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Wal-Mart Creates Channel Conflict

Wal-Mart wants you to buy stuff on its website for cheap. But that doesn't sit well with some high-end brands whose marketing managers are concerned about stewardship of a premium brand image. This is an example of channel conflict, wherein one channel member interferes with another channel member in the attainment of its goals. This is usually done unintentionally, and it often happens when products are offered for less by retailers that are able to offer lower prices by generating higher volumes. The smaller retailer, stuck with offering higher prices, may opt to replace the brand with one that the large retailer doesn't carry to avoid being on the short end of a price war with a much larger competitor.

Image result for moosejaw 

This case is a bit different. It isn't a conflict between retailers, but one between the retailer and the brands it sells. Brand managers of high end outdoor gear companies like Deuter and Leki, which are sold on a curated "premium outdoor store" connected to the main Wal-Mart site, do not want to dilute the equity they have built into their respective brands by allowing an entity like Wal-Mart to lower prices. And that's precisely what Wal-mart does, so it's hard to blame them.

 Image result for moosejaw

About 1/3 of these premium brands have already left the "Moosejaw" site, and Wal-Mart in classic form, has said that it is already in the process of replacing them. High-end brands need to sell their products online, but marketers face the dilemma of lacking control over price and selection, factors that are important to premium brands. Overall, Wal-Mart has added over 1,000 brands to its website over the past year, and it doesn't sell premium brands in its physical stores. At least not yet.

 Image result for amazon premium

So perhaps Wal-Mart should leave the premium market to Amazon and concentrate on what it does best -- serving the average shopper. It looks like the goals of most of these premium brand managers and those of Wal-Mart might not be adequately aligned. And this lack of image "fit" could be a sign that Wal-Mart's efforts to bring premium products to average consumers ultimately might be in vain.


Discussion:  Do you think that Wal-Mart should continue to offer premium products? Why or why not? Should the marketers of these premium brands be concerned about diluting the brand equity they have built?

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