Brands who both sell wholesale and through direct channels need to get to grips with the dangers of channel conflict. In the worst instances, the brand’s direct presence ends up in competition with its retail partners for the same customers. This is where revenue cannibalisation and brand damage can occur through discounting.
It doesn’t have to be this way, though. Smart brands take steps to differentiate their direct offerings from their retail partners to make sure they minimise the risks of channel conflict and get the best results in their direct to consumer channels. Here are the three top ways they achieve these results.
Apple just inked a deal with Amazon, allowing the retailer/marketplace/technology giant to sell more iPhones and other Apple products than previously accessible. This is similar to the deal Nike and Amazon signed last year, and like that deal, the point of it was to protect the brand image from the 3rd party resellers on the marketplace. Their second hand, refurbished and grey-market products were providing a poor experience of the brand to shoppers searching Amazon for iPhones.
Smartly, Apple decided to refrain from allowing their full product line to be sold on Amazon, maintaining some exclusivity and total experience control over the latest high-end iPhones. Likewise, Nike allowed only a limited selection of shoes to be sold through Amazon. The total number of available Nike products on the site actually decreased as a result of the deal.
Part of the reason why step one is effective for brands like Nike and Apple is that they understand different segments of their customer base have preferences for shopping in different ways, and for different products.
A brand seeking to avoid or redress channel conflict issues needs to use its customer data and analytics capabilities to look for opportunities to segment the customer base and look for patterns in shopping habits in order to best serve their various needs. This focuses the experience to match the profile of the shopper better on every channel and minimises conflict between channels as there is less overlap in product range.
Differentiating in branded stores
The project to give channels their own unique presence has to include any brick-and-mortar branded stores. Once again the emphasis should not be on competing with other retailers of the brands’ products – the store strategy focus for leading brands is on engaging with their customers through interesting and worthwhile experiences in stores.
This can be lead by technology, as with AR fitting rooms or checkout through an app. It can also be through events in store or just great visually captivating merchandising. In the long run, all channels should represent an investment in the equity of the brand and quality customer experiences.