When you started selling your products online, did you consider the impact it would have on your existing sales channels and on the customers who buy through them? If not, you’re not alone. Grant Thornton’s “Strategic Source and Sell: Channel diversity survey” found that executives in manufacturing, distribution and retail industries often anger customers in existing channels when they start selling online.
One in five businesses indicates that channel conflict (i.e., sales and prices in one channel conflicting with those in another) is a major or moderate issue for them. But the reward of adding online sales seems to outweigh the risk: The average profit before interest and taxes for businesses with no online sales was 13.3%, compared to 14.9% for those selling through their own or third-party sites, and 17.7% for those selling via both their own and others’ websites. In other words, online sales can make your business more profitable.
Before you consider adding an online channel to your sales mix, keep this in mind: Internet sales often have different pricing structures, which may complicate your relationship with customers who are buying from your other channels. Here are some strategies that should give you a good start in managing channel conflicts:
• Avoid product-offering overlap; instead, offer exclusivity within each channel.
• Establish clear agreements with your partners that detail scope of control over products and brand names in given markets.
• Be open with partners about channel distribution, and explain why you’re taking a new approach.
Online transactions won’t go away, but companies that manage the process poorly might. Let me know about your online sales efforts and its challenges: email@example.com or @wallygruenes.