Contract for a clothing sales rep

Posted by Kathleen Fasanella on Nov 21, 2006 at 9:38 am / Newbies, Sales and Marketing / Trackback

It’d be great if those of you with experience and established sales reps could help out with this question from Tish. She writes:

We are a 3 year old line working with a Sales Rep who has been valuable in placing our young designer into the top boutiques and dept stores which as a result have put her in all the magazines with Paris, Jessica etc. wearing her designs. Our amazing rep has come to us now with a bullish contract. We love her and don’t want to lose her, but need to know the norm and acceptable in sales reps contracts. Terms (length of contract), show room fees, trade show fees, commission rate, length of termination notice. She wants us to guarantee percentage of order we will ship, exclusive US representation, advances on commission? I have looked everywhere on line for apparel contracts to no avail. Can anyone fill me in on the industry norms?

I wrote Tish asking for specific details of the contract. She replied:

The sales rep in return wants a 3 year USA exclusive contract. 12% commission, $950.00 in trade room fees monthly. All Trade Show fees (Pro Rata with other lines). She wants 120 days termination with 3% paid for one year following termination. She will accept quota’s tied to the contract. She would like 1,500. advance every month. She does not include in the contract what she will do for that money.

I pulled up 5 sales contracts from the internet (none from apparel were available) and put together an agreement including general duties, relationship of parties, scope and limitations of Rep’s Authority, conflict of interest, commissions including how computed and when paid and not paid, charge backs, statements, sale of product {(here she wants shipping guarantees of 85%) I gave her the ability to terminate should we not reach this number. Won’t pay her the commissions for 85% if we don’t ship.} Expense of doing business, customer service, term and termination. Here I gave her 120 days unless there is undue “mental stress” or “financial harm” during that period. Return of material, governing law and jurisdiction, limitation of liability.

What I need to know is what is reasonable to pay a rep who has taken a huge risk and put all her energy into making a designer successful. She is amazing and would be very difficult to replace as I see others have not been so lucky. We want to be fair not stupid. Can you advise?

I have a few thoughts on the matter (and eagerly awaiting input from the rest of you). The parameters of the contract appear to be within bounds and very similar to the contract you’ll find on page 92 of The Entrepreneur’s Guide. Also, I commend you for trying to be fair. Too many entrepreneurs approach their partnerships like bargain hunting forays at Wal-Mart, much to their later detriment.

Some impressions I have are that the term of the contract (three years) may not be to your advantage; one year is more typical but I can see why she’d want to tie you in for three. If she’s as good as you say -and I have no reason to believe otherwise- it makes sense she’d want a return on the investment she’s made in your line. After all, a less than ethical manufacturer could take advantage of her, using the rep to build momentum for the line to the point that it was self sustaining and then let the rep go, getting other less expensive reps to process orders. At the same time, people (not just reps) are known to slack off if the trough is well stocked. See if she’ll go for two years; that is still one year beyond the length of the typical contract.

Regarding the rate of commission, I think (under these circumstances) that 12% is high. Obviously the line has some pull and 12% is more typical of untried lines. Proven lines pay 7%-10%. Also, when you say “She does not include in the contract what she will do for that money”, that is fairly typical too. The performance and duties of the rep are usually implied rather than specifically detailed. If this bugs you, I suppose you could itemize what she is doing for you now and amend the agreement with those responsibilities.

The 120 days termination is standard. The 3% is fair, some reps will try and demand the full rate of commission (!). The shipping guarantee of 85% is also standard, nothing untoward about that. The one thing I’m not clear about is the “USA exclusive contract”. I don’t know what that means. Does this mean she gets 12% on all US sales? Also, no mention was made of house accounts; no commission should be paid on those.

What say the rest of you?

Related:
Contract for a clothing sales rep
Contract for a clothing sales rep pt.2
Contract for a clothing sales rep pt.3

33 Responses to “Contract for a clothing sales rep”

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Miracle
November 21st, 2006
11:25 AM

I pulled up 5 sales contracts from the internet (none from apparel were available) and put together an agreement including

I’d be careful about cobbling together a contract based on other contracts. Without any legal background, the likelihood that you end up creating a contract that is not legally valid is high. Also, how do you know the contracts you reviewed were even good examples to use?

It seems as though consulting with an attorney that specializes in the apparel industry is extremely important here.

KellyT
November 21st, 2006
12:18 PM

I think this is the time when consulting with an attorney that specializes in apparel contracting would be worth its weight for years to come. The attorney should know the industry “standards” s/he can educate you on them and prepare a contract for you, with explaination of why things are done the way the’re done. This will give you a good foundation for future growth.

Richard Price
November 21st, 2006
12:38 PM

Hi, I have been selling and a Sales Manager since 1970. If you cannot live without the rep than I guess they own you. Maybe you need to be a bigger part of your business. Now on the rep situation #1). in the better area 12% is the Norm. Showroom participation in NY is about $750 per month – $500 for shows in Dallas, $350+ for Atlanta – The Chicago show could be $500 2 times per year, etc. In LA the showroom participation is differetn with the buildings, etc. A contract must be fair for both sides – 1 year is fine and the guarantee of shipping is normally 85% – but maybe have a clause that says if she only sells 24 pieces of a style you are not responsible for that style, etc. Or whatever your minnimums are. It has to be a two way street. Any more info – ask me..
Best,
Richard

carissa
November 21st, 2006
3:34 PM

What does shipping guarantees of 85% mean?

Karen C.
November 21st, 2006
4:12 PM

I’m still trying to get my jaw off the floor about the 120-day termination. Man, I work on contracts all day at my day gig, mostly for very well paid doctors and surgeons. Standard termination is 30-60 days. Why 120 days in the apparel industry? There must be some reason. And to not spell out the duties the rep must perform leaves the contract just ripe for breaching. There is a thing called “consideration” that every contract must have, which means “something for something.” Please, don’t ever have a contract without it. Don’t ever leave it to assumption of what you are paying for–be specific. Even if you can’t find an industry-specific attorney, go to a good contract attorney. Maybe that’s what I need to do as a side business, is to draft sales reps contracts. Hmmmmm….

J C Sprowls
November 21st, 2006
8:17 PM

I may be wrong; but, I presume the long leave-of-notice is to dis-incent the wholesaler from replacing the rep because they took the account “direct” or found a cheaper rep. Those simply aren’t “good enough” reasons on their own to switch reps.

In my opinion, I would have no problem ensuring the deal was equitable. I think 120-days notice is reasonable for an established performer. But, I would ask that the contract explicitly cite examples of circumstances under which the rep could be released immediately and waive the 120-day runout for commissions (e.g. X accounts more than 20% delinquent, etc).

I think the showroom fees are high. But, I have a limited frame of reference. I would need to see invoices to substantiate that figure.

I also think the draw on commission is steep, too. But, I’d need to analyze previous performance to know if that were the case. Typically, reps in other industries (i.e. insurance and food purveyors) are paid a draw when they’re green. To keep their position, they need to net the draw down to zero by meeting monthly quotas. Missing the quota (or, not making it up w/in 30 days) is grounds for immediate dismissal without residual commissions – they are legitimately “direct accounts” at that time.

Guaranteeing commission to pay out based on 85% of the shipped value I think is reasonable. But, I think the rep needs to be involved in the collection process if you’re guaranteeing their earnings when yours are not. An example would be when accounts are 30-days past due. I consider this to be a reasonable request since they introduced the slow payer to you.

Kym
January 5th, 2007
3:16 PM

I’ve had a clothing line for a few years now… and am now realizing I need a sales “road” rep. I am having a heck of a time finding good resources for this. I’d love to find someone with a few years experience, obviously someone that would want to travel a territory by car, someone that also handles other similar type lines.
Is there a good resource for this on line? I did find a site called fashion jobs central… are there others?

thanks!

chantel
February 11th, 2007
7:57 AM

That website, fashion jobs central is a scam. No legitimate job hunting site should charge job hunters for posting their resume or job searching. I think that you might even do well searching resumes on craigslist.

Lisa
April 9th, 2007
11:06 PM

I am currently a student and am thinking of starting
a small showroom to represent a few cdesigners in our town. What is the norm regarding commission, shipping costs, monthly fees? Also, any advice on starting this and tips would be GREATLY appreciated.

Cheryl
November 27th, 2007
8:24 PM

I am currently employed as a product development manager for a contemporary line. The buisness is only a year old and we have just completed a years worth of trade shows. I was asked to do sales at the shows for the first year only. Now, my boss would like me to continue to do 4 shows a year. I am asking for a commission but I am not sure what a fare rate would be. I am not a proffessional rep, but I am performing extra duties I was not hired for. Any tips for negotiation?

Lannette Jamieson
February 17th, 2009
10:01 AM

I am currently looking for a sales team to represent my clothing line. I have recently hired a publicist and need good sales people. It is golf and resort clothing and it would be between the months of June 09-Oct 09. I am willing to negotiate on commssion. It is very tough to find someone to push the line like I do, but saying that I really need to focus on design and have a team to help with the selling.

Kathleen
February 17th, 2009
2:45 PM

I am currently looking for a sales team to represent my clothing line. It is golf and resort clothing and it would be between the months of June 09-Oct 09. I am willing to negotiate on commssion. It is very tough to find someone to push the line like I do, but I really need to focus on design and have a team to help with the selling.

A couple of things, you list the months, are these the months you imagine your selling window to be open? Or are these your delivery dates? A rep who specializes in these goods may be a better adviser (I don’t personally know golf apparel).

We’ve discussed how to find and hire a rep many times on the blog so I would recommend searching the archives.

I’m a bit concerned tho about you’re having hired a publicist before a rep. While these can be simultaneous, usually you get a rep first because ideally, your publicist would be getting you editorial meaning you’d need some stores already too. Or maybe you already have those, it does warm my heart to read ” I really need to focus on design and have a team to help with the selling” because I think this is the ideal situation. Anyway, read up on reps, you don’t want to get burnt. I just wrote something somewhere that included lots of links to all the rep entries but I don’t know where I put it.

BFrances
August 4th, 2010
10:31 AM

As a former director of sales, planning to open a contemporary showroom in NYC, I am a little taken aback with some of the comments. An independent sales rep is a highly professional individual who takes the same risks as any other entrepreneur (designer). We are the first ones out there who introduce a collection to our contacts, work the shows, travel to clients and push for orders, yet there is a profound feeling that sales people should be paid last.

A sales rep who has successfully sold a collection for 3 years deserves to get a fair contract, including a raise in commission, a 3 year extension and at least a guarantee that 85% of her orders will be delivered. Any one commenting on the sales rep not having responsibilities, please keep in mind that every sales rep out there wants to make money. When we don’t sell we don’t get paid.
And sometimes, we sell and still don’t get paid because the designer doesn’t have it together or simply is not trustworthy. It is the responsibility of the designer to have adequate people in place to take care of any financial issues. That’s is not our job, however we assist as good as we can to ensure that all outstanding invoices are paid so we can get paid too.

Too many designers nowadays have backed out of orders, which the sales reps delivered to them 6 months before and claim economy as an excuse. That’s time a sales rep cannot recoup and is not getting paid for.

And indeed there are as many mediocre designers as sales reps, designers who have a lofty idea’s of their collection, market pricing and have no clue how the current day market has evolved. I have spend the last 6 months talking to designers are so ignorant about their own financial & production process and think that a sales rep should be their personal coach, consultant and pr person all based on commission pay. Or feel that an (free) intern (fresh out of college) is a suitable sales person and worthy of talking to seasoned buyers.

In today’s market a higher commission, fair compensation and a delivery guarantee is a huge motivator for a sales rep to spend extra time on an (emerging) designer. Buyers are looking for newness but are highly critical at which lines they look at and a well respected sales rep can open doors.

A sales rep should be able to get 12% in today’s economy and a draw if he/she has an order portfolio to support the draw. We did our job by bringing orders to the table now its up to the designer to deliver the goods.

Melissa
August 25th, 2010
2:07 PM

Does anyone know the going rate for sales commission, for sales representatives working for a clothing manufacturer – not branded label?

Kathleen
August 28th, 2010
11:15 AM

I don’t understand this question. When is output from a clothing manufacturer not branded? Even commodity producers have branded their quality tier output with their brands. Example, “gold toe” socks is unarguably a commodity sock manufacturer with various lines, each commensurate to stipulated value (=price & quality). In any event, if you were unable to discern what commissions were from this entry, they are discussed at length in my book. Any offshoot discussion for atypical situations is discussed in our private forum -which you’re welcome to join.

Melissa
August 28th, 2010
2:25 PM

What I am talking about is a sales rep representing a garment manufacturer – selling the “service” the manufacturer provides. For example – “Lucky” is a brand and they have a sales rep which would sell their lines to Nordstrom’s, Bloomingdales etc. I am talking about a rep for the manufacturing company that actually makes the jeans for Lucky. That rep would visit the “Lucky” corporate offices to work with the product managers and designers, showing them new fabrication/trims/ etc to continually work towards getting future business from them. I am wondering what the going comissiong rate is for this type of rep?

Kathleen
August 28th, 2010
3:04 PM

Very interesting question. I still think you need to read my book btw. I think your question would be better phrased as what percentage of commission could a sales rep get from a sewing contractor for finding customers for them? For that, you’d have to know the sorts of things about the potential customer that an apparel sales rep would need to know about a buyer. Such as, are they credit worthy, legit, place orders that can be serviced and whether the buyer pays their bills. Meaning, you’d have to know about designers, the right things about them, to even know if your sewing contractor would even take any jobs you’d get them. It is usually implied in these kinds of arrangements that you would be responsible. A clothing sales rep would never take orders from a store that is known to not pay their bills. It’s the same sort of thing.

I think the first step is to learn more about product development and manufacturing generally. For example, the party that buys the service is the manufacturer. The party selling the service is a sewing contractor. This is a legal designation, not a definition we can debate.

Melissa
August 28th, 2010
9:19 PM

It seems you are still confused by my question….The rep would not be representing the “sewing” contractor only but the complete “manufacturing” process of making the garment, which involves many processes including sourcing, pricing, knitting/weaving, dying, printing, sewing, washing, packaging etc. and shipping of the garment to the branded labels warehouse. Of course it is a given that the manufacturer must be sure to take orders from only financially stable companies, there are also certain criteria the branded label must agree to, including pricing, order/color minimums and delivery dates. I have been working for a manufacturer for over 10 years and am well aware of the “production” process. Our company was looking to expand to the east coast and we were looking into hiring a rep there. My question was, and still is, in reference to the “commission” part – I was asking if a rep for a clothing manufacturing company would make the same sales commission as a sales rep for a branded labels sportswear line. Thanks anyway – I will inquire within the industry to get my answer.

Kathleen
August 29th, 2010
7:13 AM

In spite of your continuing obfuscation, I understand your question well enough. As someone who claims to know the ropes, it is a mystery as to why you didn’t phrase it properly -then as now. Fwiw, “rep” is not how this job is described -another source of confusion you’re certain to run across.

Speaking of, your IP confirms you’re from California (your cavalier verbiage was the first hint). You will be sure to mention to any future clients that they will need to a license as a foreign entity garment manufacturer within the state of California lest their and your means of production be confiscated? Legally, you cannot accept any contracts from those out of state unless they have a license. Knowing all that you do, I’m sure you have a plan to facilitate that complex, expensive and lengthy process too since it is the reason contractors in the state of California aren’t getting any contract work.

I’ve written several entries about this particular job including customary commission rate as well as the requirement of foreign entities placing work within the state to be licensed but am not motivated to point them out to you. Good luck.

Buxton
September 15th, 2010
2:12 PM

I am interested in finding out the typical partnership details between a clothing manufacturer and a showroom? I have been visiting different markets and have had several showrooms provide me with different information they claim is the “industry standard”.

In a contract with a showroom – there is a basic commission structure that is agreed upon. Is there also a territory that showrooms generally also manage? Is this the norm to have a showroom claim a territory? And if so – does each market have a standard “territory area”?

If a showroom has road reps – i can understand that they may want to claim a territory based on their road reps – but if a showroom does not have road reps – is it still “industry standard” to ask for 4-6 states as a territory? If so – what is the % that is normally paid for sales in this territory and is it split or 100%?

I hope this is not too confusing – but would really appreciate any help with understanding how showrooms work. My biggest concern is partnering with a showroom and having them claim a large 4-7 state territory on top of the showroom – especially if they do not have road reps?

And – if i attend shows myself and sell to a store that is brand new to me and has never been to the showroom – am i supposed to pay the showroom a fee if the new store is based in their territory? even if the new “store” does not ever attend that show?

thanks so much

Alison Cummins
September 15th, 2010
3:57 PM

Buxton,
This is a great topic to discuss in the forum. Buy the book and join!

Buxton
September 15th, 2010
4:49 PM

what book? by whom?

Kathleen
September 15th, 2010
5:12 PM

Alison means The Entrepreneur’s Guide to Sewn Product Manufacturing which is listed off to the right side of every page. I wrote it. This is my site. It has a lot of information that you will find useful and not in any other books. Because I know that it cannot answer every question, I created a forum (click on “member’s forum” at the top of the page) where people can ask questions and compare notes. Members range from startups to sales reps, suppliers, sewing contractors, fabric salesmen as well as well established apparel manufacturers. Because we discuss a lot of proprietary information not intended for public viewing, it is private but you’re welcome to join.

Carla Behrle
October 15th, 2010
2:25 PM

Not sure if this might be covered in the book or not, 12% seems fair for better wholesale, but does anybody know what commission rates might be for high end retail sales?

jonathan
December 13th, 2010
11:25 AM

Is the 12% commission your discussing based on net or gross of sales?

sunflowers
December 21st, 2010
9:02 PM

This is a very interesting blog. I am also trying to seek a good sale reps for my line. yes, this is hard to seek. So, it would be helpful if there is a website that shows all the sale reps’ profiles national wide.
Recently, I called a company specialized in helping manufacturers to seek an appropriate sale reps, and he charges $1900 to $2400 for a one time fee.

Mauricio Alberti
January 2nd, 2011
8:49 PM

Our company have beautiful garments made of Peruvian Alpaca that people loves but unfortunately fashion shows such a Moda Manhattan did not give us the best results (even though it has open doors for us) . In the beginning we did not wanted to use any reps but now I realized that they are indispensable specially in the states that people seems to like our products the most NY, MA etc. I’m thinking on buying your book it has good reviews.

tom
March 10th, 2012
3:56 PM

I have been a sales rep for 10 years for a factory in Peru owned by close friends and now we need a sales rep contract, about time. Anyone know the standard commission rates? We use 10% and I think that is fair, there is no other clauses and I basically pay almost all my own expenses, however they did help me the first few years with some expenses.

Any advice?

Ann
April 17th, 2012
1:57 PM

Hi, we currently work with agent that take 15% for the sales and 10% for the handling, does it sounds normal for USA market ?
Also how exactly we need to calculate agent commission? In this blog appear 12%, does this 12% taken from gross sales that includes credit card fees and shipment fees or from net sales ?
And what exactly agent should do for this 12% ?
Thanks in advance

Jabez
June 24th, 2012
2:21 AM

Forign manufacturers will provide 1.5% to 2.5% commission max based on entire FOB. Best bet for sales rep to work with manufacturer who produce over 1 million pieces per month in general. We have own factory and we make denim monthly production is 4 million pieces. Our profit margin per denim 25 cents to 50 cents max. Sales Rep can make make $300,000 up to 1 million depends on the FOB. Higher the price of the merchandise more commission for the rep. Commission chart for Clothing brand & manufacturer are very different for rep.

Alyson
January 10th, 2014
7:29 AM

I am wondering about whether or not sales reps generally require advance commission payments on new customers? I know that commission payments are certainly standard, but an advance commission on a new customer seems strange. Can anyone shed some light on this?

Paris
January 13th, 2014
11:45 AM

Abit out of the subject. I am looking for a good sales rep for men’s clothes. Where do I find th? Any ideas?

Thank you

Alison Cummins
January 17th, 2014
8:01 AM

Paris,

There’s a great forum thread about exactly that right here with lots of links:
http://www.fashion-incubator.com/phpbb/viewtopic.php?t=8820

To read it you need to join the forum. Info here:
http://www.fashion-incubator.com/phpbb/viewtopic.php?t=1507

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