Silver Dollar Jeans Channel Conflict

You are the marketing director for Silver Dollar Jeans International. You are having some problems with the large department stores who are channel partners for your products. They are unhappy about your company selling this product directly in your own stores, and also online, because it competes with their own sales of the product. They threaten to boycott your clothing line unless you agree to a non-competition agreement with them. What do you do and why?

For Silver Dollar Jeans International the answer is to definitely not sign the non-competition agreement because in essence if it is signed, they will have signed away the entire company and its future. Instead, Silver Dollar needs to realize that large department stores and mass merchandisers including Wal-Mart, Costco, and others are continually pressuring suppliers to align their own product lifecycles to the needs of the department store or mass merchandiser. There is a continual struggle between retailers and manufacturers as the former are under more pressure than every to reduce their costs while reducing suppliers but increasing selection of products (Nair & Pleasance 2005).

Silver Dollar International needs to realize that they must protect their brand and its value is tantamount, and that if the department stores want exclusive rights to their jeans, they are welcome to purchase a private label brand. All apparel manufacturers have this capability, and this fits the product needs of the department store or mass merchandiser in addition to allowing Silver Dollar International to retain its brand value. Further, Silver Dollar International needs to re-consider the strategy of selling through department stores and move into boutiques and other channel partnerships where they can retain profits, control of the brand, and control of the product lifecycles. These types of conflict lead Nike to pull out of Wal-Mart for example. For Silver Dollar International the most important criteria are retaining its brand equity, finding distribution partners that are more interested in profitability than pure volume, and concentrate on retaining control of their own product lifecycles.

Reference

Nair, G & Pleasance, D (2005). Mitigating channel conflict. The McKinsey Quarterly,(3), 16-17. Retrieved December 17, 2007, from ABI/INFORM Global database. (Document ID: 880048511).