Channel conflict in B2B e-commerce: solve or avoid?

The battle over omnichannel has been won. In its latest survey of B2B decision makers, McKinsey found that almost all believed an omnichannel sales strategy was at least as effective as traditional face-to-face selling. The Covid crisis accelerated this acceptance; in April 2020, during the first wave of lockdowns, confidence in omnichannel was markedly lower (65%).

But there’s a problem. When asked: “What are the barriers contributing to overall usage of eCommerce at your company?”, over a third of B2B leaders replied “channel conflict”.

In the age of eCommerce, saying that you fear channel conflict is as futile as protesting that you fear competition – both are unavoidable, and both need to be tackled head-on.

This first blog of a two-part blog series is a briefing on how you need to do that.

A source of internal conflict is that eCommerce competes with the efforts of the sales teams. In our recent blog series on B2B eCommerce strategy, we saw how sales should pivot to a more consultative approach as digital self-service and automation reduce the burden of routine tasks.

We will explore the wider conflict between channel partners in the chain of distribution. This friction is inherent to eCommerce but it played out with more urgency during the pandemic when brands and wholesalers started selling directly to their end users, because supply chains had been fatally disrupted, and physical retail had to close its shops.

These wholesalers and brand manufacturers had no choice but to switch to D2C channels (Direct to Consumer). It turns out, however, that many businesses that could grow revenue on direct channels do not make that choice out of fear of conflict with traditional business partners. An astonishing 93% of eCommerce managers report that they have lost income in this way because they want to keep their channel partners happy. The majority (59%) believe that they could grow sales by 10% or more if they were unconstrained by channel conflict.

In other words, there is a lot to be gained by getting your mix of channels right – and a lot to be lost if you don’t.

D2C: the future beyond Covid

The attractions of bypassing third-party distributors or resellers to go directly to your end customer are overwhelming. Not only do you make more margin, the proximity to your end customer gives you more data and insight into what these customers are thinking.

Pivoting to D2C requires considerable effort and investment. The fruit and vegetable wholesaler Van Gelder saw most of its market fall away overnight when restaurants closed in March 2020. The wholesaler had to completely reorganize its fulfillment to go from pallet distribution to single-wallet shipping. It did so successfully and its direct channel is still open even as its pre-Covid distributional channels are back in business.

Before the pandemic, the smart wallet brand Secrid was a fervent advocate of the retailer-only business model. When high street shops closed, Secrid had no alternative but to open a direct channel.

The success of Secrid’s eCommerce initiative confronted the brand with an interesting question: if someone buys a Secrid wallet from a shop, what is the added value of this reseller? Convenience, you might say, or instant gratification. But that is only true if the outlet stocks the Secrid model or color that you want; if it doesn’t your trip will have been wasted.

The Secrid experience illustrates the tendency in B2B for the middlemen to get squeezed out gradually. But few brands (and that includes Secrid) want to dispense with indirect sales channels altogether.

So, how do you avoid channel conflict with your resellers?

D2C: How to keep your distributors happy

Trust is as important in B2B relationships as pricing and service; it is crucial therefore that you are transparent with your distributional partners that you are opening up a direct channel.

You can proactively keep your resellers on board by giving them a place and a role in the online customer journey of your direct channels:

1. You could include a dealer/reseller selector page on your eCommerce site, giving your customers the choice of buying from you directly or from one of your partners. Store locators are a great way of driving footfall to your distribution channel.
2. If a customer decides to buy online, you could ask him to select a service dealer as part of the checkout process. This works for products that require maintenance, installation, spare parts or replacement consumables such as ink and toner for a printer. By rewarding a reseller for being your service outlet (by giving it a kickback fee, for example), you take the edge off the channel friction between you.
3. Another way of reconciling the interest of a brand manufacturer and its wholesalers or distributors is the transfer order. This is where the customer places an order directly with the manufacturer, but indicates at checkout that the wholesale partner is to invoice for the order and/or deliver it. Transfer orders give customers the flexibility they want without you cutting out the middleman from the transaction. This is important for all parties: manufacturer, wholesaler, and end customer all have an interest in maintaining an efficient and friction-free relationship.

While D2C is increasingly common – and feasible – most brands do not have sufficient scale for the level of time and investment required. The fastest way for those brands to ramp up sales is the marketplace.

Almost no brand can ignore the opportunities and threats of the marketplace sales channel.

In part 2 of our blog series we look at how you can defuse channel conflict in marketplaces, and how different brands are adapting their sales strategies through trial and error.