I recently worked on a case regarding a distribution dispute of riding breeches. A company provided breeches to a local barn that had a tack shop. There were several issues that lead to the dispute between the two parties. I've included two of those issues in this post to help guide your decision-making when you consider distributing your horse product to a retailer (as opposed to direct to consumer).
Payment for Horse ProductThere are a few different ways that payment is handled in distribution agreements, and there are "industry norms" for different types of products. Money is always the greatest catalyst for dispute, so make sure you are happy with and fully understand the financial arrangement prior to signing a contract. There are many different blends of structuring the deal, here are two common and straightforward methods:
1. The product is purchased by a tack shop at the supplier's wholesale price. Tack shop bears all risk for any inventory that doesn't sell.
2. The product will be paid for at wholesale price, but contingent on sales of the product. Here, the tack shop is motivated to sell the product for the profit margin. However, any product that isn't sold can be returned to the supplier. In this situation, the supplier bears the risk for the inventory: the product may be out of style when the tack store decides to send it back, the product may have faced some wear and tear, and now the supplier needs to figure out what to do with the leftover supply.
Promotion of Horse ProductAn important part of any horse product is preserving the brand identity and integrity. A brand may be known for excellent customer-service, a generous return policy, excellent quality, great for a particular horse industry (western, english, etc.), and more. If you decide to use third parties to distribute your horse product to the consumer, you bear risk of losing control over the brand of your product. Be sure to include in your distribution agreement whether there are parameters to how the product may be promoted (and give yourself a way out of the third party fails to adhere to your brand's commitment). Consider:
1. Can the product be put on sale? When can it go on sale and for what level of discount?
2. Can any product be used for sponsorship purposes? For example, can the local tack store provide local riders with breeches and call the rider "sponsored by" your breeches company, or would it be the local store as the sponsor?
3. Are any of the items permitted to be used without cash payment for the purposes of promotion of the product? This is similar to the one above, but involves for example a tack store requesting a shipment of 100 breeches, and 10 of the breeches will be given to top riders in the tack store's discretion, and those 10 breeches will not be paid for in cash because the company is receiving valuable exposure through the tack store's contacts.
If you're a consumer you likely don't think about distribution agreements much, you just want to purchase the products you love with the price and quality that is important to you. But next time you shop the sale rack at your local store, think about all the mechanics that have occurred behind the scenes to get your favorite horse items to you!
Would you ever consider distribution of your horse product? If so, what limitations would you want to include?
Image Source: Oughton Limited