In the world of business, companies often rely on partners to expand their reach and generate revenue. Two common types of agreements used to establish these partnerships are distribution agreements and reseller agreements. While the two may seem similar, there are important differences between distribution agreements vs. reseller agreements that businesses should understand when choosing which type of agreement is right for them.

What is a Distribution Agreement?

A distribution agreement is a contract between a manufacturer or supplier and a distributor. In this agreement, the manufacturer or supplier grants the distributor the right to sell their products in a specific geographic area or market segment. The distributor then takes on the responsibility of marketing, selling, and delivering the products to customers.

The manufacturer or supplier retains ownership of the products and sets the prices, but the distributor may negotiate pricing and delivery terms with customers. The distributor typically earns a percentage of the sale price as a commission, which is agreed upon in the distribution agreement.

What is a Reseller Agreement?

A reseller agreement is a contract between a manufacturer or supplier and a reseller. In this agreement, the manufacturer or supplier sells their products to the reseller at a wholesale price, and the reseller then sells the products to customers at a higher price to make a profit.

The reseller takes on the responsibility of marketing, selling, and delivering the products to customers, but they have more control over the pricing and delivery terms than a distributor would. The manufacturer or supplier typically sets a minimum price at which the reseller must sell the products, but the reseller may negotiate pricing and delivery terms with customers.

Key Differences Between Distribution Agreements and Reseller Agreements

While both types of agreements involve a manufacturer or supplier partnering with another company to sell their products, there are some key differences between distribution agreements vs. reseller agreements that businesses should understand.

Ownership: In a distribution agreement, the manufacturer or supplier retains ownership of the products and sets the prices. In a reseller agreement, the reseller purchases the products from the manufacturer or supplier and has more control over pricing.

Responsibility: In a distribution agreement, the distributor takes on responsibility for marketing, selling, and delivering the products. In a reseller agreement, the reseller takes on all of these responsibilities.

Commission: In a distribution agreement, the distributor typically earns a commission on the sale of the products. In a reseller agreement, the reseller earns a profit by marking up the price of the products they purchase from the manufacturer or supplier.

Geographic Area: In a distribution agreement, the manufacturer or supplier typically grants the distributor the right to sell their products in a specific geographic area or market segment. In a reseller agreement, there is no such restriction.

Choosing the Right Agreement for Your Business

When choosing between a distribution agreement vs. reseller agreement, businesses need to consider their goals and resources. If they want to expand their reach into new geographic areas or market segments, a distribution agreement may be the best choice. If they want more control over pricing and delivery terms, a reseller agreement may be a better fit.

Ultimately, the key is to find a partner that shares your goals and values. Whether you choose a distribution agreement or a reseller agreement, working with the right partner can help you build a successful and profitable business.