What is the difference between wholesaler and agent

In the case of self-employed agents, under UK and European law you are also required to notify the agent if you anticipate that sales will be lower than the agent could reasonably expect.

Failure to do this could make you liable to cover any shortfall in the agent's income. Your agreement with the agent should specify the payment arrangements, including when payments will become due. If the agreement does not, it will be assumed that normal practice applies. Typically, the agent's commission becomes due either when you have received payment or when you supply goods or services to the customer. If the agent is self-employed and your agreement says nothing to the contrary, the commission does not have to be paid if the sales agreement with the customer fails through no fault of your own - for example, where a customer refuses to pay for the goods or services for no good reason.

If the agreement is for a fixed term, it will normally be terminated at the end of that period. However, if you allow the agent to continue to act for you after the term expires, you will have effectively entered into an indefinite arrangement. For an indefinite arrangement, the agreement should state what notice period there will be if either you or the agent wish to terminate the relationship. In practice, if the agent wishes to terminate the relationship, you may wish them to immediately cease acting for you.

You may, however, be obliged to pay the agent some compensation to cover this. For self-employed agents, you must give a minimum notice period to terminate the relationship: one month in the first year; two months in the second year; and three months thereafter.

The notice period can be longer if agreed, but the agent can't be required to give more notice than you. You can terminate an agency relationship without notice if the agent breaches the contract with you. For example, if the agent fails to provide you with the information you need to fulfil sales. Self-employed agents are legally entitled to either indemnity or compensation arrangements. If an indemnity is agreed, it can be limited to one year's average earnings, but will not necessarily rule out the possibility of the agent claiming compensation as well.

With an indemnity agreement , you pay an amount reflecting the value of the work the agent has done in building up your sales - for example, the agent's efforts to identify customers and build relationships with them. With a compensation agreement , you pay an amount reflecting the value of what the agent has done and the agent's loss of future earnings - for example, commissions on future sales to customers the agent introduced to you.

The way in which this future income stream is valued is by looking at the amount a hypothetical purchaser of the agency would pay for it eg by reference to the potential net earnings that the purchaser could generate and whether income from it was increasing or decreasing.

So a successful agent, acting on behalf of a successful business, may be entitled to significant compensation, while an unsuccessful agent acting on behalf of a business that has ceased trading will be entitled to very little - nothing at all in some circumstances.

If you terminate the relationship because the agent defaulted on the agreement, compensation is not due. For self-employed agents, however, you will be required to pay compensation or an indemnity unless the agent was guilty of gross misconduct.

If the agent is self-employed, you will be required to pay an indemnity or compensation even if the agent dies or retires.

Legal advice should be sought, both at the time of drafting the agreement and when calculating or agreeing any payments. To be effective, the agreement must relate to the customers, territory or type of goods in relation to which the agent was acting for you. Restrictions can in no case last more than two years, and must be seen to be reasonable. The agreement must be carefully drafted to take into account what you are trying to achieve, and the implications of competition law and other regulations.

These vary depending on the territory covered by the agreement. Yes, you can. However, under competition law you may not be able to give the distributor exclusive rights and at the same time prevent the distributor from selling competing products see Agents and Brokers As mentioned earlier, agents represent manufacturers and wholesalers. The two leading membership warehouse chains recently entered the luxury market, offering expensive diamond rings at steeply discounted prices.

At Costco, a 5. Why do cash-and-carry wholesalers offer jewelry for considerably lower prices than those offered by high-end retailers such as Tiffany and Neiman Marcus? Define wholesaling, and describe what wholesalers do. Describe merchant wholesalers. Explain the difference between agents and brokers. Summary of Learning Outcomes What is wholesaling, and what are the types of wholesalers? Glossary manufacturer A producer; an organization that converts raw materials to finished products.

If the business wants to retain greater control of the terms of sale of its products or services, in particular the price.

Imposing resale price maintenance on a distributor is unlawful in most countries, but by selling through an agent the business can retain the freedom to safeguard its own prices for sale. However, by using an agent, a business retains the freedom to choose who to deal with and with whom the agent deals. Generally, fewer competition law issues arise with agent agreements than with distributor agreements.

Where the business wants to retain direct contact with its customer. For example, where it offers bespoke design work or highly specialised after-sales service that can only be effectively provided by the business itself. In effect, the agent finds the customer and the business maintains the customer throughout the entire lifetime of the relationship.

So that, for example, in the event of the agent going into insolvency, the business still owns the stock. What are the benefits of appointing a distributor?

Resources There are some other articles and resources which will provide further useful know-how: Getting the best deal from your agent or distributor. The wholesaler will typically buy goods directly from the manufacturer but could also buy from a reseller.

In either case, the wholesaler gets large discounts for buying large quantities of goods. The wholesaler is rarely involved in the actual manufacturing of a product, focusing instead on distribution. Wholesale is buying on a large scale. The wholesaler can specialize in selling a wide range of different products to other businesses, governmental agencies, or hospitals.

Then these institutions use those products for their own operations. When companies buy products wholesale, it is important to track all these products for the success of your business. Where the waters get murky is when people try to discern the difference between the wholesaler vs the distributor.

A distributor works closely with a manufacturer in order to sell more goods and gain better visibility on these goods. Distributors find wholesalers who will resale their products. A wholesaler works more closely with retailers to match their needs through buying products in bulk at a discount. The distributor does perform some of the same functions as a wholesaler but generally takes a more active role.

Distributors also take a more proactive approach in educating resellers about new products. They are not responsible for having the products sold to the customers or whether the retailers would sell them all.