1.5.3 Channel Leadership
Completion requirements
Ultimately, channel success depends on one member of the chain taking a leadership role to improve how the entire channel functions. To do this, a channel leader must have channel power.
But good leaders moderate their power (i.e., they don't become too "bossy"). If the channel leader is too forceful, channel conflict can result. Distribution channels work best if members are interdependent, and have mutual respect.
Producers, wholesalers, or retailers can be leaders. Increasingly, retailers are becoming channel leaders.
Retailers often have a great deal of customer loyalty. They can control which brands they carry. Retailers can replace uncooperative producers with competing brands. Smooth relationships with a supplier are in a retailer's best interest because of less risk. Retailers can make smaller, more frequent orders. The retailer can carry less stock safely. If the products don't sell, the retailer won't have excess stock.
A wholesaler as the channel leader may form voluntary agreements with a few retailers. The wholesaler might provide these retailers with bulk buying, management services, or inventory control. In return, the retailers shift most of their purchasing to this wholesaler.
Channel leaders can exercise their power by providing
- business advice,
- support materials,
- ordering assistance, and/or
- publicity.
But good leaders moderate their power (i.e., they don't become too "bossy"). If the channel leader is too forceful, channel conflict can result. Distribution channels work best if members are interdependent, and have mutual respect.
Producers, wholesalers, or retailers can be leaders. Increasingly, retailers are becoming channel leaders.
Retailers often have a great deal of customer loyalty. They can control which brands they carry. Retailers can replace uncooperative producers with competing brands. Smooth relationships with a supplier are in a retailer's best interest because of less risk. Retailers can make smaller, more frequent orders. The retailer can carry less stock safely. If the products don't sell, the retailer won't have excess stock.
A wholesaler as the channel leader may form voluntary agreements with a few retailers. The wholesaler might provide these retailers with bulk buying, management services, or inventory control. In return, the retailers shift most of their purchasing to this wholesaler.