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How to Negotiate an Exclusive Distribution Agreement for Online Sales, by Cliff Ennico


“I have been selling merchandise on eBay and Amazon for quite some time. I would like to create a “brand” for the goods I sell, but I am told that the only way to do it (since I am not the manufacturer of these products, only the distributor) is to obtain a distribution agreement. exclusive with each manufacturer so that I am the one person selling these products on eBay and Amazon.

What do you think of this idea? If it’s a good one, how do I go about negotiating contracts with these manufacturers? “

Generally, it is difficult to create a “brand” online when you are not the manufacturer of the merchandise you are selling. Most new sellers on eBay and Amazon make the mistake of selling products “everywhere on the map”. While this can be a good way to start selling online and “learn the ropes”, you won’t be able to develop an online selling business unless you:

– You specialize in a commodity “niche”

– You have goods that are not readily available elsewhere

Unless you have a proven track record of selling online, manufacturers are likely to be reluctant to deal with you unless you show them that you are creditworthy and that you have the expertise and sophistication to maintain their image. brand online. Most big manufacturers won’t want to deal with you at all (they only deal with other big companies like themselves), but there are many small family businesses that can give you a chance to represent their wares.

If your manufacturers are willing to give you the exclusive right to manage their goods online, here are some of the key points that you will need to negotiate with each manufacturer.

N ° 1: The extent of your “exclusive territory”. Will you be the manufacturer’s exclusive distributor for the entire web? Only eBay? eBay and Amazon? You should look for as large a territory as possible. Additionally, since people can access the web from anywhere in the world, you should not accept any kind of geographic limitations on your activities (for example, “online sales to customers in the continental United States). United ”), because there is no practical way to apply them.

N ° 2: The duration of the agreement. Once you’ve established an online “brand” for a manufacturer, odds are they will be approached by other online sellers offering to do a better job than you. To protect your investment, you should ask the manufacturer for as long as possible (I recommend at least five years), with options to renew for additional periods.

N ° 3: Will you be allowed to transport competing goods? Just as you want “exclusivity” for online sales, your manufacturer may also want “exclusivity” by prohibiting you from transporting the goods of its competitors. You should try to limit them as much as possible. For example, if a jewelry designer asks you not to deal with “any other jewelry designer”, you can respond by offering to not deal with “any jewelry designer who specializes in Celtic inspired designs.”

# 4: Will you be required to purchase “minimum quantities” of goods? In a “real” distribution, you buy products from the manufacturer at wholesale prices and then sell them online, keeping the difference for the profit. Some manufacturers will only grant you “exclusivity” if you agree to purchase minimum quantities of merchandise each month or quarter. Keep them as low as possible and negotiate credit for any merchandise you return to the manufacturer that has been in your inventory for too long.

# 5: will the manufacturer require you to sell at specific prices? It is illegal for a manufacturer to dictate your resale price or set a maximum resale price for their products. The law is more vague as to whether a manufacturer can set a minimum resale price. If a manufacturer commits to a “minimum advertised price”, you may need to agree to it. Just make sure that you retain the right to offer “clearance” prices for goods that have been in your inventory for a long time if the manufacturer refuses to take them back.

N ° 6: Will the manufacturer agree to inform other distributors of your exclusive rights? Your agreement should contain a clause requiring the manufacturer to notify all of their other distributors of your exclusive online rights, specifically prohibiting them from selling the manufacturer’s products on their own websites.

Here’s one final question you should ask yourself: How will you deal with “retail arbitrageurs” and others who circumvent your exclusive relationship by (legally) buying the manufacturer’s products at retail and then reselling them online? ? If this is a serious problem (many sellers do), you may need to send them nasty letters directing them to “stop and give up” their online sales business.

If only a handful of items are sold through “retail arbitrage,” you might just want to ignore it. After all, that’s probably how you got started on your own.

Cliff Ennico ([email protected]) is a columnist, author and former host of the PBS television series “Money Hunt”. This column is not a substitute for legal, tax, or financial advice, which can only be provided by a qualified professional licensed in your state. To learn more about Cliff Ennico and other Creators Syndicate writers and designers, visit our web page at www.creators.com.

Photo credit: Free-Photos at Pixabay


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