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1

 

Place of purchase

In a B2B context, e-commerce is conducted on the manufacturer’s own site, at an intermedi-

ary or is procured on a customer’s site.

2

 

New channel structures

New channel structures such as changes introduced by disintermediation, reintermediation 

and countermediation (referred to in Chapter 2).

3

 

Channel conflicts

A significant threat arising from the introduction of an Internet channel is that while dis-

intermediation gives a company the opportunity to sell direct and increase profitability on 

products, it can also threaten distribution arrangements with existing partners. Such channel 

conflicts are described by Frazier (1999), and need to be carefully managed. Frazier (1999) 

identifies some situations when the Internet should only be used as a communications chan-

nel. This is particularly the case where manufacturers offer an exclusive, or highly selective, 

distribution approach. To take an example, a company manufacturing expensive watches 

costing thousands of pounds will not in the past have sold direct, but will have used a whole-

saler to distribute watches via retailers. If this wholesaler is a major player in watch distribu-

tion, then it is powerful, and will react against the watch manufacturer selling direct. The 

wholesaler may even refuse to act as distributor and may threaten to distribute only a com-

petitor’s watches, which are not available over the Internet.

Further channel conflicts involve other stakeholders including sales representatives and 

customers. Sales representatives may see the Internet as a direct threat to their livelihood. 

In some cases, such as Avon cosmetics and Encyclopaedia Britannica, this has proved to be 

the case with this sales model being partly or completely replaced by the Internet. For many 

B2B purchases, sales representatives remain an essential method of reaching the customer to 

support them in the purchase decision. Here, the Internet can be used as a sales support and 

customer education tool. Customers who do not use the online channels may also respond 

negatively if lower prices are available to their online counterparts. This is less serious than 

other types of channel conflict.

Internet channels can take these forms:

● 

a communication channel only;

● 

a distribution channel to intermediaries;

● 

a direct sales channel to customers;

● 

any combination of the above.

To avoid channel conflicts, the appropriate combination of channels must be arrived at.

Internet channel strategy will, of course, depend on the existing arrangements for the mar-

ket. If a geographical market is new and there are no existing agents or distributors, there is 

unlikely to be channel conflict, in that there is a choice of distribution through the Internet 

only or appointments of new agents to support Internet sales, or a combination of the two. 

Often SMEs will attempt to use the Internet to sell products without appointing agents, but 

this strategy will only be possible for retail products that need limited  pre-  sales and  after-  sales 

support. For  higher-  value products such as engineering equipment, which will require skilled 

sales staff to support the sale and  after-  sales servicing, agents will have to be appointed.

For existing geographical markets in which a company already has a mechanism for dis-

tribution in the form of agents and distributors, the situation is more complex, and there is 

the threat of channel conflict.