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Exploring
Exploring channel conflict in an channel conflict
emerging economy: the small in an emerging
economy
retailer’s perspective
Satyam and Rajesh K. Aithal 1061
Department of Marketing, Indian Institute of Management Lucknow,
Received 16 March 2016
Lucknow, India, and Revised 5 April 2016
Harshit Maurya 10 April 2016
23 September 2016
Department of Business Administration, University of Lucknow, Lucknow, India 10 February 2017
3 May 2017
14 June 2017
Accepted 4 July 2017
Abstract
Purpose – The purpose of this paper is to explore channel conflict from the small retailer’s perspective in the
context of emerging economies. The study investigates the factors and probable outcomes of perceived
channel conflict.
Design/methodology/approach – A qualitative research design is adopted. This study involves
semi-structured in-depth interviews with 14 small retailers, selected through the purposive sampling
technique, in a capital city of North India.
Findings – This exploratory study reveals five key reasons for channel conflict in the context of small
retailers: coercive sources of power, retailer dependence, competitive intensity, retailer characteristics, and
distributors’ role performance. The findings also highlight channel exit and passive acceptance as two
probable outcomes of perceived channel conflict. Conflict may also lead to changes in the channel structure,
which may significantly affect the success of multinational firms in emerging economies. The paper
concludes with a discussion and presents an agenda for further research.
Originality/value – Channel conflict is a well-researched area, but the context of most existing studies has
been larger retailers in developed economies. The findings of this study provide the reasons for and outcomes
of the channel conflict encountered by small retailers in emerging economies. This study should be of interest
to marketing managers, especially of consumer packaged goods firms, who want to succeed in emerging
economies. These managers can use insights from the study to manage channel conflict in the context of
small retailers.
Keywords India, Emerging economy, Small retailer, Channel conflict
Paper type Research paper

Introduction
The importance of emerging economies globally has been rising due to the dual reasons of
economic reforms in many of emerging economies (Sheth, 2011; Narasimhan et al., 2015), and
the fact that the growth rate in these countries has far exceeded that of developed nations.
Though this growth has attracted many multinational firms, they have met with limited
success in these markets (Dawar and Chattopadhyay, 2002; Khanna and Palepu, 1997).
One of the reasons for this limited success is the complexity of the distribution
channel and retailing in these economies, which has been emphasised by many authors
(Kumar et al., 2015; Arnold and Quelch, 1998). One key element of this complexity is the
presence of small retailers in these markets.
An effective distribution channel is crucial to succeed in the retail sector across
the globe, especially in the case of emerging economies due to their complex distribution
structure. According to Zhuang et al. (2010), cooperation among channel members and
conflicts among them are the driving factors to developing an effective distribution channel.
International Journal of Retail &
It is thus vital for multinational companies to enhance their understanding of the Distribution Management
behavioural issues of channel members in emerging markets such as India. Traditionally, Vol. 45 No. 10, 2017
pp. 1061-1078
channel research has taken the manufacturers’ and distributors’ perspective (Frazier, 1999). © Emerald Publishing Limited
0959-0552
Moreover, the extensive research on retailers has more or less ignored small retailers DOI 10.1108/IJRDM-03-2016-0037
IJRDM (Runyan and Droge, 2008; Lenartowicz and Balasubramanian, 2009). Among the various
45,10 dimensions of behaviour within a channel, conflict has been identified as one of the most
important, and has been even seen as inevitable given the disparity of power among channel
members (Rosenbloom, 2013; Bucklin et al., 1997).
In this research, we explore channel conflict in the context of small retailers in an
emerging economy. To the best of our knowledge, this is one of the first studies to delve
1062 deeper into this domain. The objective of this paper is to understand channel conflict in the
context of small retailers by identifying the reasons for and outcomes of this conflict from
the perspective of small retailers in an emerging economy. The study is expected to address
the general research gap in the domain of small retailers (Runyan and Droge, 2008),
specifically conflict studies, and to add to the understanding of differences in channel
behaviour in different countries (Kale and McIntyre, 1991).
This study was conducted in the capital city of one of the largest state in North India.
The study highlights certain aspects that are particularly interesting, especially with regard
to the probable outcomes of conflict. For example, the impact of conflict on the channel
structure, in that it leads to an increase in the reliance of small retailers on the wholesale
channel, should be of interest to channel managers. The findings of this study are expected
to help both academicians and managers to appreciate the uniqueness of the small retailer
context, as well as the emerging economy context.
The remainder of the paper is organised as follows. First, we review the extant literature on
emerging economies, small retailers, and channel conflict. Then, we discuss the methodology
adopted for the study. In the subsequent section, we elaborate on an analysis of the findings
based on semi-structured interviews conducted in the capital city of North India. We then
move on to a discussion based on the findings by mapping it back to the extant literature.
We conclude by outlining our contributions and suggesting issues for further investigation.

Literature review
In this section, a brief review of the literature on the three main aspects of the study –
i.e., emerging economies, small retailers, and channel conflict in marketing channels – is
presented.

Emerging economies
Emerging markets account for 65 per cent of the world’s population and 40 per cent of the
world’s economic output (Narasimhan et al., 2015), and their growth is expected to take place
three times faster than that of developed economies. This high growth can be attributed to the
emergence of a new middle class in China and India, and the rise of entrepreneurs, including
small retailers, especially in emerging markets (Sheth, 2011). The growth and size of these
markets make them a preferred destination for many multinational corporations. The unique
characteristics of emerging economies, such as their heterogeneity, socio-political governance,
chronic shortage of resources, unbranded competition, and inadequate infrastructure make
the application of conventional marketing strategies to these markets difficult (Sheth, 2011).
Thus, there is a need to adapt marketing strategy (Burgess and Steenkamp, 2006) and, within
this, customise distribution strategies of brands (Kumar et al., 2015).

Small retailers
Small retail is the dominant form of retailing in many emerging economies; Indian retail in
particular is dominated by “mom-n-pop” type stores. There is no consensus on the definition
of a small retailer (Runyan and Droge, 2008). Hutchinson et al. (2009) identified small
retailers in the UK based on certain key characteristics, such as being less well known and
having a small share of the market and limited operations (i.e. operating no more than
15 retail store outlets). Similarly, Ozcan (2000) identified small retailers in Turkey as those Exploring
who own independent stores – such as convenience stores, butchers, and grocery stores – of channel conflict
less than 400 square metres in size. Ramakrishnan (2010) defined these retailers as small in an emerging
(less than 500 square feet in area) neighbourhood stores that are largely owner managed
with negligible hired help, and that stock a limited number of items. Moreover, small economy
retailers have not been found to be dominant in their field of operation (Doody and
Davidson, 1964). Some common aspects were identified from extant definitions, such as that 1063
small retailers are those that independently own and operate their stores, and that the size of
the shop is small in terms of area.
India has one of the highest retail densities in the world, with only 8 per cent of organised
retail (PwC Retail Report, 2012). The bulk of grocery and branded consumables retailing in
the country is via small, traditional retailers (Dholakia et al., 2012), and they are estimated to
account for more than 90 per cent of both employment and national market share.
This is despite the entry of organised large-format retailers and the emergence of
e-commerce. Table I highlights the dominance of small retail in India.
Around 96 per cent of retail establishments in India are less than 500 square feet in size,
as per KPMG Retail Report (2014). Small retailers in rural India buy more frequently and in
smaller quantities due to space constraints (Aithal, 2012). Small retailers also face challenges
in terms of working capital constraints, lack of access to formal credit, etc., which also
differentiates them from organised retailers (Sarma, 2005; Satyam and Aithal, 2014).
The real strength of the small retail trade rests on a strong value proposition to emerging
consumers and a business model that centres on quick conversion of inventory into cash
(D’Andrea et al., 2006). Small retailers exhibit both customer and entrepreneurial orientation
despite their limited resources (Tajeddini et al., 2013). D’Andrea et al. (2006) identified that
personal relationships and emotional proximity to consumers are key drivers of these
retailers’ collective success in emerging markets.
According to Dholakia et al. (2012) and BCG Retail Report (2015), small retailers are part
of the channel reality in India, which is unlikely to change in the near future (Table II).
Other researchers have also come to similar conclusions for countries such as Latin America
(D’Andrea et al., 2006) and Turkey (Ozcan, 2000). Thus, multinational corporations need to

Statistical category (unit) Value Year Source

Total number of retail establishments (million) 14 2014 KPMG Retail Report (2014)
Total number of retail establishments with size less 13.44 2014 KPMG Retail Report (2014)
than 500 sq. ft (million)
Number of retail establishments run by owner, with 10.57 2005 Government of India (2005)
help of family members (million)
Size of retail sector in terms of revenue (USD billion) 534 2013-2014 KPMG Retail Report (2014)
Size of retail sector in terms of revenue (USD billion) 622 2014-2015 BCG Retail Report (2015)
Projected size of retail sector in terms of revenue 948 2018-2019 KPMG Retail Report (2014)
(USD billion) Table I.
Projected size of retail sector in terms of revenue 1,000 2020 BCG Retail Report (2015) Key statistics of the
(USD billion) retail sector in India

2015 (expected) (USD billion) 2020 (projected) (USD billion) Growth rate (per cent)
Table II.
Modern retail 60-70 165-180 20-25 Market size and
Traditional retail 550-560 890-910 8-10 growth of retail
Source: BCG Retail Report (2015) sector in India
IJRDM understand and foster a culture of cooperation with small retailers. Overall, the market size
45,10 of Indian retail is projected to exceed USD1 trillion by 2020, from USD600 billion in 2015
(BCG Retail Report, 2015). Table II provides details of the projected market size and growth
rate of both organised and traditional retail in India.
However, small size need not necessarily mean insignificance. For example, small and
medium enterprises (SMEs) represent 75 per cent of all retailing companies in Europe and
1064 represent the second largest employer, after manufacturing, with a total workforce of
21 million people (Coca-Stefaniak et al., 2005). In the UK alone, SME retailers still employ
64 per cent of all the employees in the retail sector. In India, apart from the distribution
reach, retail is an important source of employment; in fact, it is the second largest
employment sector after farming (Ramakrishnan, 2010). According to Hallsworth (2010),
there is a positive association between employment growth in small retail and the number of
larger store retail developments approved, as found in earlier literature. D’Andrea et al.
(2006), in research conducted across six Latin American countries, found that small-scale
retailers can fulfil the needs of consumers effectively. Hallsworth et al. (2015) suggested that
markets comprising small independent retailers contribute to the economic, social, and
political health of towns and cities. The role of small retailers in the context of emerging
economies has enormous policy implications regarding issues such as attracting foreign
direct investment to these countries, and the impact in terms of the direct and indirect
employment of millions of people engaged in small retail (Sarma, 2005). The next sub-section
focusses on conflict in channel research.

Conflict in channel research

This section elaborates on channel conflict and two associated issues of power and
dependence. Conflict is concerned with the overall level of perceived disagreement between
exchange partners (Palmatier et al., 2006), and is defined as a situation in which one channel
member perceives that another is engaged in behaviour that prevents them from achieving
their goal (Stern and El-Ansary, 1977; Gaski, 1984). For example, channel conflict occurs
when a supplier or distributor tries to influence someone else so as to gain an important
position or a larger market share (Gaski and Nevin, 1985), or when a stronger member
pushes to increase their power while weaker members strive to maintain their position
(Gaski, 1984; Lusch, 1976; Liu and Sharma, 2011).
Several stages of conflict have been discussed in the literature. According to
Pondy (1967), conflict can be classified into five stages: latent, perceived, felt, manifest, and
conflict aftermath. Latent conflict is the underlying source of conflict, whereas perceived
conflict is only a perception of conflict (Pondy, 1967). Felt conflict is defined as tension and
anxiety in addition to the perception of conflict (Brown and Day, 1981). Manifest conflict is
the stage at which channel members go beyond the cognitive and affective states (perceived
and felt conflict). Conflict aftermath refers to post-conflict conduct by channel members.
Many reasons for channel conflict can be found in the literature. For instance, Stern and
Heskett (1969) identified incompatibility of goals; role congruency and dysfunctional domain
definitions; and differences in the perception of realities in joint decision making. 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).
Conflict, power, and dependence have been inter-linked in the extant literature.
The first associated concept, power, is seen as the ability of one channel member to
influence the decision of another member in a channel (Gaski, 1984). Researchers have
operationalized power as an exercise of power bases, such as coercive, reward, legitimate,
referent, expert, and information (Frazier and Rody, 1991) – though it has also been
acknowledged that it is difficult to distinguish these different power bases (Gaski, 1984).
Coercive sources of power are easier to differentiate among the five, as they involve
potential punishment. Therefore, most researchers have agreed on a fundamental Exploring
dichotomy of coercive and non-coercive power sources (Hunt and Nevin, 1974; Gaski, 1984). channel conflict
The exercise of non-coercive power in a channel dyad aims to change the target’s in an emerging
behaviour by providing suggestions and benefits in the event of compliance (Gaski, 1984,
Zhuang et al., 2010). The exercise of coercive power refers to a firm’s imposition of harsh economy
sanctions, threats, or legal action (Gaski, 1984; Gaski and Nevin, 1985), which further leads to
conflict. Zhuang et al. (2010) found that channel members are more sensitive to the exercise of 1065
coercive power in the context of emerging markets such as China, whereas the exercise of
non-coercive power should have a direct effect on cooperation, rather than conflict.
The second concept is dependence. In an exchange relationship, all participants depend
on each other for successful execution of their tasks, and in distribution channels there is
significant dependence among the various channel members. Conflict, power, and
dependence are inter-linked. The power of a channel member is determined by the
dependence of other channel members. Dependence is an antecedent of power, and can be
one of the reasons for conflict among channel members (Liu and Sharma, 2011). It is related
to the frequency of disagreements leading to channel conflict (Rosenbloom, 2013).
Elaborating more on the linkage between power and dependence, Emerson (1962, p. 32)
explains the connection between power and dependence as follows: “If one actor is highly
dependent on the second actor that means the second actor has more power than the first
one. The dependence of one actor B upon actor A is (1) directly proportional to
B’s motivational investment in goals mediated by A, and (2) inversely proportional to the
availability of those goals to B outside of the A-B relation”.
When one channel member in a dyad requires more assistance and resources than the other
in order to achieve its goals, the dyadic relationship may shift to unilateral dependence. Power
imbalance stems from the asymmetric dependence (Liu and Sharma, 2011). However,
a one-sided exchange relationship is not necessarily unstable. The possession of channel
power is perceptual, and may or may not be exercised. It equates to the potential influence that
a channel member exerts over other dependent channel members.
Outcomes of conflict can be measured by behavioural or financial performance. Conflict
creates negative feedback, and tension is felt by channel members when some of them
exercise power for their self-interest (Liu and Sharma, 2011). Several outcomes of channel
conflict can be identified in the literature. For instance, Graham (1986) proposed five
approaches as responses to channel conflict, namely, voice, aggregate, ignore, loyal, and
exit. Hibbard et al. (2001) proposed a typology of responses as disengagement, constructive
discussion, passive acceptance, and venting. These responses have been applied in
marketing channel contexts (Ping, 1999).
Conflict is considered dysfunctional and destructive (Anderson and Weitz, 1992), but
sometimes conflict can also lead to positive outcomes (Dwyer et al., 1987; Rawwas et al., 1997).
It has been recognised that dysfunctional conflict can lower channel efficiency and have an
adverse influence on performance (Frazier and Rody, 1991), even leading to exit from a channel
relationship (Ping, 1999; Kang et al., 2012). Overall, the negative impact of channel conflicts on
relationships can overshadow all the other positives from marketing activities (Palmatier et al.,
2006). It is important to manage channel conflict, as unaddressed conflict can create negative
sentiment in the entire channel system. Liu and Sharma (2011) suggested that negotiation
through discussion and dialogue can help channel members resolve and manage the conflict in
the exchange relationship with a long-term orientation, and further suggested four negotiation
strategies (i.e. subordinating, collaborative problem-solving, avoidance, and competition strategy),
which should be applied in four phases, to handle the situation of channel conflict.
There is sparse literature on conflict studies in the context of small retailers. However, we
came across one study by Reardon and Hopkins (2006) that analysed the growing conflicts
between supermarkets and traditional retailers primarily in the USA, Western Europe, and
IJRDM South America. Kale (1986) emphasised that understanding the behavioural aspects of
45,10 channel systems within developing countries such as India and China is vital for the future
growth of multinational corporations. Channel conflict is one of the most important
variables in channel behaviour research, first because it is inevitable, and second because it
influences channel performance (Rosenbloom, 2013).
The next section outlines our research methodology.
1066
Research methodology
This study aims to understand channel conflict and identify factors and outcomes of
channel conflict in the context of small retailers. The size of the shop is identified as a
criterion for defining a small retailer, as applied by earlier researchers (Ramakrishnan, 2010;
Runyan and Droge, 2008) and found relevant in the context of this research. Thus, we
operationalise a small retailer as one who is independently owned and operated and has a
physical size of less than 500 square feet in area. It has been observed that most of the
retailer’s functions are performed by the individual owner, who is mostly under-capitalised
and has only one store in operation (Chung, 2014), with limited stock.

Exploratory and qualitative methodology

A qualitative research design was adopted as this study aims to explore and describe the
phenomenon of conflict among small retailers in the context of asymmetric power-
dependence. A qualitative research method was considered most appropriate as the study is
exploratory in nature (Creswell, 2007). Semi-structured interviews were conducted with a
select group of small retailers so as to explore channel conflict in line with similar recent
studies (Wagner et al., 2005; Coca‐Stefaniak et al., 2010). This semi-structured interview
method allows informants to express their beliefs, life circumstances, and other activities in
their words (Miles and Huberman, 1994). A combination of deductive and inductive
approaches was adopted for the study, as employed by Coca‐Stefaniak et al. (2010) in their
study of small retailers.

Sampling technique
The informants were chosen through the purposive sampling method. The following
criterion was adopted for selection of participants: the shop had to have been in operation
for longer than one year; be serviced by two or more distributors, either currently or in the
past; and stock groceries and various branded, as well as unbranded, products, such as food,
cosmetics, etc.

Data collection and analysis

Initially, we familiarised ourselves with the research setting through open-ended
conversations, after which, semi-structured interviews were conducted. The site was
considered suitable for the study as two of the authors lived nearby, and all three speak the
local language, Hindi. A total of 14 interviews were carried out in the local dialect by
the authors with the owners of small independent retail stores. Data were collected in the
participants’ setting. These interviews were later translated into English.
The retailers were asked questions on their existing relationship with their major
distributors, and any incidence of conflicts in the recent past. They were also asked about
their experience at various stages of the relationship and how they had responded to
conflicts with their distributors. They were further probed about their childhood, education,
prior work experience, how they started their store, etc. Demographic details, such as the
size of the shop, the age of the shop, and turnover, were recorded. The initial intent was also
to collect information on the age of the retailer-distributor relationship, but due to frequent
changes in distributors’ salespeople, the retailers were unable to answer this question, so the Exploring
age of the shop is used as a proxy. The retailers were also asked questions about their channel conflict
stocking patterns, product categories, order sizes, and frequency and source of purchase. in an emerging
Aspects of each owner’s background, such as age, prior work experience, and educational
qualifications, were also recorded. Demographic characteristics of participants are provided economy
in Table AI. Specifically, with respect to conflict, we attempted to understand the
relationship between the retailer and the distributor. To obtain an in-depth understanding, 1067
additional questions on the distributors’ service levels, including behavioural aspects of
distributors’ salespeople, were also asked.
The analysis was conducted following data reduction, data display, and drawing and
verifying conclusions. The responses were categorised from the transcript and recurrent themes
identified. In this paper, we have used the word “distributor” and “supplier” interchangeably.
Looking at the frequency and using qualitative judgements, the themes were either retained or
removed in agreement with theoretical meaningfulness and substance. The following section
provides a description of each of the factors and outcomes identified during the data analysis.

Analysis of findings
The retail landscape in India is unique due to the dominance of small retailers, and this
research focussed on exploring conflict in channel relationships. It was identified that 12 out
of the 14 small retailers had experienced incidents of conflict with their channel partners.
The results of the qualitative interviews with the small retailers provided seven broad
themes around channel conflict. These themes were further analysed and classified. Five of
them were labelled as reasons for conflict – i.e., use of coercive sources of power, retailer
dependence on the distributor, competitive intensity, distributor role performance, and
retailer characteristics – and two were labelled as outcomes of the channel conflict – i.e., exit
and passive acceptance. Two variables, age of the shop and turnover of the shop, were used
for further analysis. The findings were analysed following the categorisation of retailers
based on the age (Table III) and turnover (Table IV ) of their shops.
All five reasons and two outcomes were identified in both analyses based on the age and
the turnover of the shop. Two retailers reported that they had never experienced any
instance of conflict, and were happy with services extended by the distributor. Both of these
retailers had been operating their small shops for more than five years.
The seven identified themes are discussed below.

Coercive sources of power

This study highlights a context in which the power balance is heavily in favour of the
manufacturer and their suppliers. This is in contrast with the findings of earlier studies,
where retailers have also been seen as powerful channel members. Some of the retailers
shared their views on how the distributors would change orders, deliberately delay

Retailer
No. of retailers who dependence No. of retailers who Outcome
experienced incidences of experienced coercive sources Passive
Age of shop conflict High Low of power Exit acceptance

o5 years (8
retailers) 8 7 1 7 7 1 Table III.
5 years+(6 Summary of findings
retailers) 4 3 3 4 2 2 based on shop age
IJRDM supplies, refuse to offer exchanges, and refrain from passing on credit-related offers
45,10 extended by the company.
For example, one of the retailers Salim shared one instance and stated: “if we want to buy
fast-moving products we have to buy them along with the slow-moving and new
introductory ones. If we don’t want these products, we are not given supply at all”.
With regard to ordering, Sanjay said: “They change the order sometimes. Now we can’t
1068 do much. We have to stock items that customers demand. We are small shopkeepers, so we
have to buy”.
The small retailers also faced difficulties in returning products that were either unsold or
were nearing expiry.
Irfan said: “They don’t let us return products easily. What can we do? We have to
manage on our own. Sometimes despite ordering, they don’t deliver on time, and we have
to buy from the open market as we can’t let customers down”.
The emphasis here was on the fact that these actions were deliberately taken, and thus
seen as coercion, rather than arising due to inefficiency on the part of the distributor. Out of
14 retailers, 11 retailers mentioned that they had experienced a distributor’s use of coercive
power in the past. The majority of the retailers reported instances (Tables III and IV ) in
which a distributor had deliberately delayed supplies, changed orders, or refused to extend
credit. We observed that retailers with less experience had encountered more instances of
conflict in which coercive sources of power were employed. These instances led to
disagreements, tension, and frustration, which are synonymous with conflict. In summary,
the use of coercive sources of power by distributors to manage activities enhanced the
channel conflict perceived by the small retailers.

Retailer dependence
Interdependence among various types of channel members is part of the channel reality.
We found that small retailers with higher turnover and more experience showed less
dependence on their distributors compared to retailers with low turnover and younger
shops. Out of 14 retailers, ten retailers mentioned a higher dependence on their distributors.
Based on our exploratory study, we found that many of the small retailers were dependent
on manufacturers’ suppliers for two primary reasons. First, a substantial portion of overall
sales for most of the small retailers came from selling products manufactured by large
consumer packaged goods companies. Second, these companies have strong brands that are
in high consumer demand, so that the small retailers have to buy their products.
Nitin said: “Times have changed. Now customers come with a particular demand, and we
can’t do much. They won’t buy any substitute or similar product. People have become very
brand conscious now. So we have to buy from the distributors. If we buy from a wholesaler,
we have to pay more for buying the same product. So we can’t do anything”.

Retailer
No. of retailers who dependence No. of retailers who Outcome
Turnover experienced incidences of experienced coercive sources Passive
(INR per day) conflict High Low of power Exit acceptance

W2,000
(5 retailers) 4 2 3 3 3 1
Table IV. 1,500-2,000
Summary of findings (6 retailers) 5 6 0 5 3 2
based on shop o1,500
turnover (3 retailers) 3 2 1 3 3 0
This dependency limited the extent to which the retailers could react or complain to the Exploring
distributor. With regard to fulfilling consumer demand, Raju spoke about alternative channel conflict
sources through which they have to buy: “We have to stock whatever customers demand. in an emerging
Otherwise, they will not come back to my shop next time around, so we have to buy from
these distributors. Even if the salesperson’s behaviour was not good (rude). But I haven’t economy
tried to raise a complaint with the distributor, as nobody listens. We are small retailers, so
our voice goes unheard”. 1069
Our observations from the field indicate that some of the small retailers had to continue
buying from the same distributor in spite of poor service, errors in order fulfilment, and even
refusal to honour promotional offers. All of these indicate the dependence of the small
retailer on the distributor: small retailers continue to buy from the distributor so that
customers can buy the product from their shop. Despite the problems, the retailers in our
study seldom raised the issue with either the distributor or the company directly, because
they felt that they are too small and fear retribution from the distributor.
Next, we go on to the third theme identified, which is competitive intensity.

Competitive intensity
In emerging economies such as India, opening a small retail store is seen as a low-skill and
low-investment opportunity. This has led to the mushrooming of small stores across the
country. We also observed an increase in the number of shops in the same neighbourhood.
With more small retail stores opening up, the overall density is increasing, which increases
competition among small retailers. We operationalise competitive intensity as the presence
of other small retailers in the vicinity of the focal retailer. This competition has an impact not
only on the incidence of conflict among retailers, but also on the relationship between the
retailer and the company indirectly, as the small retailer shifts to another company whose
treatment is fair.
As Nasir said, “The neighbouring shop is very old, and his sales are also very high, and he
doesn’t allow the distributor’s representative to come here as my turnover is not very high”.
This was confirmed by our findings in the field, where we found that competition among
retailers affected the exchange relationship between small retailers and distributors.
We found instances of distributors who were not supplying to small retail stores because these
stores were near a larger (in terms of turnover) or older shop. Based on observations from the
older shops, we found that competition has increased greatly compared to earlier times.
As Nazeer said: “Initially there were very few shops, so almost negligible competition.
But so many shops have sprung up around my shop. Accordingly, sales have dropped
significantly”.
In summary, competitive intensity was identified as one possible reason for channel
conflict in the case of small retailers. With more small shops opening up, competition has
been increasing, resulting in adverse effects on channel relationships.
The next theme to be elaborated is the distributors’ role performance.

Distributors’ role performance

It was found that small retailers tended to form opinions about their distributors based on
their past experiences, and how well the distributors had been fulfilling their role.
This parameter is labelled distributors’ role performance. It can be measured based on
timeliness of deliveries, accuracy of deliveries compared to orders, credit support as
promised, return services, etc.
As pointed out by Nazeer: “This is a small shop, so I can’t hold much inventory as my
working capital gets blocked. I order in small quantities equivalent to one week’s sales.
But [the distributor’s] delivery pattern is uncertain. Sometimes they deliver in two days and
IJRDM sometimes on the third day after taking the order. In between, we have to buy from the
45,10 wholesaler from the open market in case of stock-outs”.
Similarly, Sanjay shared his experience about returning a damaged product: “I returned
a damaged product six months back, but the amount has yet to be credited. Whenever I ask
the salesperson, he says everything is done through the system now, so it will happen after
some time”.
1070 We found many instances of conflict in this dimension, especially due to the return policy
for products. Some retailers raised the concern that they do not receive offers and point of
purchase (POP) material support as in the past. Deepa said: “We haven’t received any offers
this year. Earlier they use to give some POP material, but we don’t even get that now. Only
last year they provided this billboard”.
Thus, our field observations showed many instances in which retailers were not getting
the services they wanted in terms of having a good salesman, POP material, and timely
order fulfilment, which can be seen as poor performance on the part of the distributor.
We found that retailer characteristics also influenced channel conflict, as described in the
next section.

Retailer characteristics
Although this study focusses only on small retailers, we found significant diversity among
those studied. During our operationalization, an attempt was made to try to control some of
these variables, but we found variations in terms of the retailers’ education level, location,
performance, and experience. Based on the qualitative data, we found that retailer
characteristics such as relationship age, turnover, and location also affected the channel
conflict experienced by the small retailers.
Rakesh said: “[Our distributor] have been delivering to us for more than nine years now.
They deliver products on time, and they even replace damaged products. Once a company
officer even visited my shop”. Another retailer, Deepak, said: “I know three different
distributors of the company [his shop buys from], and I can ask any of them to deliver to my
shop, and I have known them for many years”.
One additional parameter that we assume would have an impact is the retailers’
turnover; however, most of the small retailers were hesitant about sharing financial details.
Nevertheless, field insights show that turnover does moderate the relationship. One small
retailer, Ansar, said: “Why would the distributor come here and provide good service? They
go to that older shop which gives them good business. That’s all that matters to them”.
Location was mentioned by relatively fewer of the small retailers as a reason for conflict,
compared to relationship age and turnover. Nasir, said: “None of the distributors’
representatives have come since I opened the shop one and half years back. Only a few local
company representatives have turned up. I don’t have much in terms of sales, so I buy from
wholesalers from Daliganj [a popular wholesale market]”.
During our field visits, we also found out that the warehouse of a very prominent
distribution company was located just 200 metres away from a small retailer, but even then
the store was not getting a direct supply from them. The reason was his location in the
basement of a building, which was far from the main road. Thus, it was identified that
location also plays a significant role in the case of small retailers. Hence, for this study we
operationalise retailer characteristics as relationship age, turnover, location, and education.
In the next section, we present the possible outcomes of channel conflict.

Outcomes of conflict: passive acceptance and channel exit

Following our analysis of the findings, two themes were identified as possible outcomes of
channel conflict: passive acceptance and exit. Channel exit can be defined as a situation in
which the retailer exits the retailer-distributor relationship and switches to alternate channels.
On the passive acceptance dimension, we found that though many retailers were not being Exploring
serviced well, they had come to accept this, without any attempt to reach out to either the channel conflict
distributor or the manufacturer. When a retailer switches from a company distributor to a in an emerging
wholesaler, we consider this the exit outcome of channel conflict, while when the retailer
continues to stay in the relationship without voicing concerns, we consider it to be passive economy
acceptance of the conflict.
As one retailer, Irfan, said: “We have to buy to sell. Consumers ask for specific brands 1071
now. Some delay in delivery is accepted, but repeated stock-outs due to delay on the
distributors’ part lead not only to loss in sales but also loss of customers. We run a small
business; hence, no one will listen to us. Hence, we started buying from wholesalers instead
of distributors”.
The observations from the exploratory study showed that in the event of continuous
conflict with the distributor, the retailers would begin to buy from wholesalers instead.
This was mentioned by nine out of the 14 retailers interviewed.
One retailer, Rajender, narrated his experience as follows: “I told the distributor to deliver
products on time, but his salesperson never turned up on time. I can’t let the customers go, so I
have to buy from the wholesaler. If any consumer doesn’t get even one item, then he/she may
not buy at all, and may move to the next shop. Earlier there were only a few shops, but now
there are so many of them and so much competition. So I also buy from wholesalers now.
I normally go to Daliganj once a week and buy from nearby wholesalers in cases of urgency”.
Small retailers with less experience were more dependent on the alternate sources –
i.e. wholesalers – for their supplies as they exited from the distributor relationship (Table III).
Moreover, the analysis based on shop turnover suggests that retailers with low turnover had
encountered more instances of coercive sources of power, leading to conflict and eventually
exit from the relationship.

Discussion
This paper sought to explore channel conflict in the small retail domain within emerging
markets. Using semi-structured interviews with small retailers, five reasons and two
outcomes of channel conflict from the perspective of the small retailer were identified. The
findings show that retailers face situations of conflict due to the active use of coercion by
suppliers, competitive intensity of other retailers, poor role performance of suppliers, and
dependence on suppliers for most branded product categories. Furthermore, we found that
such practices change the channel structure, thereby increasing dependence on alternate
channels, such as wholesalers. The small retailer fulfils all the roles and responsibilities that
any typical retailer would, but with the added constraint of being a small player. Though we
did not specifically explore the services provided by the small retailers to customers, we did
observe them assisting customers and selling on credit.
Due to the power imbalance in the channel, the small retailer is always on the receiving
end of channel conflict. In the study, most of the small retailers who were interviewed had
discontinued buying from their regular distributor at some point in their business, and had
bought from either a wholesaler or an alternate distributor, which we felt was a reflection of
conflict existing in the small retail context. Johnsen and Lacoste (2016) reported that conflict
is often defined as being synonymous with disagreement, tension, and frustration in channel
relationships. In recent years, the advent of organised retail has also brought to the forefront
conflict issues, especially with regard to margins and promotions.
Although the literature has discussed various dimensions of power, this paper considers
only coercive sources of power, which have been identified as the main reason for conflict.
Zhuang et al. (2006) suggested that the chance of using coercive sources of power is higher
when the source member is in a position of power advantage, as per the distributors in this
study. In the context of a channel dominated by small retailers, this dependence is quite
IJRDM different from what has been observed in markets where retailers are much larger. Small
45,10 retailers are said to be dependent when suppliers are critical of their operations, and
alternative options are not as attractive (Chung, 2014; Ganesan, 1994). We have
operationalized retailer dependence as the extent to which one trade partner, such as the
distributor, offers important and critical resources for retailer operations, and for which
alternate sources are scarce or less attractive (Buchanan, 1992). For example, we observed
1072 that the retailers often continued to buy from their distributors in spite of deliberate errors in
billing and delays in supply, which we felt was a reflection of the former’s dependence on the
latter. Kumar et al. (1995) suggested that dependence can lead to coercive behaviour by
suppliers; however, we did not identify this theme as emerging from the qualitative data.
This can be attributed to the perceptual difference of dependence between the small retailer
and the distributor.
We found that the higher the retailer’s dependence on the distributor, the lower the
perceived channel conflict. This finding is in line with the negative association between
dependence and conflict established by Frazier et al. (1989). We found evidence of this in our
field observations in terms of a sense of acceptance from the small retailers when asked if
they had attempted to voice their concerns. They stated that even when they were
dissatisfied, no one would listen to them because of their small size and thus they did not
voice their concerns.
Samaha et al. (2011) and Gailey and Young (2012) found that competitive intensity affects
exchange performance. Vinhas and Anderson (2005) also suggested that conflict between
competing channels drives the channel structure. However, the scope of Vinhas and
Anderson’s study was limited to concurrent channels, and the research was conducted in
the US context and not on small retailers. Extending the same argument to the context of
small retailers, inter-shop competition is often prevalent. We found evidence that older
shops were exerting influence on their suppliers to not supply new shops in the vicinity.
The location decision in the case of larger organised retailers is carefully thought out, but in
the case of small retailers it is often based on chance, availability, and opportunistic behaviour.
Thus, in general, smaller retail outlets in emerging economies are clustered together
(Prahalad, 2005). The agglomeration reduces the search effort by consumers but increases the
competitive intensity among retailers. Although historically smaller retailers have exhibited
cooperative behaviour (Dholakia et al., 2012), this is changing rapidly. Evidence of increasing
competition among the small retailers studied here was found in the fact that every area had a
number of new, recently opened shops, which the owners of older shops resented.
The functional performance of the distributor may also affect perceived conflict among
small retailers. Reviewing earlier research work, we drew on studies conducted on firms’ role
performance (Frazier, 1983) and applied this to the small retailer context, where supplier
role performance includes dimensions such as favourable prices, better margins, good-quality
products, prompt delivery, and provision of marketing support (Chung, 2014). We found that
in many instances the small retailers were unhappy and dissatisfied with the performance
of their distributors.
Regarding the possible outcomes of channel conflict, Kang et al. (2012) and
Dwyer et al. (1987) suggested that conflict enhances the likelihood of relationship
dissolution; furthermore, according to Ping (1999), the decline in satisfaction increases the
chances of the dissatisfied party exiting the channel. Liu and Sharma (2011) reported that an
exit strategy is considered even after a “cooling-off” period when the members cannot see a
future for their relationship. Mooi and Frambach (2009) also stated that relative seller power
decreases the severity of buyers’ reactions to conflict with the seller. In line with this, we found
that the more power the small retailer perceives the distributor as having, the less the retailer
reacts to conflict; rather, they try to maintain the status quo, which maps back to the passive
acceptance identified in the literature. In this study, we did not find much evidence for
constructive discussion and venting (Hibbard et al., 2001) because of a lack of communication Exploring
from the small retailers. Exit and passive acceptance were identified as two outcomes of channel conflict
channel conflict. in an emerging
Earlier studies have shown that small retailers in rural areas influence the channel structure
through their buying preferences (Aithal, 2012). According to Ingene and Lusch (1981), the economy
actual structure of any line of retail trade is based on the behavioural patterns of consumers, as
well as the marketing actions of retailers. Small retailers are attracted to wholesalers due to 1073
their unique requirements (Aithal et al., 2017). This study clearly showed that most of the
respondents were buying from wholesalers and alternate channels, and intended to continue
doing so in the future, as many of them were dissatisfied with distributors’ services.

Conclusions, implications, and avenues for future research

Small retailers make up a significant portion of the retail industry, but often represent an
ignored channel for distributing products in emerging economies (Lenartowicz and
Balasubramanian, 2009). For firms wanting to succeed in these markets, the small retail
channel has to be effectively tapped, and negative interactions in the channel minimised
(Samaha et al., 2011). Among various negative interactions, this study only looked at
channel conflict, and identified some of the key issues in this regard.
Some of our observations and resulting dimensions can be mapped back to existing
research, such as that on the relationship between the use of coercive power and the impact
of supplier role performance on channel conflict (Gaski, 1984; Rawwas et al., 1997; Zhuang
et al., 2010). The findings of this study also validate the existence of power asymmetry in
distributor-retailer relationships (Sutton-Brady et al., 2015). The key differences we observed
were in the relationship between dependence and perceived conflict, competitive intensity,
and outcome of the conflict. We identified specific five reasons and two outcomes of
perceived conflict experienced by small retailers. It was observed that relatively new small
retailers with less turnover faced more instances of conflict. We found that retailers who felt
that they were dependent on their distributor were willing to accept unfavourable terms
from the distributor. Moreover, we observed that small retailers were reluctant to express
their problems regarding the quality of service they were receiving. There was a sense of
resignation or acceptance that they were unable to do much, and that the distributor would
not respond to their problems. Although on the face of it this could appear to be good for the
distributors, as it means that they can afford to ignore small retailers and continue with their
existing policies, in the long run the channel strategy of the manufacturer will be affected, as
many small retailers will buy from alternate channels, such as wholesalers. This would
mean that the formal channels of the manufacturer would weaken, while alternate channels
would remain significant. The manufacturer’s control over formal channels would also
weaken. Thus, we observed that conflict could even lead to changes in the channel structure.
The second difference we found was with regard to competitive intensity. The type,
severity, and level of competition that small retailers face are very different from those faced
by larger retailers. In addition, these aspects are evolving rapidly as more shops open in
areas with greater sales potential. We observed that inter-shop competition also has an
adverse impact on conflict.
The third and final aspect in which we found an important difference pertained to the
outcome of conflict; in the field interviews and interactions we found only two possible
outcomes – exit or passive acceptance. In the literature, two addition possible outcomes can
be found – constructive discussion and venting – but we did not find evidence for these two
in our interviews, which could be due to the lack of communication between the retailer and
the distributor, or even the small size of the retailer.
In conclusion, the main contribution of this research is that it provides a better
understanding of conflict from the perspective of small retailers, paving the way for future
IJRDM researchers to further investigate the relationship between power, dependence, competitive
45,10 intensity, and outcomes of conflict.
Managers of multinational firms should keep these issues in mind while designing their
distribution strategy. As mentioned earlier, in order to establish a substantial presence in
emerging markets, companies’ penetration in the small retail channel is critical, and channel
conflict could prevent success in this regard.
1074 Some specific implications also emerge from this research for firms that want to enter or
expand into emerging economies. First, they should monitor their distributors and ensure that
these distributors are reaching out to small retailers and servicing them well. Otherwise, alternate
channels, such as wholesalers and Walmart cash-n-carry outlets, will remain significant,
eventually leading to decreased control by manufacturers. Direct reach through small retailers
would ensure better control regarding shelf space, access to consumer insights, support during
new product launches, etc., vs indirect reach through the wholesaling channel. Second, firms
should provide adequate training to distributors and their representatives who deal with small
retailers, and sensitise them to the implications of the use of coercive power and poor role
performance. This study represents a first step towards investigating the conflict associated with
small retailers, and will hopefully pave the way for additional research in the future.
The study has certain limitations. The first stems from the fact that the study is
cross-sectional in nature, and in retailing, evolution has a role to play in many of the issues
studied. A longitudinal study may yield additional interesting findings. The second
limitation is that the study assumes that dependence and intensity of competition are
homogenous across all small retailers, which is not true; thus, we were unable to talk about
the possible impact of variation in the level of either dependence or competition. Within
competition, we also did not look at competition from emerging formats of retail. The third
limitation is that we have not considered the dimensions of interdependence and its
interaction with trust, commitment, and satisfaction. Lastly, the qualitative methodology
involved 14 semi-structured interviews, which constrains the study’s generalisability. In line
with a study by Lewis and Cockrill (2002), the findings of this study do not claim any
representativeness, though strong trends can be seen despite the small sample size.
The findings of the study are expected to open several avenues for future research. First,
future studies could explore ways in which to manage channel conflict in the context of
small retailers. Second, they could consider the relative importance of the identified factors
leading to perceived channel conflict. Along the same lines, the relative impact of retailer
characteristics – such as location, turnover, age, and education – on perceived channel
conflict could be further investigated. Third, researchers could explore policy implications of
introducing the concept of business improvement districts (Hogg et al., 2003) for the benefit
of small retailers in emerging economies. Our findings also pave the way for policy
formulation, as Hallsworth and Worthington (2000) reported that small retailers are unable
to generate resources internally. Fourth, researchers could explore variations between the
intensity of channel conflict experienced by small retailers in the case of large
manufacturers and small manufacturers. Lastly, future studies could consider the impact of
other contextual factors, such as caste, religion, etc., on channel conflict.

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Appendix

Age of shop Size of Turnover Interview

Respondent Name (years in shop (INR/ length Education
number (pseudonym) Gender operation) (sq. ft) month) (minutes) level (grade)

1 Deepak Male 13 110 3,200 45 7th

2 Irfan Male 3 80 1,800 32 3rd
3 Deepa Female 8 150 2,500 21 5th
4 Rajender Male 6 90 2,200 25 Uneducated
5 Nasir Male 1.5 80 1,400 36 2nd
6 Nitin Male 5 120 1,700 22 10th
7 Anil Male 2 100 2,100 31 8th
8 Sudhir Male 9 150 2,800 45 7th
9 Ansar Male 2 150 1,100 24 3rd
10 Sanjay Male 3 150 1,500 23 5th
Table AI. 11 Raju Male 4 110 1,800 26 8th
Summary of interview 12 Rakesh Male 13 250 1,700 32 12th
sample used 13 Salim Male 2 100 1,500 22 4th
in this study 14 Nazeer Male 3 70 600 27 Uneducated

Corresponding author
Satyam can be contacted at: satyam@iiml.ac.in

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