HomeSpecial ReportE-commerce That Avoids Channel Conflict

E-commerce That Avoids Channel Conflict

“Wait — let me get a pencil and paper to take that down. (Pause) OK, what was it you wanted?”

No B2B buyer wants to hear that from a vendor when they place an order the old-fashioned way, by phone. Such aggravations, among other factors, have helped spur the growth of B2B e-commerce.

By 2025, 72% of B2Bs expect 41% or more of their revenue to be derived from e-commerce websites they own or operate, according to Episerver’s “B2B Digital Experiences Report.

At Innovaxis Marketing, e-commerce for our B2B clients has risen from 5% to 15% or more of total sales. Over the past three years, we’ve seen a 20% to 30% e-commerce annual growth rate, especially in 2020, as in-person prospecting proved difficult if not impossible during the pandemic.

However, according to the Episerver report, 54% of B2B companies are letting one obstacle keep them from selling online — potential conflict with their channel partners. Businesses don’t want to jeopardize the business that comes through channel partners — as much as 90% — for a relatively small increase from e-commerce.

Best of Both Worlds

“B2Bs can’t let channel conflict get in the way of serving customers,” Ed Kennedy, senior director of commerce strategy at Episerver, states in the report. “Organizations can use serving customers as a good cover for investing in digital commerce, even if it is peripheral at first.”

Without e-commerce, B2B marketers miss opportunities to sell outside their geographical area, expand into new markets and appeal to the increasing number of engineers, purchasing agents and others who want to buy without human interaction.

Even when distributors offer pricing below the manufacturer’s advertised list price, some engineers and purchasing agents are willing to pay more for the item as a tradeoff for the time they save ordering it from the company’s website any time of day without having to talk to someone (especially, perhaps, “annoying sales reps”). This trend is expected to increase as millennials and the digital natives of Generation Z make more B2B purchases.

B2B marketers can minimize channel conflict while also successfully growing an e-commerce presence by serving those who would rather buy direct. Here’s how.

Pricing Is Key to Keeping Channel Peace

Fair and consistent pricing is key to keeping peace with and within the channel. Channel partners typically sell significantly below the manufacturer’s list price, while also providing other added value (local presence and stock, availability of other products, credit terms, etc.). If manufacturers maintain list price when selling online, one major potential source of channel conflict and distrust is eliminated.

Some channel partners will complain anyway, but manufacturers need to hold firm. If a distributor sells below the manufacturer’s list price and is providing sufficient additional value to customers, they should not lose sales to a manufacturer. If they do, they have to look at their own service.

Disputes arise within the channel when a distributor sells at such a low price they lure customers away from other distributors. These distributors are content with thin margins and typically provide no added value. They are a larger threat to a manufacturer’s relationship with its best partners (and a big share of business) than an entry into e-commerce.

The best way to prevent this undercutting and resolve disputes is through a minimum advertised price (MAP) policy, under which channel partners agree not to sell below the MAP for any product. The price is set well enough below the manufacturer’s list price to maintain the channel partners’ pricing advantage but high enough so the channel can make money.

One of our clients, a manufacturer of induction heating tools, was plagued by online resellers selling at prices far below MAP. One of the manufacturer’s largest resellers complained of repeatedly losing sales to online sellers after going to the trouble of providing an in-person demo. The reseller, who represented at least 20% of the manufacturer’s worldwide business, threatened to sell a competitor’s product if the situation didn’t change.

The manufacturer saw the need for a program that not only enforced MAP but offered channel partners incentives such as promotion as an “authorized reseller” on their website and the ability to download pricing, videos and sales tools from their partner portal. Resellers who did not agree or who were found to be in violation later were cut off.

Promoting Distributors Online

Another client, a manufacturer of plastics processing aids, gives distributors a featured position on their website by featuring “Find Distributor” and “Buy Now” buttons. Clicking the “Find Distributor” link brings visitors to a page that promotes distributor value-add with this message: “Our distributors go the extra mile. Having your own local distributor has its advantages. You get great service and technical assistance. And since they are local, you get your order fast.”

Drop-down menus enable the customer to find the closest distributor in the U.S. or internationally.

By checking an additional box, the customer can be even more selective, seeing only distributors that have achieved the manufacturer’s platinum status and that have “the highest level of service and broadest selection of products in stock, ready to ship.” It’s a way of providing customers many incentives to do business with the distributors without mentioning the price will be lower as well.

E-Commerce Strategies Benefit Channel Partners

Maintaining an e-commerce site that appears high in search engine results is crucial for B2B e-commerce success, yet it also benefits distributors. Customers searching the web are usually looking for a product type, not a specific company. A distributor or reseller who doesn’t have e-commerce, or whose site is weak, is unlikely to be one of the first to be found. It’s more likely the web user will find the manufacturer. If the manufacturer also doesn’t have a good site, the customer may go to a different manufacturer who does, even if it offers an inferior product.

An effective B2B e-commerce site also must offer engaging, educational content directed to the prospect’s needs and interests. Users and prospects of a product or service that find a helpful blog post will be drawn to the manufacturer’s product when they otherwise may have never known about it.

Post-pandemic, some B2B buyers will continue to buy online directly from those manufacturers that offer it, even if they pay more to do so. Some buyers will remain faithful to resellers and distributors, but only as long as they make it convenient to buy. The acceleration of B2B e-commerce is likely to expand. Placing orders by phone, at a trade show or with a visiting sales rep will be increasingly rare and may eventually become obsolete.

Manufacturers and channel partners must be open to this disruption.  

Sean Parnell is the founder and president of B2B marketing consultancy and agency Innovaxis Marketing. He serves as a fractional/outsource CMO for B2B clients without a marketing department, and marketing consultant for B2B marketing executives, while serving the Innovaxis team as the head marketing architect.

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