How to Manage Online and Offline Channel Conflict
When a company adds an online channel of distribution to existing brick and mortar channels of distribution, there are many challenges that it must address to develop cohesion between the two types of channels. By selling goods through a website, a company gains the opportunity of reaching a new audience of potential customers while also accepting the risk that it may also simply be spreading out its customers among more sales channels which it must manage. The e-business strategy of the online channel must be aligned to the business strategy of the offline channels so that they work together in order to maximize revenue. If the company does not achieve this cohesion, the two types of channels could work against each other to the detriment of the company.
Determining Product/Service Offerings
Every company has to make choices. For instance, a company can offer the same range of products through both channels or a range of products which are offered only either online or offline. This decision should be made on the basis of the target customers' characteristics and preferences as well as the relationship between the manufacturer and their offline partners. Generally speaking, online offerings should be similar to offline offerings. Otherwise, sales through one channel can have the effect of cannibalizing sales from the other. It is always a good idea to offer products and services wherever possible online to save on the costs of shelf space and warehousing at point of sales outlets. However, if offline channels are managed by partners, sometimes selling slightly different variations of products online and offline can allow for distributors to feel that you are not directly competing with them.
The Issue of Pricing
When online channels are added to offline ones, or vice versa, pricing strategy becomes critical and companies need to decide how to price offerings through one channel in comparison with another. A company may choose to charge the same price across both channels or a higher price for one and a lower price for the other. Each of these decisions conveys a different impression to the customer. Offering the same price tells said customer that the advantage of buying online offers benefits in other ways than price discounts. Offering lower prices online can create an incentive to buy whereas demanding higher prices online implies that the company is incurring additional costs. Offering a higher price through one channel when it is cheaper through the other channel generally confuses customers, which is why most retailers quote the same price for both web-based and store-based sales.
Managing the Conflict
Despite best strategies and policies, channel conflict can arise and must be properly managed. Coordination and control systems to help the channels complement each other have to be in place along with accurate inventory information. Customers should be easily able to use both types of channels. For instance, inducing a customer to order digitally and then picking up the item at the nearest store could encourage traffic to stores and provide customers with additional buying opportunities. An alternative to building up an online channel from scratch is to create partnerships with established e-commerce retailers. Companies have a large variety of options to choose from and it is up to them to maximize the benefits of omni-channel retailing.
However companies decide to manage their online and offline sales channels, it is crucial that management be aware of the conflicts that can arise between the two, from product offerings to prices to purchasing options.