Channel Conflict The objective of this exercise is to aid understanding of the d

Question

Channel Conflict

The objective of this exercise is to aid understanding of the dimensions of channel selection and their possible relationships with channel conflict. For instance, many manufacturers sell products in outlet stores at 25 to 70 percent off retail prices. Retailers do not like the added competition from their own suppliers despite manufacturers’ claims that they are only selling last season’s merchandise.

1.     How could business objectives, buyer behavior, product attributes, or environmental forces affect a manufacturer’s decision to distribute through outlet stores?

2.     By selling in outlet stores, how have these manufacturers changed their intensity of market coverage? How is customer service different at an outlet store? What are the strategic options available for retailers when manufacturers become retailers through their own outlet stores?

3.     Facing the threat from outlet stores, should retailers develop store brands, refuse to stock certain items, or focus their buying power on one supplier or group of suppliers? How should the conflict be resolved?

Explanation / Answer

Manufacturer decision to distribution through the outlet stores are widely influenced by various factors. This item is directly depends on the situation of that region and provides an extensive support to the decision making process of a manufacturer.
Some of the effect in factors in decision making for distribution through the outlet stores for the manufacturer are as follows.

Business objective

This is the core reason of a manufacturer to manufacture things according to the market. If a manufacturer is industry oriented then it will be developing the industry oriented products which cannot be sold in the retail outlet stores. If a manufacturer is manufacturing consumer goods then the distribution of the product through the outlet store are mandatory.
Both of the situations decision making of a manufacturer directly depends on the objectives of their businesses and provision of the services also depends on the situations according to the different markets.

Buyer behaviour

Buyer behaviour also plays an important role for a manufacturer to decide telling his products through the outlets. If buyer is very active towards the specific product then the overall sale of the product would be done increasingly to the outlets. If buyers are not reacted to the product or the product is very passive that it can be purchased through different services rather than going into the outlets, manufacturers decide not to sell the products in the outlet or through the outlet chains.

Product attributes

Some products are designed specifically for different channels rather than selling it in the outlets. Most of the services which are provided does not have any physical appearance in The outlets rather than they have a small office with a proper provision of the services structure. Most of the products which are designed for industrial aspects are not sold in outlet as they don't have any market for those kind of products.

Environmental forces

If a product is harming the environment and it would not be sold in the outlets to be in the reach of the general public. If these products are sold in outlets, public outrage will happen resulting a great loss for the company hence the product should not be sold in the outlets. This also affects the manufacturer to decide if the product should be sold in outlets or not.

When a manufacturer decide to open the run outlets they directly increase the level of profit and it is also beneficial for a customer to buy from the factory outlet. Factory outlet usually have lower prices and provide products directly coming out from the factory rather than going through a supply chain which increases the overall cost of the product. Does a specific type of outlet is mostly very well constructed as the capital used in constructing the outlet is ready coming from the company itself. Maintenance of the product range and updation of the product through the changing Trends and new technologies is also very quickly implemented as a product have to be replaced Titli from the factory rather than going through a whole structure of distributors and retailers.
Customer service also differ in outlet store as they are very informative towards their products as they have total information about the product they build. Warranty claims are also easier in the factory outlet as the replacement are mostly done on spot which decreases the overall service time and increases the overall customer experience.

Outlet store is a bigger threat for the retailers. Setting for developing retail store brands, retailers should use proper advertisement and promotional strategies to provide discounts as well as different scheme to the customers. These schemes therapy attract the customers towards the store and buy having multiple ranges and products into the store, retail store can decrease their monotonus product tree in which is very much applicable for the factory outlets. If an Store has different product range is it will directly increase the overall involvement of the customer to the store as they want different brand at the same place. This would definitely create a competitive advantage over the factory outlets.

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