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Question:Why are online firms encountering channel conflict? How can they avoid it?

Answer:The fact is that distributors who deal with manufacturers who go online perceive that these manufacturers are not as dependent on them as they are on the manufacturers. This is called "asymmetric dependence", and not surprisingly, this leads to channel conflict in any world (online or off).

Firms that avoid this asymmetric dendences successfully include firms that don’t use distributors, like Dell Computer. There is no dependence (since there is no distributor), so conflict is not relevant. Of course, these ideas apply to Dell and its suppliers, and in those relationships dependence and the possibility for conflict is relevant.

So, what can we expect to happen in these situations with channel conflict in an online world - and therefore how conflict can be avoided? Well, the same thing we would expect in an off-line world. For one thing, firms will generally do things to avoid conflict. One way is for the manufacturer to sell certain products online, and others through off-line stores. Black and Decker, for example, might sell certain models online and others through Home Depot. To the extent that the products are not the same, and thus the distributor perceives that competition with the manufacturer does not exist, channel conflict will be lower because the perceptions of asymmetric dependence will be lower.

But other firms will try other ways to lower conflict, and these will take the form of "countervailing dependence" actions. In friendly language, a countervailing dependence action is something that someone will do to lower its perceived dependence. Thus, if a distributor perceives that it is more dependent on a manufacturer than vice versa, it may take a countervailing dependence action by looking for other manufacturers to represent. In the case of online selling, a distributor could also lower its dependence on a manufacturer by selling online as well. Channel conflict and any action a distributor takes in this situation to lower its dependence is predictable - and it doesn’t make any difference whether its digital or analog, online or off.



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