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If your business is trying to expand sales, you should consider using a reseller. Perhaps your organisation has a brand new product and wants to ensure it reaches its full sales potential. With this purpose in mind, many businesses find it helpful to reach a reseller agreement with a reseller. A reseller is another company that can advertise and sell goods on behalf of your business. Many companies find that a good reseller agreement can open the door to increased sales, better advertising reach and growth. This article will explore the potential advantages of reaching a reseller agreement with another company, so your business can make the most commercially beneficial choice.
Agreeing to a Reseller Agreement
A ‘reseller’ usually advertises and sells your company’s products in exchange for a commission on each sale. In this way, they absorb some of the expense of promoting the goods without having intellectual property (IP) or trademark rights. So, if your business sells laptops, the reseller can advertise them and gain commission on each sale to customers. Still, they do not own unsold units or any trademark or IP related to the laptop. Some individuals confuse resellers with distributors, but both perform different roles in practice.
Resellers and Distributors
A distributor will buy a certain number of items from your business and then own and store them. For example, the distributor may purchase 300 laptops from your business. The distributor business will own them, keep them in their warehouse and make their profit by charging more from the end consumer than they paid your company.
On the one hand, your company does not obtain commission from the distributor for each sale to an end-user. However, if the distributor cannot sell all 300 laptops, they cannot simply return them to you (because they have legally purchased them from you). Therefore, the main difference is that a reseller performs more of an ‘agent’ role. They act as a middleman, and the only purchase of the goods is by the customer (not the reseller). A reseller can return goods if they do not sell them.
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Example
Independent travel agents are a helpful example of a reseller business. They do not own the airlines or hotels, nor do they have a stock of pre-purchased tickets or reservations. Instead, they act as a middleman in helping their customers book those tickets and hotel reservations at a cheaper rate through their connections with travel companies (and under the terms of any reseller agreements).
Reseller Agreement Content
The document affords another company with prior written consent to sell your products at their sole discretion to any end-user. Unless the reseller company commits a material breach of the obligations within the reseller agreement, they can sell your goods for a certain period. Additionally, the agreement will clarify that the reseller should always act to maximise sales of that item.
Benefits of Using a Reseller Agreement
Many resellers have a significant retail presence, whether through physical stores, a popular website or both. They are often better positioned to increase awareness of your products and handle high sales volumes. A reseller provides professional services to your company and can agree to initiatives with your business to maximise sales. For example, they may create a bundle including your company’s laptop with another technology company’s printer.
Key Takeaways
Your business may wish to focus more on the production and manufacturing of its products than the sales side. If this is the case, a reseller arrangement can provide your company with an opportunity to achieve outstanding sales figures without investing large sums in your sales (or advertising) division. However, reseller agreements are legal documents, and the wording of the entire agreement is critical. You may be happy with a certain reseller offering to market your goods, but it may be of little benefit if they wish to obtain a significant commission per unit.
If you need help with a reseller agreement, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Yes, your organisation can licence goods or services (through a licence agreement) or allow another business to licence goods to another party (through an assignment agreement). These documents can be complex, so it is worth obtaining legal advice when negotiating their terms.
No, unfortunately not. These documents tend to be built from the ground up to reflect the type of goods and the rights (such as intellectual property rights) you wish to protect.
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