Choose an effective distributor: Choosing the right entity as a distributor of your products or services is the most important point. You can name a distributor you stumbled upon by chance or that looks impressive. However, you must remember that you have made an appointment for your products to be distributed and sold. The concern is that the merchant will not respond to the appointment and that the agreement you have signed will remain “on the shelf”. These situations are complicated when the distributor is granted long-term exclusivity throughout a territory. In such a case, the concern is not only that the dealer does nothing, but that you cannot name another best distributor for the same territory. Second, use your network of friends in the industry. While it`s unlikely that your direct competitor will borrow a copy of their distribution agreement, friends with indirect competitors may not be afraid to share a deal that has proven to be trouble-free over time. Many retailers represent a dozen or more manufacturers, often in the same field, but not identical competing products. If one of your manufacturers starts selling a competing product, how do you manage it? Samples and sales materials can be very expensive and a good distributor will try to have access to an abundant supply, as sales largely depend on customer conviction, and nothing is as convincing as good product samples.
The distributor should carefully consider the likely need for hardware, web support, etc., etc. and try to have them delivered free of charge. If the dealer decides to represent a competing product, THIS MUST BE IN THE CONTRACT or the manufacturer may subsequently assert this breach of obligation and bring a lawsuit for breach of contract. Equally important, if the products offered by the manufacturer change over time, whether through improvements or new products, the contract must provide for how this may affect the retailer`s existing lines. Most written errors in distribution agreements are made by parties who have no experience in creating and negotiating these agreements. Most large companies with years of experience with agreements rarely write mistakes in those agreements. Many mistakes are the result of one partner trying to gain an advantage over the other partner by adding a bias to the agreement that favors the party with greater experience. This requires not only financing for the purchase of the product, but also collection efforts by the merchant and credit checks of customers, as the merchant will soon be bankrupt if the customer does not pay. Retailers, such as retailers or value-added resellers (VARs), buy products from distributors, which they then sell to their end customers.
In the dealer-dealer relationship, the distributor acts as an intermediary between a supplier supplier and the dealers. This relationship requires a contractual agreement other than that described above. Determine the duration of the agreement: Flexibility in terminating the distribution contract is crucial. Take, for example, a case where your company is about to make an acquisition and the acquirer binds the purchase to the termination of the distribution agreement. In this case, your exit will depend on your distributor`s consent to exempt you from the agreement. This issue also occurs when “change of control” provisions are included, according to which your distributor can terminate the contract in the event of a change of control in your company. So, if your buyer`s proposal depends on continuing your relationship with the merchant, you are at their mercy. Therefore, set final and short departure periods, which can be extended several times by mutual agreement. This way, you may not be able to end the relationship whenever you want, but you can still do so within a certain amount of time. Territory is everything for a distributor.
This is the place and/or type of product where the distributor is authorized to sell. If it is an “exclusive territory”, it means that only the dealer is allowed to sell in the area. A non-exclusive territory means that the manufacturer or other representatives or both can sell in the territory, which can be disastrous for a trader, since there is little value for the dealer in this type of agreement – the manufacturer can destroy the trader`s activity by simply undercutting the dealer directly or through another designated dealer. Parties who have no experience with merchant agreements sometimes try to minimize the possibility of termination. The request for annual termination and semi-automatic renewal is a routine procedure for experienced players. In this case, the contract contains a provision for the termination of the contract at the end of the first full calendar year following the entry into force of the contract and each year thereafter. The terms and conditions allow both parties to submit a notification of the intention not to renew 30 days before the end of the calendar year. Both parties to the agreement may use an exclusive distribution agreement in a variety of ways.
Sometimes the distributor is the sole distributor of the supplier`s product in a specific geographical area. In other exclusivity agreements, the distributor has the exclusive power to sell the product to specific customers, which means that no other distributor can sell to those customers. .