What Are the Benefits of Using a Reseller Arrangement?

December 18, 2019

If you are a supplier looking to sell more products, you may want to consider engaging a reseller. This involves connecting with another business that will promote and sell products on your behalf. A reseller arrangement can offer:

increased brand awareness;
access to a previously untapped market; and
the potential for more sales.

This article will explain how a reseller arrangement can benefit your business and what terms to include to ensure that the agreement advantages you.

How Does a Reseller Arrangement Work?

As a supplier, you can choose to:

sell your goods or software directly to customers;
engage distributors to purchase your goods or software from you to sell it directly to their customers; or
engage a reseller or ‘middle man’ to effectively do your selling for you.

It is essential to distinguish between distributors and resellers. Although both options have their benefits and will increase brand awareness by reaching new markets, they are distinct in the way they interact with your business and sell your products.

Resellers will usually market and sell your products in exchange for a commission. They act as an intermediary between your business and customers who wish to purchase your products. This means that they generally will not have ownership over products at any stage in the process. In contrast, distributors will buy and store your goods in their own warehouse before selling them to end consumers.

A reseller arrangement is generally used by suppliers who sell:

goods, such as homewares or technology hardware; and
software licenced for resale to customers.

You may engage multiple resellers who can sell to different markets, which will help you to grow your sales. You can use the same template reseller agreement with each reseller, so long as you change the commercial details for each new agreement.

Benefits of a Reseller Arrangement

Engaging a reseller could benefit your business because they:

have an established presence in the market, with a well-known store and a solid customer base;
may be able to sell a high volume of your products;
can handle the sales and customer interaction process;
can increase awareness of your brand;
may be able to bundle your products with other products they sell, with your permission to do so.

What to Include in a Reseller Agreement

You will need a reseller agreement to set out the arrangement between you and the reseller. This should be a mutually beneficial relationship, but you must ensure that you are adequately protected so that the agreement does not disadvantage you.

The table below sets out some of the points that you should cover in your contract.

Pricing	Determine how you will compensate the reseller, which is generally by a commission of the sale price. Consider whether to set a recommended retail price. While you can suggest a price at which to sell the products, you cannot stop a reseller from selling below a specified price. Outline that you can request a sales report including the number of units sold and at what price.
Orders and Delivery	Specify whether you will deliver the product directly to the customer or ship it via the reseller. This will determine how and when you receive payment.
Marketing Material	Mandate whether the reseller must use your marketing materials when selling your product. Outline which materials the reseller should use when advertising your products and state that the reseller should return these materials when the arrangement has ended.
Intellectual Property (IP)	License your intellectual property to the reseller so that they can use your name and logo. Be clear on how resellers can use your branding so that it aligns with your brand guidelines. You should prohibit resellers from copying the goods or software.
Non-compete	Prevent the reseller from selling other products that compete with your business.
Disputes and Termination	Establish a dispute resolution process. Maintain your right to terminate the arrangement if the reseller breaches the agreement, or you are no longer benefiting from the partnership.

Key Takeaways

As a supplier, you probably want to focus on manufacturing your products. Therefore, engaging a reseller may be an appropriate way to sell a high volume of goods and to reach new markets. However, it is vital that you prepare a reseller agreement to ensure that your business benefits from the arrangement. If you would like help drafting, reviewing or negotiating your reseller agreement, contact LegalVision’s contract lawyers today on 1300 544 755 or fill out the form on this page.

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