The distribution contract with a deposit is a modality that has advantages for both the manufacturer and the distributor himself.
Normally, in distribution contracts, the distributor buys the product from the manufacturer to resell it, so there is a transfer of ownership. Once the product is delivered, the distributor pays and acquires it for later resale.
In contrast, in a warehouse distribution contract, the distributor receives the products and stores them in warehouse (without paying the price, so ownership remains with the supplier). At the time the distributor has an order, he will pay you the price, acquire the property and resell the merchandise to the final purchaser (periodic liquidations can also be established, depending on the merchandise sold in each period).
For the distributor, receiving the goods in storage has advantages, since he does not pay for them until he has sold them and, in addition, he can return those that he does not finally sell (although minimums and certain conditions are usually agreed upon to make this possible). The manufacturer, for its part, reduces its storage needs.
Of course, it is important to agree on the following extremes to prevent risks, especially in the event of a distributor contest:
- Property. Specify in the contract that the distributor is not the owner of the goods, but that they are delivered in deposit, until an order is made (it will be then when the distributor will pay the agreed price and acquire the property).
- Storage. The product will be stored in the distributor’s facilities following the supplier manufacturer’s guidelines and they will apply the FIFO (first in, first out) practice to prevent products from expiring or being discontinued.
- ID. The goods must be correctly identified, without being mixed with others, and a very precise inventory must be kept through systems that facilitate the identification (QR codes/bar codes) of each product. This allows knowing which goods belong to the supplier at all times, so that, in the event of bankruptcy of the distributor, the bankruptcy administrator will also be able to more easily identify the assets of the bankrupt and those that do not belong to him to exclude the latter from the active mass.
Our consultants will study your case and help you draw up a distribution contract with or without a deposit, depending on your needs.