wholesaler is a major player in watch distribution, then it is powerful, and will react
against the watch manufacturer selling direct. The wholesaler may even refuse to act as
distributor and may threaten to distribute only a competitor’s watches, which are not
available over the Internet. Furthermore, direct sales may damage the product’s brand or
change its price positioning.
Further channel conflicts involve other stakeholders including sales representatives
and customers. Sales representatives may see the Internet as a direct threat to their liveli-
hood. In some cases such as Avon cosmetics and Enyclopaedia Britannica this has
proved to be the case, with this sales model being partly or completely replaced by the
Internet. For many B2B purchases, sales representatives remain an essential method of
reaching the customer to support them in the purchase decision. Here, following train-
ing of sales staff, the Internet can be used as a sales support and customer education
tool. Customers who do not use the online channels may also respond negatively if
lower prices are available to their online counterparts. This is less serious than other
types of channel conflict.
To assess channel conflicts it is necessary to consider the different forms of channel
the Internet can take. These are:
1 a communication channel only;
2 a distribution channel to intermediaries;
3 a direct sales channel to customers;
4 any combination of the above.
To avoid channel conflicts, the appropriate combination of channels must be arrived
at. For example, Frazier (1999) notes that using the Internet as a direct sales channel
may not be wise when a product’s price varies considerably across global markets. In the
watch manufacturer example, it may be best to use the Internet as a communication
channel only.
Internet channel strategy will, of course, depend on the existing arrangements for the
market. If a geographical market is new and there are no existing agents or distributors,
there is unlikely to be channel conflict in that there is a choice of distribution through
the Internet only or appointments of new agents to support Internet sales, or a combina-
tion of the two. Often SMEs will attempt to use the Internet to sell products without
appointing agents, but this strategy will only be possible for retail products that need
limited pre-sales and after-sales support. For higher-value products such as engineering
equipment, which will require skilled sales staff to support the sale and after-sales servic-
ing, agents will have to be appointed.
For existing geographical markets in which a company already has a mechanism for
distribution in the form of agents and distributors, the situation is more complex, and
there is the threat of channel conflict. The strategic options that are available when an
existing reseller arrangement is in place have been described by Kumar (1999):
1 No Internet sales. Neither the company nor any of its resellers makes sales over the
Internet. This will be the option to follow when a company, or its resellers, feel that
the number of buyers has not reached the critical mass thought to warrant the invest-
ment in an online sales capability.
2 Internet sales by reseller only. A reseller who is selling products from many companies
may have sufficient aggregated demand (through selling products for other compa-
nies) to justify the expenditure of setting up online sales. The manufacturer may also
not have the infrastructure to fulfil orders direct to customers without further invest-
ment, whereas the reseller will be set up for this already. In this case it is unlikely that
a manufacturer would want to block sales via the Internet channel.
PLACE