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Don't Let Channel Conflicts Limit E-Commerce Sales
bcg.com
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As e-commerce accounts for more and more sales, it creates both significant opportunities and new challenges that need to be addressed. The opportunities lie in the potential for additional revenue from new customers, new products, and new sales channels. But the more e-commerce channels a company uses, the greater the potential for conflict between them. “the vast majority, 93%, said that choices about product assortment or pricing made to please distributors had led to lost revenue.” 1 / 1
As e-commerce accounts for more and more sales, it creates both significant opportunities and new challenges that need to be addressed. The opportunities lie in the potential for additional revenue from new customers, new products, and new sales channels. But the more e-commerce channels a company uses, the greater the potential for conflict between them. “Two-thirds reported avoiding selling through some channels in order to avoid disrupting existing sales in others.” 1 / 1
Sources of Conflict “But the more e-commerce channels a company uses, the greater the potential for conflict between them.” Channel conflict may sound innocuous, but the effect on sales can be substantial. Of 600 e-commerce channel managers whom BCG surveyed, the vast majority, 93%, said that choices about product assortment or pricing made to please distributors had led to lost revenue. (See Exhibit 1.) Close to six in ten said they could have increased revenue by more than 10% had they not made such choices. Two-thirds reported avoiding selling through some channels in order to avoid disrupting existing sales in others.
It’s not a simple task. In a BCG Digital Ventures survey of corporate e-commerce channel managers, 38% said channel conflicts are their top business concern, and 44% believe that such tensions will increase in the future. “Conducting a data-based assessment of existing products, customer segments, and sales channels can uncover gaps and help companies weigh the relative merits of rolling out new e-commerce options for each one.” Sources of Conflict
It’s not a simple task. In a BCG Digital Ventures survey of corporate e-commerce channel managers, 38% said channel conflicts are their top business concern, and 44% believe that such tensions will increase in the future. “From there, they can map out a strategy, adjust pricing and positioning accordingly, and communicate the changes to sales partners.” Sources of Conflict
1 / 1 “three-quarters of consumers said that having multiple options when buying a product was sometimes, often, or almost always confusing.” We identified five key elements of the sales process that can create conflicts when companies expand their e-commerce presence.
Changing what’s sold through new or existing e-commerce channels may require companies to ask their channel partners to agree to new contracts. Moreover, it may be necessary to wait until current contracts expire before renewing them under new terms and conditions, which could delay rollout plans. “They should consider in advance how partners may react and prepare talking points or other materials to address their concerns.” Getting Started
Changing what’s sold through new or existing e-commerce channels may require companies to ask their channel partners to agree to new contracts. Moreover, it may be necessary to wait until current contracts expire before renewing them under new terms and conditions, which could delay rollout plans. “These materials can highlight what partners stand to gain from new channels, pricing, or customer segments.” Getting Started
For example, analysis of purchase data at an industrial-goods company we work with revealed that the company was missing out on sales to small businesses. The owners of those businesses needed the products the company sold but were unaware that they could use its existing e-commerce channels to make purchases. Similarly, consumers’ increasing comfort researching, shopping, and buying online is starting to extend to products such as cars, which historically were not sold through e-commerce channels because they were considered too complex or expensive. “Generally speaking, offering a new product to new customers generates the least amount of conflict and can lead to significant increases in sales.” 1 / 1
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