How Do Purchase Orders

How Do Purchase Orders Work

What should be in a contract when selling to a retail chain?

Selling to a retail chain can be a great opportunity for your consumer product. However, it’s important to understand that the contract you’ll be dealing with is unique to this type of selling. In this short video training, we’ll discuss some key points to consider when reviewing a contract with a retail chain.

Understanding the Unique Nature of Retail Contracts

When selling to a retail chain, it’s crucial to recognize that the buyers will provide you with their own contract. Unlike other types of sales, you won’t have much flexibility to negotiate or make significant changes to the contract. While you may be able to discuss and negotiate certain aspects such as pricing, there are limits to what you can modify.

The Power Dynamic with Retail Chains

Retail chains have a significant advantage in the buyer-seller relationship. They invest millions of dollars in marketing and advertising to build brand awareness and attract a large customer base. By agreeing to work with you, they believe they are doing you a favor by exposing your product to their audience. This gives them the upper hand when it comes to the contract terms.

Key Points in a Retail Contract

When reviewing a contract from a retail chain, there are several important points to pay attention to:

  1. Product Returns: The contract will outline what happens if a product is returned by a customer. It’s essential to understand the return policy and any associated costs or penalties.
  2. Product Sales: The contract may address what happens if your product doesn’t sell well. This could include potential markdowns or discounts, as well as the possibility of discontinuing the product.
  3. Shipment Timelines: Retail chains expect timely delivery of products. If you fail to meet the agreed-upon shipment dates, there may be consequences outlined in the contract.
  4. Consignment Deals: In some cases, a retail chain may offer a consignment deal, where they only pay for the products that sell. It’s crucial to carefully review the terms of this type of agreement to ensure you understand the financial implications.

The Importance of Reading the Contract

It’s surprising how often people fail to thoroughly read the contract when presented with an order from a major retailer. While it’s exciting to receive a large order, neglecting to review the contract can lead to serious issues down the line.

By carefully reading the contract, you can identify any potential pitfalls or obligations that may impact your business. For example, if you overlook a clause about late shipments or make mistakes in the shipping process, you may face penalties or damage your relationship with the retail chain.

Make Informed Choices

While it’s rare for a retail chain to make significant changes to their standard contract, it’s still important to review it and make informed choices. By understanding the terms and conditions, you can decide whether or not to proceed with the agreement.

When selling to a retail chain, it’s crucial to understand the unique nature of the contract you’ll be dealing with. Retail chains have the upper hand in the buyer-seller relationship and provide their own contract, which may not be open to significant changes. It’s important to carefully review the contract and pay attention to key points such as product returns, product sales, shipment timelines, and consignment deals. Neglecting to read the contract thoroughly can lead to serious issues in the future. By making informed choices and understanding the terms and conditions, you can navigate the contract process with retail chains successfully.

In this short video training, we discussed the unique nature of retail contracts and the power dynamic between sellers and retail chains. We highlighted key points to consider when reviewing a contract, such as product returns, product sales, shipment timelines, and consignment deals. We emphasized the importance of reading the contract thoroughly to avoid potential pitfalls and make informed choices. Selling to a retail chain can be a great opportunity, but it’s essential to understand and navigate the contract process effectively.

I hope this video has provided you with valuable insights and tips for dealing with contracts when selling to retail chains. Remember to always read the contract carefully and make informed choices based on the terms and conditions. Thank you for reading!

How Do Purchase Orders

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In this training, I will discuss some of the things to think about when approaching a retailer to sell your products and become a vendor. Hope it helps! 🙂

Karen Waksman,
Retail MBA

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How Do Purchase Orders

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