DISTRIBUTION CHANNEL CONFLICT: A STUDY ON THE FMCG SECTOR

Abstract

All of us owe our lifestyle to the distribution channels which run through the contribution of various channel partners like Carry Forward Agents, Distributors, wholesalers and dealers who provide products and services to the end consumer. The GDP of any economy flows through the dense network of these distribution channels. Distribution Management has often been overlooked as compared to the glamorous world of advertisement and consumer behaviour in marketing. However, the smooth functioning of these channels is utmost important for us to get our uninterrupted supply of goods and services. In view of same, it becomes extremely important to check the health of any firm’s distribution channels and the opinion of its channel partners about the issues they face in the daily operation of these channels. This investigation becomes all the more important in the backdrop of Distribution 4.0 which is causing immense disruption in the existing channels as new channels of e commerce and modern trade change the landscape of the Indian retail. What started as multi channels is now soon evolving to the concept of omnichannels where the consumer can place the order anywhere, anytime and collect the same anywhere anytime at his own convenience. This has been the genesis of the new marketplace model which is the online presence backed by an offline fulfilment. Though lot of studies has been done in the area of consumer behaviour and advertisement, but studies on channel relationships particularly in India have been grossly missing. This is essentially due to the difficulty in collecting data from channel partners who are highly busy with their routine operations. This study is set in the context of the FMCG sector which is the barometer of any economy. The FMCG sector has a long intensive and a complicated channel having numerous channel partners at different levels. The same increases the likelihood of conflict the activities need to be coordinated at different levels and stages. Thus FMCG sector was chosen as the context for the exploration of the phenomenon of Channel Conflict. The study was designed to be different from the previous studies by exploring conflict at four primary levels of FMCG distribution channel: - the manufacturer, the Carry & Forward Agent, the distributor and the retailer. Thus, attempt was made to analyses the antecedents of conflict at each stage as different channel partners at different levels had different drivers of conflict. Important factors were identified from the combination of expert interviews and literature review which led to conflict all the more in the Indian context. The results of the qualitative and the quantitative analysis confirmed that the factors identified had a significant impact on channel conflict at different levels. The results also confirmed the increasing impact of new channels on channel conflict, particularly at the distributor level. The results of the study indicate that role performance mattered the most for occurrence of conflict at the distributor level and communication at the retailer level. The economic and business objectives were the most vital causes of conflict at the manufacturer and the Carry Forward agent level. The results of the study were further corroborated with of the case study on ITC Ltd, an FMCG major in India. The study is useful particularly for the channel sales managers, the business development managers for strengthening their relationships on the ground and reducing the incidence of channel conflict for the smooth coordination of channel activities that lead to enhanced level of customer satisfaction.