources are deployed effectively and efficiently.
- It fosters innovation and experimentation, encouraging resellers to test new approaches, technologies, and business models that can drive differentiation and growth.
By taking a proactive and strategic approach to partner compensation, manufacturers can create a virtuous cycle of growth and success, where the success of their reseller partners feeds back into the brand’s success.
Concluding Perspectives: Channel Optimization Drives Shared Value
In navigating the changes that expanded online engagement creates for their commerce ecosystems, manufacturers ultimately face a strategic choice: adopt either a defensive posture and rely solely on their channel for sales, or continue to grow with online technology where they sell to select segments while minimizing channel conflict.
With transparent communication, channel differentiation, price management, and partner compensation as core focus areas, manufacturers can reduce channel friction. More importantly, they create synergistic connections across sales avenues – blending physical and digital pathways into a cohesive commercial engine.
So rather than allow emergent ecommerce to fracture existing dealer/distributor ties, manufacturers must embrace this inflection point as a chance to enrich these collaborations. This approach helps in balancing growth and sustainability in the sales ecosystem.
If your business is considering rolling out a B2B eCommerce program and want to learn more on mitigating channel conflict, Wasserman Digital is here to help. Reach out to us today!
