Welcome to the final part of our three-part retail contract series. This series takes some of the key contracts from retail businesses and focuses on the three key aspects that tend to be overlooked by retailers in the haste to ‘get the deal done’ and get the products to market. Be sure to check out Part 1: Supply Term Contracts and Part 2: Procurement Contracts.
Nothing frustrates me more than seeing intelligent and competent retailers sign up to wholesale terms that are not worth the paper they are written on. Often they are ‘done on the fly’ in the haste to get the next seasons range into production, or worse, are no more than a handshake! There are many, many aspects that are important to consider when entering into a wholesale agreement. I thought it would be useful to set out three common oversights that retailers make when entering into a wholesale arrangement:
1. Intellectual Property
I always advise my clients that it’s important to outline how intellectual property is going to be assigned within the agreement and whether, as a retailer, you have the right to use images or branding of the products without infringing any existing copyright of your wholesaler.
Ensure that your contract states that, if you are not receiving the IP rights to the products, that you have a licence to use it and that the conditions of this licence are not too limiting. For example, the wholesaler may limit your use of any branding or images for a particular purpose only or they may even require that you do not make alterations to the images, which could become an issue when creating promotional material.
2. Stock on hand
If a product you are purchasing is integral to your business, what would you do if your supplier suddenly ran out of stock? One obligation that can be included in your agreement is for your supplier to hold a minimum amount of stock on hand specifically to be purchased by you. This could be calculated by stating a specific number/volume of product, or can be tied to rolling forecasts based on historical sales (eg 3 months of stock on hand to be held based on the last three months average sales).
3. Pricing and minimum orders
It can be difficult in the fashion industry to have prices locked in over multiple years, especially when designs and styles change from season to season. However, retailers should consider whether they are required to order minimum quantities during the term and if so, what happens if the wholesaler increases their prices? Is there a way that you can lock in prices over the term of the agreement so as to have a level of certainty about supply?
I hope you have found these three oversights helpful in providing you the first steps to ensuring you are entering a fool-proof wholesale agreement. We love working on wholesale agreements, please don’t hesitate to contact us to see how we can help you!