Buyers do not determine sales policies

Posted by Kathleen Fasanella on Nov 5, 2012 at 1:39 pm / Sales and Marketing / Trackback

A recent bit of misinterpreted advice going around is that buyers determine wholesale sales policies. In fact, said advice suggested that buyers should use their own sales forms when placing orders because a vendor’s sales policies don’t favor the buyer. Other than saying that both are categorically false, I have two fast responses to this (detailed below). First is that it’s a benefit to buyers generally that buyers don’t dictate the conditions of sale and second, a buyer can use their own form if you allow it.

As to the first point: Imagine if you will what the marketplace would be like if buyers routinely determined sales policies for anyone else. In all fairness, this would include retailers themselves. Consumers could walk in, say they’d pay cents on the dollar, on store credit and return it any time they happened to feel like it and in any condition for full credit. Obviously a retailer would be outraged at the arrogance of a customer who would have these expectations so it does not hold a retailer could have special consideration they don’t extend to their own customers. Legally, it is the seller who determines policies. The only exception I’m aware of is a public utility.

Now imagine if buyers set terms… buyers generally would be at a disadvantage because another buyer could dictate terms that would be in conflict with the first buyer. There would be no way to enforce regional exclusives, preventing web retailers from undercutting Brick & Mortar, some buyers would get one unit minimums while others would get X. It would be insane. You might make the first buyer happy but few subsequent ones and it would be difficult to go back to your first buyer to renegotiate the terms of sale.

In the vending relationship, the buyer makes an offer to buy but the seller retains right of refusal. No shirt, no shoes, no service. Every seller has the right to refuse to sell to whomever. Of course the buyer has the right to abstain from tendering an offer but that is a far cry from being able to dictate sales policies. Usually. If you’re over a barrel with all your eggs in one basket in selling to one big box retailer, you may not have the luxury of refusal but that’s another story.

So, while a buyer can’t dictate terms, it might be possible to negotiate on a case by case basis. What those terms may be are up to you. This entry provides a lot of links to related content with suggested parameters for negotiation. The two biggies for start ups are payment terms and minimums.

Payment terms:
I can’t tell you what to do but I wouldn’t ship product without payment. Period. I don’t extend credit and I don’t ask for it either. Everything is cash. If I have a new customer who is an unknown quantity, they pay a deposit before work starts (you’d be surprised how many go belly up before they’ve finished product development). If they have a referral or I’ve seen them around, I relax a little.

Minimums:
I’ve gone on the record as saying that I personally wouldn’t have minimums which is not the same thing as saying a single unit buyer would get the same wholesale price. A customer only buying one or two amounts to a “personal” sale. I think personals are a good thing; a retailer wants to make money. They are not like your other friends who will play coy on wherever they bought X because they don’t want anyone else to have one. A retailer who buys a personal, bought one to gauge response. Even if they know it is something they can’t sell in their store, you do want these people talking about it with their friends. Everybody loves to be the first to make a great designer discovery.

Buyer’s Sales Forms:
Returning to the second issue I opened with, that of allowing a buyer to use their own sales form, it is traditional for a buyer in any industry to tender an offer with a purchase order which is often their own form. It is very common that the seller will never see the purchase order because it is most commonly an internal document. In fact, many vendors (fabrics, parts, sewing machines and supplies) will ask for your PO number but not the form itself. In asking for the PO number, they are sometimes indirectly assessing the maturity of your organization. If you’re issuing POs, it is more likely that the PO was approved by purchasing and there are funds in the budget allocated for purchase and your payment policies are typical (minimally net 30). If the PO is internal and not submitted to the vendor for approval, the seller’s policies apply.

As to whether you should accept a buyer’s purchase order if they give or send you one, you will have to read it to determine whether those terms are amenable to you. If you accept it then this governs the terms of sale and supersede any of your terms. If they don’t send or give you a form, your policies apply.

I realize all of this can be a bit confusing so here is the summary:
1. You should still create sales forms for buyers.
2. If a buyer asks you if you will accept a PO, say yes. This doesn’t mean you accept their terms (because you haven’t seen them yet) but that you are amenable to entering into a relationship with a new account.

2 Responses to “Buyers do not determine sales policies”

Comments RSS feed

Sabine
November 6th, 2012
8:15 AM

I actually know what you are talking about, now that I have about 11 weeks of contract law behind me. ;)
The gist of it is:
Every time someone makes an offer and another someone accepts, you have a legally binding contract, providing the purpose isn’t unlawful or at least on of the parties underage.

If you do accept someones purchase order, but managed to get them to abide by YOUR terms,do get it in writing, dated and signed. Otherwise the terms on the purchase order become your written contract, which holds over any verbal one that might have been added afterwards (verbal ones are just harder to prove)

Cheryl
November 6th, 2012
7:52 PM

I’m NOT a manufacturer but I do custom sewing on occasion. Just put EVERYTHING in writing. Copies to the provider AND the purchaser. That way, EVERYTHING is clear and no hard feelings if things go WRONG. I don’t ask for cash upfront but I WOULD if I did more custom sewing. As it is, my customers purchase most of their materials BEFORE I start work for them. If in doubt… COPY it on your homeprinter and SIGN ALLLLLLLL Your rear-end should be legally COVERED that way.

Leave a Reply

Current day month ye@r *

Archives

Categories

The Entrepreneur's Guide to Sewn Product Manufacturing

Often described as the garment industry “blue book”, the most highly rated book in the business is guaranteed to get you off to a solid start or your money back. Many service providers require you read this before they’ll work with you. Learn more »

Subscription Options

RSS Feed Google Reader My Yahoo My MSN Technorati

Subscribe by email: