This week on the Friday 15 podcast, Andy & Brian talk about how much channel conflict fears should impact your distribution strategy (in short, it shouldn’t.)
They dig into 7 ways to sell direct while managing the conflicts:
– MAP and sales channel agreements
– Public vs private pricing (pricing exposed behind logins or inside custom catalogs)
– Assortment variations by channel
– Being mindful of who is selling
– Taking control in marketplace channels
– Provide digital assets and analytics to channel partners
– Channel monitoring and enforcement.
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Brian Beck: Well, good day everyone. Welcome to Friday 15. My name is Brian Beck. I’m here with Andy Hoar. And we are here to talk about some great stuff today. Our Master B2B weekly Friday 15 session. We’re rocking out today. Andy, welcome to Friday.
Andy Hoar: Yeah, it’s good to be here, and it’s good to have a conversation. And this is a good one.
Brian: It is a hot issue. We’re going to talk about channel conflict today. But before we do, let’s talk about some breaking news. Emarketer, I don’t know if you saw this this week. Voice shopping is not a major commerce channel now, but Ge.Y and Gen Z may change that with what EMarketer found – they published it this week. They found recent studies that showed that the use of voice assistance and voice related commerce amongst Gen Z, which is our youngest generation, just coming into the workforce is growing at about three times the rate as it is amongst other cohorts. So this is not something that should be ignored by B2B or really by any any sector of commerce. Voice commerce, while it’s been sort of played a second fiddle to many other types of commerce, it needs to be paid attention to because this will emerge as these Gen Z folks become more part of the B2B buying cohort. What are your thoughts?
Andy: To me, one of the best use cases is in B2B, somebody who’s out in the field, installing or whatever. They don’t have access to a screen and they need a part and if they could just talk to an AI bot and say, I need this part number. Great. It’s on its way or you can pick it up in two hours here. That’s just so convenient. You’ve seen these guys like plumbers and stuff. They can’t really hold the phone while they’re doing their job. So they can just hit speaker phone and reorder something. It’s a huge deal. So this voice recognition has gotten so good now that this is a viable option.
Brian: In some of our past debates and other events we’ve even played some of the voice recognition and it’s pretty amazing. There’s still a lot of things that we find lag time and things like that in the responses, but, there’s been some incredible advances with AI as it relates to voice recognition, voice response. So this is coming, folks, and something to pay attention to. This caught our eye this week. So our topic this week is one of the biggest we’ve heard constantly ever since we started this thought leadership series: Is channel conflict a good reason not to sell directly via eCommerce? Hmm. A very hot topic and let’s start by defining what channel conflict actually is. I’m just going to site Wikipedia here, Andy. Channel conflict, the way they define it – Channel conflict occurs when brands disintermediate their channel partners such as distributors, dealers, retailers, sales reps, by selling products directly to buyers through general marketing methods and or over the internet. This is a classic challenge. The opportunity exists particularly for manufacturers, but frankly, also for distributors, to sell and create their own private label products in the case of distributors or manufacturers, to go direct on eCommerce to the buyer that they’re traditionally relied on their dealer distributor. And this is an issue that has caused consternation because eCommerce provides a dramatic opportunity for many companies, but it affects everything, really everything from direct eCommerce, but also really even Amazon. So I’m sharing some statistics here. So my company Enciba that works with B2B product manufacturers on Amazon, we do a poll and every year – it’s from our pulse survey. In fact, we’re going through it right now for 2025. We asked questions like, Hey, if you’re not selling on Amazon, why aren’t you? Well, a full third, 34% said, we don’t want to cause conflict with our other sales channels. A top reason why they’re not selling on Amazon. They don’t want to cause channel conflict. The same thing holds true of other channels. And in fact, we got a comment on this when we posted this on LinkedIn, Andy. Joe Kovacs, co-founder of Brand Guarde, which does brand work for companies on Amazon. He said, we see most sources of channel conflict coming from uncontrolled eCommerce channels like Amazon and unauthorized sellers undercutting price and such on Amazon. So he sees how this can happen. And I see it too in our work with Enciba, where this uncontrolled channel can cause conflict. A lot of it’s due to price. Companies will get products, they’ll list them on Amazon, drop the price. It’s the only way they can earn the sale. But this carries over to the direct eCommerce channel. One of the companies that we’ve done work with, who sponsored some of our events over the past year, Logik.io. They did a study this year. And they found that conflict fear prevents direct selling on eCommerce as well. Nearly eight in 10 B2B websites that they surveyed – and there were hundreds of them -did not enable buyers to complete transactions online. That’s 80%. That’s one of the highest numbers I’ve seen around this. But I’ve seen numbers anywhere from 50 to 80%. Companies not selling online directly B2B. My goodness, we’ve got a situation here where companies are not taking advantage of the opportunity and due to channel conflict. What are your thoughts?
Andy: Well, this is this classic. This is not a new issue. But to me, the trap here is that people extrapolate from the present to the future instead of thinking from the future back to the present. That sounds like some sort of theoretical construct. But most companies that I’ve worked with in the last 10 years, they start with where they are today and they go, “Okay, this is what we want to be in five years.” But they always leave out of that equation. What are customers doing? And what will the customers want and what’s their behavior look like? And the one problem with all this stuff about selling direct is that there are actually definitely customers who want to buy direct from brand manufacturers. Period. End of story. That’s just not in question. I’ve done a lot of research around this. There are a distinct group of customers that want to buy direct to you. And by the way, not only that, but they actually want to pay for the privilege of doing so. They’ll pay a premium to do so. But all these brand manufacturers say, “Well, we don’t want to disrupt our channel.” I’m like, “Well, you know all of your distributors are doing private label.” So they’re selling their own version of what you’re doing. How is that not disrupting the channel? So there’s this illusion or myth that the channel is perfect and undisrupted. And I’ve been reminding people of this as have you for years now, we’ve got news for you. It’s already disrupted. It’s not that it’s every man for himself because you want to have a channel partnership. But there is that famous term “co-opetition.” There is something to be said for that. You need to find your place. Everybody needs to serve the customers in the best way possible because the customers are going to find it. They’re going to do it on their own. And if you don’t participate, if you don’t sell direct to them, somebody else will.
Brian: Absolutely. And you know it’s so funny because I’ve been in this business a long time and I started in eCommerce in the late 1990s. So I’m dating myself here. But I was on the consumer side. In the first, almost 20 years of my career, I was on the consumer side of eCommerce. I worked with PacSun, which is a clothing retailer. I ran their eCommerce business for a little while. If a brand that we sold did not have their own direct eCommerce, something was wrong with them. We felt like they weren’t doing what they needed to do to establish the brand in the marketplace. They weren’t present controlling their presence on Amazon. They weren’t doing the things they needed to do to build their overall presence – a rising tide floats all boats, right? If you’re out there and you’re controlling your overall presence in the marketplace and selling direct, as long as you have a thoughtful channel strategy as a branded manufacturer, then there’s not this is an accountability issue. It’s something that is expected or should be expected. I think B2B is going to get there. It’s just taking a freaking long time.
Andy: So because there’s still this perception that manufacturers make and distributors sell and service. And in general, that’s correct, but we just gave examples of private label distributors making products and where customers go to a brand manufacturer’s website and want to buy from them. How is that not a brand manufacturer selling and servicing to some extent? So again, it’s not as clean and cut as it’s always been. Your point is valid. This happened early on in B2C. Remember back in the day when the Procter and Gamble’s of the world were threatening the Walmarts to the world by saying, if you ever sell direct, we’re going to yank all of our Tide and Huggies and all this off the shelves. Well, the last time went to Walmart, they still had all that stuff on the shelves. S So we just all lie to each other and pretend the reality isn’t what it is. And as you show on the screen here, this is actually happening B2B. It totally has.
Brian: Today’s value chain is so much more complex than it was where the maker makes and the taker takes and resells to the end user, right? And the distributor. But today, the value chain is much more complex. You’ve got branded manufacturers that are selling themselves. They’re selling to pureplay eCommerce. They’re selling to Amazon and Marketplaces, also the multi-channel distribution. You’ve got the distributor now making private label product. You got distributors buying their suppliers. You see this happening all the time. So they’re vertically integrating. So they’re creating. They realize that there’s better margin, for example, in private label product. In my book I talked about this when we published it a few years ago. I think this is all what I call the age of transparency. You think about this on the consumer side. The consumer or the B2B buyer now has more power than they’ve ever had. And that’s actually a good thing in a lot of ways. I mean, just opens up. If you’re a manufacturer who differentiates on product, you just have to recognize this is all happening and take action on it and not sit on your butt, and have a direct selling channel. And embrace Marketplaces, sell directly on Amazon. Work with your distributors who are progressive in eCommerce. Not to the extent of ignoring the traditional channel. If you look at Andy, if you look at the leaders in their categories and consumer products, companies like Apple or Nike, what are they doing? They’ve embraced all this. They have huge direct selling channels. And you’ve got retailers clamoring over themselves to sell their products. Not every company can sell Nike. I remember this at PacSun back in the years.
Andy: Nike actually went too far in the other direction. Oh, they basically wrote off the channel during the pandemic and said, “Oh, we’re just going to sell off our stuff direct.” That was a mistake. So you can go too far in either direction.
Brian: Yes. I would agree with that.
Andy: The most important thing is you’ve got to acknowledge the reality here. What changed all of this was the fact that the internet made it possible for buyers to interact directly with manufacturers. That’s it. Before you had to go through a distributor, before you had to go through a retailer. How did you buy as a consumer or Samsung television direct from Samsung 20 years ago? It was impossible. But now you can go to their website and you’ll type in the word Samsung. You’ll go there. The same thing in B2B. And I think there’s still this perception that that doesn’t exist. That, oh no, the buyers all understand the way it’s supposed to operate. We make this stuff and they sell and it’s like, well then shut down the internet because when somebody types in the brand name for something like a 3M respirator, where do they expect to go? Oh, there’s a 3M.
Brian: Right. 75% of buyers are now millennials or Gen Z, guys. Listen, it’s a different buyer. That’s changed. So I love what Tim Peterson contributed in our LinkedIn discussion. President of the Speir Digital, what he said. He said distributor first or distributor only methods of selling are less preferred by buyers year over year. So in other words, things have changed. There may be some great value added services out there from resellers. But on balance, even folks who aren’t digital natives show in surveys and focus groups that they prefer to have less intermediation and would rather tap into an app or click on a site than deal with layers of people, etc. So what Tim’s saying is the same thing we’re saying here is that you know, get out of the way of the buyer. I worked with some manufacturers over the last few years, Andy, that have been very, very successful in growing their business. And their attitude has been, hey, we want to be wherever the buyer is in the best way we can be, we’re going to not ignore channel dynamics, we’re going to have a MAP policy, we’re going to have other things. But you know, we’re going to be in front of the buyer the best way we can. Because manufacturers get caught up on the fact that hey, you know, it’s only about price, right? It’s just this is just about price competition – or distributors do. It’s not necessarily about that. There are powerful incentives for a manufacturer to sell direct. They have more margin, for example. They could theoretically undercut price – other distributors – because they have more margin to work with. They make the product. There’s aren’t two or three steps in the way. But it’s not just about price. In fact, when you look at the data, it’s about other things. The top reasons customers are shifting buying online is not just about price. The top two reasons are that it’s more convenient to sell online. It’s faster. Over 50% of the survey by Forrester a couple of years ago said it’s not about price, it’s about these other things. People get caught up on the price thing. You can manage the price thing. But why do you think all these marketplaces and Amazon Business are coming in and taking all this share and these categories because they’re doing these first two things well faster, easier, right?
Andy: It is about those things and the reason it’s less about price than it’s in B2C is because you’re spending somebody else’s money. That’s number one. And number two, they’re a lot less price sensitive because you have a mission to accomplish here. It’s not like I’m buying a t-shirt for myself and I want to save a dollar on it. It’s because if I have to pay an extra three cents on a widget, but I can get it today and it enables me to earn more revenue today, a dollar today is with more than a dollar tomorrow. These are considerations for B2B companies because it’s a business. There isn’t as much fixation on price in B2B and again, that’s another mindshift thing. So you’re absolutely right about that.
Brian: So the question is can or how do brands sell direct and avoid conflict? And there’s a number of things that I’ve seen where companies can have a deliberate channel strategy while not ignoring what the customer is needing or looking for. So number one is having a minimum advertised price or sales channel agreements with your sales channel honored by everyone including the brand itself. There’s ways to sell on Amazon.
Andy: That’s a great point. It’s got to be 3P and not 1P, right?
Brian: That’s exactly right. You could still have a 1P program if you’re doing that well because then the rest of the channel and the rest of the market is selling at a reasonable price. But so yes, there are, that does have significant implications. But things like pricing too. When we think about price, taking it out of the equation where in B2B we have logins and that’s after the login, that’s where you see your customer specific pricing inside a custom catalog, things like that. So be mindful of how your pricing is displayed in the market. You can vary your assortment by channel so that you’re perhaps selling things on your own site that maybe you’re making product for a distributor that’s unique to that distributor. Being mindful who’s selling the product. So in other words, how and where are you selling the product and is it getting into the hands of folks who you may not want representing your brand, taking control of marketplace channels.
Andy: Yeah, that’s an interesting point that’s worth reinforcing. There has to be an enforcement mechanism in place. You can’t just put a MAP pricing strategy out there or talk about how people who divert inventory we punish and not punish people. I’ve always said take a demonstration event, take one person and demonstrate, with punishment. Set an example, but if you don’t have an enforcement program, I’m sorry, people are going to violate everywhere.
Brian: 100%. There’s lots of companies that come across, particularly in my Amazon work, that may have a MAP policy. It’s not enforced. No one cares. It’s not worth the paper it’s written on. Don’t even bother. So an enforcement takes the internal alignment. At the end of the day, this stuff also provides a branded manufacturer the ability to better support channel when you have good digital assets to distribute and syndicate analytics about what’s happening on your own website, what people are searching for. You can actually empower your channel. So these things work together. And again, to the point of not cannibalizing, but raising the bar for that. And Ryan Weller, thanks for your comment, he said terms and conditions usually have more teeth than MAP. And I would agree with that actually. Ryan, thanks for that comment.
Andy: Yeah, because it’s a contract, right?
Brian: And who’s selling it. Right, there’s all kinds of tricks to the trade behind that. In fact, Ryan, we pulled the comment from you from LinkedIn. So, thanks for contributing live here. Ryan is the Senior Manager of eCommerce marketplaces at Adidas. And also does his brand management stuff, professionally. So he said brands need to set guardrails on how they are going to prevent channel conflict. It’s likely that products that drive brand awareness need to be managed differently. And that’s kind of that assortment segregation argument Andy, right? We were just making for talking about. We also got a comment from Rick Wingender, director of integrated marketing at Mueller Sports Medicine. He said reducing contact points for customers is a losing strategy. Sometimes the distributor dealer is a better contact than the manufacturer. If you’re a dealer, what the PC industry calls VAR years ago, then you’re path to success by focusing on the value add. And there are plenty of things that manufacturers can’t compete with dealers on. And they don’t want to. But again, don’t be focused only on price. So, thank you, Rick, for that comment. I think it’s insightful.
Andy: Yeah, by the way, he’s absolutely right. This seems like it levels the playing field and actually in a way empowers brand manufacturers over distributors. Not necessarily. Distributors have distinct advantages. And he points out the fact that they can offer multiple products, the fact that they can offer services, the fact that they’re local, the fact that they have deep domain expertise across multiple products – this is the stuff they should be focused on. Those are the value-added services. But he’s right. Too many of them for so long have been just competing on price with other distributors. And they need to think it’s not a competition with other distributors exclusively. It’s actually a competition for the customer’s attention, which has a lot less time to do in B2B with price and more to do with those things you mentioned earlier in the survey, which is speed and convenience.
Brian: Exactly. So we asked our audience – Should concerns with channel conflict prevent B2B companies, particularly manufacturers, from selling directly to end buyers, 100% said no!
Andy: This has never happened. This wasn’t a small number.
Brian: It’s like 100 people who replied to this, right? It was a substantial number of people that voted. I was shocked that it was 100%.
Andy: I don’t know if we’re living in a bubble here or wishful thinking land. But, well, we talked about this beforehand. We’ve been doing these roundtables around the country and we’ve asked people what are the priorities for 2025? And one of the options is channel conflict. And it consistently this year has been in the basement. And I’ve even pointed it out, like nobody seems to be focused on it or care about it. You and I both know that that’s not true. But we think that people in the middle phase, the first phase was panic. We’ve kind of passed through that phase. The second phase is kind of reconciliation with reality. And a lot of them are like, oh, I think there’s probably some here, but I’m not quite worried about it because it seems to be taking care of itself. There’ll be a third and a fourth phase. But the next phase is reality. And that reality is going to be, wait a minute, we are kind of competing with these guys and we have to get smart about it. But nobody’s going back to the world of two-step distribution where we make, they sell. I don’t see that happen anywhere. And that may be the reason that people here aren’t as concerned about it. So, I mean, this gives me some hope. We’re going to move beyond this issue in a managed way.
