A manufacturer signs a direct deal with a large national account. At the corporate level, the math is clean: one price, one contract, one point of contact. Three weeks later, the rep agency that has owned the specification work in that customer’s home territory for fifteen years hears about the deal. Not from the factory. From a distributor.
That is where channel conflict starts. Not in the decision to sell direct, but in how the decision was handled.
Most manufacturers treat conflict as the cost of running both direct and indirect channels simultaneously. It is not. The same deal can land as a threat or as an asset to the rep. What determines which outcome you get is rarely the deal itself. It is whether the rep was governed by the arrangement or blindsided by it.
The same direct deal lands as a threat or an asset. What decides which is whether the rep was governed into it, or blindsided by it.
How Conflict Always Starts
Channel conflict shows up in a few familiar patterns:
- A national account is signed directly, and the rep finds out downstream from a distributor.
- A manufacturer opens a web store and posts prices that undercut its own reps’ distributors on the same product.
- A house account carved out years ago keeps growing, pulling in more product and more locations; the rep is still working, with no one reopening the conversation.
In every version, the rep is the last to know. A rep kept in the dark does what any business does: it protects itself. It gets careful with the forecast it sends to the factory. It steers orders toward the distributors where its commission reliably tracks.
There is a deeper move underneath it, and it is the one manufacturers consistently underestimate. A rep carries a full line card. When one principal stops playing straight, the rep quietly works around that principal. Time, spec defense, and demand creation drift toward the lines that behave. Where the rep also carries a competing line, the spec the manufacturer used to count on goes to the competitor instead. No argument. No announcement. The card just tilts away, and the factory rarely sees it happen.
A rep carries a full line card. When one line stops playing straight, the rep tilts the card toward the lines that do.
Define “Direct” Before Someone Else Does
Most of this traces back to one loose word. A deal gets called a national account because someone wants it to be one. The cure is a definition that holds and that binds the manufacturer as tightly as the rep.
A real national account has five parts:
- An identified customer
- A documented lighting or controls schedule
- A centralized purchase
- A standardized price
- A defined build schedule on a known or estimated timeline
The part that does the most work is the centralized purchase. If the job is bid out as design-bid-build, market by market, it is not a national account. It is local spec work that belongs to the rep, whatever the customer’s letterhead says.
Then write it down. Put the definition, and every account that meets it, in a place both the manufacturer and the agency can see. A definition that only one side can read is not a rule. It is a claim.
If the job is bid out market by market, it is the rep’s spec work—not a national account, whatever the letterhead says.
Two Clauses and One Habit
Whether conflict can be handled on paper comes down to two clauses in the rep agreement.
1. The House-Account Exclusion
The clean version names each house account on a schedule and commits the manufacturer not to pull other customers in-house during the term. Named and listed, a house account is governable. “Major national accounts,” with nothing behind it, is just standing permission for the deal described at the top of this article.
2. The Split-Commission Clause
This is where the manufacturer decides, ahead of time, how a deal that crosses territories or converts to direct gets credited. Put a rule in the agreement, and there is a rule. Leave it blank, and every one of those deals gets argued after the fact, once both sides have dug in. The clause does not have to be generous. It has to exist before the deal does.
The One Habit That Makes Both Clauses Work
Tell the affected rep before the customer does. Almost all the damage in the opening scenario came from the sequence, not money. A rep can usually live with a deal going direct. It cannot live with hearing about its own territory from a distributor.
Be Honest About Going Direct
None of this is an argument against direct. Sometimes a large customer simply wants to deal with the manufacturer directly. That is the customer’s preference to make, and when a customer wants a direct relationship, the right answer is to give them one—not to fight to keep the order in the channel. You do not win that fight, and you should not want to.
E-commerce follows the same logic at a smaller scale, and it is not optional: by 2025, 62.3% of electrical and HVAC buyers were ordering online, with online purchases accounting for 30% of total material buys, a 702% increase since 2018.
But there is a line worth holding. A customer choosing to go direct is one thing. A manufacturer reaching into pull an account directly is another. The moment you pull an account away from the agent who built it, you have made yourself a competitor to your own rep.
Aim instead to be the partner you would want your agent to be when it is protecting your brand. In that market, the agent is your brand. In most territories, the agency has carried the brand into specifier offices and contractor trailers for years, often decades, and built the demand the direct deal is now collecting on.
What happens too often instead:
- A national accounts team inside the manufacturer needs to show its value, and a signed corporate agreement is the easy proof, even when the demand under it was built in the field long before that team arrived.
- The account gets reclassified, the rep’s commission on it gets cut, and the rep is told rather than asked.
- Cut far enough, it stops reading as economics and starts reading as an insult. The rep answers the only way it can. It tilts the card.
Threat or Asset: One Question Tells You
One question tells you whether your hybrid model is governed or only tolerated. Ask the affected reps how they would describe your direct motion. Not on a survey. In the hallway.
If they call it an asset, they were told before the customer was, they knew the rules going in, and they had somewhere to go when the rules got tested.
If they call it a threat, they learned about deals from a distributor—and had no say when the commission was cut.
The model did not decide which answer you get. The way you governed it did.
That is the whole job here. Not choosing between direct and reps, but running the line where they meet with rules both sides can see.
