Madras Agric. J., 2019; doi:10.29321/MAJ 2019.

000234

RESEARCH ARTICLE
Reasons for Channel Conflict among the Small Retailers in
Tamil Nadu
C.P. Sharafath1, P. Balaji and V. Sakthirama
Department of Agricultural and Rural Management
Tamil Nadu Agricultural University, Coimbatore - 641 003.

Abstract

Retail sector in India is at the crossroads today. A shift between organized

and unorganized retail sector is apparent, especially in the vegetable, fruits
and groceries retailing zone. The channel conflict arises when the channel
partners such as manufacturers, wholesalers, distributors, retailers, etc
compete against each other for the common sale with the same brand.
Received : 28th August, 2018 The small retailers are affected by this conflict. The study was undertaken
in Coimbatore district of Tamil Nadu with aim to assess channel conflicts
Revised : 16th October, 2018
from various interactions with the small store retailers. The Factor analysis
Accepted : 15th November, 2018
is used to analyze interrelationship among a large number of variable and
to variables regarding their common underlying dimensions. The result
showed that, six variables under factor coercive source of power explained
67.17 per cent of total variance. Therefore six factors, using factor analysis
were identified as main reasons for conflict between small retailers-vendors
and small retailers-customers.

Keywords: Retail industry, Channel conflict, Small retailer and Factor analysis

Globally the importance of economies which are emerging has been increasing due to economic reform
of the emerging countries and the growth rate has also exceeded than that of the developed nations which
attracted many multinational firms but letting with limited success in the markets because of the complication
in distribution channel and retailing in the economies. This complication is mainly due to the existence of small
retailers in the market. Making the distribution channel more effective will lead to success in the global retail.
Within the channel, there are various dimensions of behavior. In that conflict has been considered as most
certain thing which is due to the inequality of power among the channel partners. Among the various studies, the
outcome of conflict implies that increase in the reliance of small retailers on the wholesale channel which will
be of interest to the members of the channel partners. Aithal et al. (2017) explains about the wholesaler as an
intermediary has been one of those decease which has been predicted many times. Each time it has managed
to survive and continues to be an important part of distribution channels at least in emerging economies.
The replacement of traditional channel intermediaries has been a topic of debate among the academics
and practitioners, especially in the framework of emerging economies such as India and China. The research
is to find out the oldest intermediaries in the marketing channels. It is in-depth semi-structured interview with
twelve wholesalers in one of the oldest wholesale market in India. Also aims to provide a description of 250
years old whole market. Cunningham (2013) described that, there are two conflict resolution strategies such
as internal strategy and external strategy. The internal strategies include overall respect for each function,
better communication and cross functional teams whereas the external strategies include clear goals, business
planning process, expectations and also for understanding the performance metrics. Bobot (2011) revealed
that almost all the retailers (95.00 per cent) reported the functional conflict and a vast majority (85.00 per
cent) of them reported dysfunctional conflict in retailer-supplier relationships. The functional conflicts have
positive effects on the quality of the retailer-supplier relationship, whereas the dysfunctional conflicts have
neither positive nor negative effect. The main aim of the study was to find out the major reason for channel
conflict among the small retailers in Coimbatore city
Material and Methods
The sample small retailer was interviewed personally at their own retail outlet. The purpose of the study
was explained clearly to the sample respondents for their better understanding and to ensure their cooperation
in order to collect the accurate information regarding the study. The interview schedule was prepared with

*Corresponding author’s e-mail: [email protected] Volume 106 | Issue 1-3 | 125

attentive by incorporating appropriate words and also at the time of interview in expressing the words to
minimize bias, if any.
Factor analysis
Factor analysis is used to analyze interrelationship among a large number of variable and to variables
regarding their common underlying dimensions (factors). The statistical approach involves finding a way of
condensing the information contained in a number of original variables into a smaller set of dimensions (factors)
with a minimum loss of information (Hair, Black, Babin, Anderson, & Tatham, 1998). Following statements are
taken for the study.
Statements of reasons for channel conflict

1. If the supply delay on product making conflict between wholesaler and retailers.
2. Offer to exchange as promised by the retailer to consumer make any conflict
3. Conflict arise due to consumer demand to a specific product or brand
4. Conflict arises between wholesaler and retailer due to instead of giving one product or brand for another.
5. Increasing no. of neighborhood shops creates any disturbance and it leads to conflict.
6. Period of sales by neighborhood shop leads to conflict between retailer and wholesaler
7. Retailers keeping the same brand year round; will cause any conflict
8. Is there any conflict arise due to neighborhood shops because of your Promotional activities.
9. Did accuracy of delivery towards the consumer make conflict
10. Credit support as promised by the retailer to consumer make any conflict
11. Is Product return service influencing the sales problem
12. Lots of offers and point of purchase attracted more consumers towards particular store
13. Good sales performance in your shop leads to any conflict.
14. Less experienced retailer create conflict during procurement from wholesaler
15. The difficulties faced by the retailers to communicate consumers about Sales is more
16. Always there must be some Scarcity of resources faced by the retailer from wholesaler
17. Channel management is poor among wholesalers –retailers – consumers
To identify the reason for channel conflict factor analysis were used. A list of the statement was prepared and
the retailers were asked to indicate on a five point scale whether they are strongly agree (5), agree (4), neutral
(3), disagree (2) and strongly disagree (1). The response of the retailers was recorded and the score was given to
each factor, then the scores, in turn, were added to obtain the total score. T-test the sampling adequacy, Kaiser-
Meyer-Olin measure of sampling adequacy was calculated. The principal component analysis was employed for
extracting factors. The orthogonal varimax rotation was also applied. Variables, whose communalities are greater
than 0.50 were retained. The factor with Eigenvalue greater than 1.0 considered and the analysis was done.
Results and Discussion
This elaborates on reason for channel conflict among the small retailers. “Conflict is concerned with the
overall level of perceived disagreement between exchange partners and is defined as a situation in which
one channel member perceives that another is engaged in behaviour that prevents them from achieving their
goals (Palmatier et al., 2006). Several reasons are discussed in literature, in order to identify factors mainly
affecting the store performance. Therefore seventeen factors were identified and sample responses were
collected using multi-dimensional scaling technique.
Multivariate factor analysis was applied to these seventeen factors to reduce them into prominent factors
using SPSS software. Factor analysis is a multivariate statistical technique used to condense and simplify the
set of large number of variables to smaller number of variables called factors. This technique is helpful to identify
the underlying factors that determine the relationship between the observed variables and provides an empirical
classification scheme of clustering of statements called factors. Principal component analysis was used for
extracting factors. Eigen value represents the total variance explained by each factor.
From the result of factor analysis, Kaiser-Meyer-Olkin measure of sampling adequacy is 0.617 and Bartlett

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Test of Sphericity and approximate Chi-square value is 262.477 which are statistically significant at 5% level.
Therefore, it can be concluded that, the sample size is adequate to drive the existing channel conflict among
the small retailers in both Kannur and Coimbatore cities.
The Kaiser-Meyer-Olkin (KMO) and Bartlett’s test, measures strength of the relationship among the variables.
KMO is used for assessing the sampling adequacy and evaluate the correlations and partial correlation to
determine if the data are likely to correlate or not on factors. The KMO measures the sampling adequacy which
should be greater than 0.5 for a satisfactory factor analysis. The Barlette test evaluates whether or not the
correlation matrix is an identity matrix that is 1 on the diagonal and 0 on the off diagonal.
Table.1 displays rotated factor matrix value along with the per cent of variance and cumulative per cent of
variance after factor rotations. The idea of rotation is to reduce the number of factors on which the variables
under investigation have high loadings.
Table 1. Extraction of factors of reason for channel conflict

Component/Factor Initial Eigen values

Number Total Variance (%) Cumulative %
1 1.553 17.489 17.489
2 0.810 9.243 26.732
3 0.995 11.349 38.081
4 0.946 10.795 48.877
5 0.821 9.369 58.246
6 0.778 8.874 67.120

Harman, (1976) indicated that factors with loading score greater than 0.29 at the 5 per cent level of
significant could be considered. In respect to the present study, the factors had component loading greater
than 0.5 were included to define the factor and the remaining factors were eliminated. For more simplification,
the factors which were similar in sense were clubbed together manually and named. The details on the factors
and its name are given in the Table .2.
Table 2. Reason for channel conflict among the small retailers (Factor Analysis)
Attributes Rotated component matrix value Factors
Factor 1 Supply delay 0.764 Coercive source of power
Credit to consumer 0.879
Delivery accuracy 0.823
Offers on product 0.703
Factor 2 Communication 0.774 Retailer’s characteristics
Experience of retailer 0.663
Channel management 0.526
Factor 3 Period of sale 0.662 Competitive intensity
Neighbor competitor 0.635
Promotional activities 0.617
Factor 4 Consumer demand 0.764 Consumer expectation
Product returns 0.663
Factor 5 Width of the product 0.697 Store characteristics
Place of store 0.611
Keep on same brand 0.592
Factor 6 Sales performance 0.758 Retailer’s strategy
Product altering 0.678
(Source: Primary data )

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 It can be observed that six variables explain 67.17 per cent of total variance. The first factor was named as
“coercive source of power”. The second factor with grouping of three variables could be named as “retailer’s
characteristics”. The third factor is formed with three variables and named as “competitive intensity”. The
fourth factor is formed with two variables and named as “consumer expectation”. The fifth factor is formed with
three variables and named as “store characteristics”. The sixth factor was named as “retailer’s strategy” and
consists of two variables. Therefore the results reveal that factor analysis results in six predominant factors.
The nature of the channel system, years of relationship with the firm, and dissatisfaction with the performance
of channel partners can also be possible causes of conflict(Rosenberg and Stern, 1971). The first factor i.e.
coercive source of power consists of source of conflict like supply delay (0.764), credit to consumer (0.879),
delivery accuracy (0.823) and offers on product (0.703). The power towards the one channel in a system
influences the change of another channel in the system (Gaski, 1984) many researchers are operationalized
power into coercive, legitimate, reward, referent, information and expert (Frazier and Rody, 1991).
The communication of retailer (0.774), experience of retailer (0.663) and channel management (0.526)
are categorized under retailer’s characteristics which directly and indirectly are the reason for conflicts. Proper
management of the above factors will minimize channel conflicts.
In emerging economies such as in India, many people prefer opening small retail stores since the investment
requirement is low. This increases the competition among the small retailers for the market share. Competitive
intensity comprises of variables such as period of sale (0.662), neighbor competitor (0.635) and promotional
activities (0.617). Increase in number of small retail stores in neighborhood increases competition among
existing small retailers. Age of the store also plays important role in capturing the major share of consumer
base. The retailers who are in the market since long time see new retailers as threat, which also may lead to
conflict among the retailers for suppliers and consumers.
Consumer expectation includes the consumer demand (0.764) and product returns (0.663). Each consumer
has a certain expectation towards the product and service; if this is left unsatisfied there may be a probability
of conflict between the retailer and the consumer.
Store characteristics refer to location of the store, width of product range and consistency in maintaining
same brands for brand loyal consumers. The store location was observed to be main factor among all the
factors, because most of the consumers preferred stores closer to their residing place since it was convenient
for purchasing to the consumers. Similarly size of store played major role in the sales performance and store
keeping. (Ozcan, 2000) identified in turkey that, small retailers are the store with less than 400 square meter
in size, store such as convenience store, grocery stores and butchers.
Retail strategy includes sales performance and product altering. The product altering in case of sample small
retailers means offering lower quality product than the quality demanded by the consumer without his knowledge.
According to American marketing association, “strategy is defined as the direction the business will pursue within
its chosen environment and guides the allocation of resources and effort”. It also provides the logic that integrates
the perspectives of functional departments and operating units, and points them all in the same direction.
When the consumer realizes that he was deceived by lower quality product, he may not prefer visiting the
same store again. Such kind of manipulative practices should be avoided by the small retailers, since it is
not ethical.
Conclusion
The study mainly focused on channel conflicts from various interactions with the small store retailers and
an attempt was made to indentify the major reasons for channel conflict. Some of our results are mapped
back to existing research, such as exploring channel conflict in an emerging economy: the small retailer’s
perspective. The result of factor analysis showed that, six variables under factor coercive source of power
explained 67.17 per cent of total variance. The second factor with grouping of three variables was named
as retailers characteristics. The third factor was formed with three variables and was named as competitive
intensity. The fourth factor was formed with two variables and named as consumer expectation. The fifth factor
was formed with three variables and named as store characteristics. The sixth factor was named as retailers
strategy and consisted of two variables. Therefore six factors using factor analysis were identified as main
reasons for conflict between small retailers-vendors and small retailers-customers.
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References
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