Posted in Marketing and Strategy Terms, Total Reads: 1008
Definition: Inter-Channel Competition
Inter channel competition can be referred to the situation in market where the different members of same distribution channel compete among each other to get the same customer. There are several examples of inter-channel competition. A few commonly observed ones are – Nike Factory Outlet competing with local retailer of shoes, Samsung’s Dealers competing with the multi brand showrooms, Big Baazar vs the retail sector for FMCG products. Apart from them, the major Inter-channel competition occurs between Brick and Mortar stores and E-commerce. Companies are rapidly going online and embracing the E-Commerce boom.
They are opening their own online portals and also collaborating with third party E-commerce players. These business strategies are creating channel conflict between the channel members because one member’s traditional customer is targeted by other channel member or by the producer itself. The Channel Conflict originates when the manufacturers (brands) by-pass their channel members like retailers, distributors, dealers and sales representatives, by selling their products and services directly to customers by using generic marketing strategies and/or using the E-commerce. Inter channel competition can be classified broadly in 3 types -
Vertical inter-channel competition – It occurs when a manufacturer disrupts the supply chain. Example - Samsung selling its products online on its website directly to customers disrupting the entire supply chain causes vertical inter-channel competition.
Horizontal inter-channel competition - It occurs when firms at the same level of the distribution channel compete for the same customer. Example – Two McDonald stores competing for customers in a same shopping mall will lead to horizontal inter-channel competition.
Multilevel inter-channel competition – It occurs when there are two or more channels that serve the same customer. Example – A FMCG area distributor of say HUL also doing retail business and competing with the local retailers.