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How To Manage the Brand-Retailer Relationship

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In the fashion industry, the relationship with your retailer is extremely important but at times can prove troublesome. As a producer, you are responsible for the creation of the product; it is your retailer’s job to buy that product from you and sell it on to the end customer. When a retailer wishes to purchase your beloved product, you must put to one side your jubilation and pride, and consider the actual cold hard details such as prices, purchase orders and lead times etc.



Creating a purchase order
A purchase order is the means by which a retailer places an order for your product – They raise a P/O that contains all the relevant order details which you then fulfil. Once the P/O has been fulfilled and processed, and an invoice will be generated for payment etc. Purchase orders signify a binding contract and should be managed carefully ensuring both yourself and your customer are clear with all the terms stated. A P/O should contain the following:

– Description and quantity of the product ordered
– Payments terms and price per unit etc or another quantifiable measurement (weight, meter etc)
– Delivery and invoice address
– Expected delivery date
– Cancellation date

Once all of these items are present ensure you have a signature and that the customer’s invoice address is correct otherwise you will not be able to bill them.


The orders terms
Invoices are usually paid in the designer fashion market in one of two ways  – 8/10 EOM and Net 30. A brief explanation of both can be seen below:

8/10 EOM – An 8% discount is provided to the customer from the total invoice amount if the invoice is paid within 10 days from the same month in which the products are shipped.

Net 30 – The invoice is expected to be paid 30 days after the invoice date.

Nevertheless, you can meet all types of terms so here’s the complete list. Ensure you have your invoice terms set out properly and do not enter a contract with a retailer who you do not trust to pay invoices in full and on time.


The shipping process
It is imperative to not simply dispatch every order you process without consideration of your retailer’s financial situation and current credit limit etc. What if you dispatch a hundred garments to one of your customers, only for you to find out that they are over their credit limit and you end up not receiving payment until months down the line? In instances like this, you are out of pocket as you have already paid your production and raw material costs. Only release orders to your retailers with open credit limits or at least ask for a partial deposit on larger orders so you have covered in the short term for some of your outlay. You may also think about a drop shipping model to transform your shipping process.


Credit Terms
Once a purchase order is acquired (Or preferably before even entering business with a retailer) you must ascertain if they have a reliable credit history. To effectively check a company credit report you can ask for references directly from the store and check them out, or alternatively contact one of their other suppliers and find out how the suppliers credit limits and payments worked for them. It is important not to try to evaluate your retailer based on their appearance, reputation or any of its products – These are all irrelevant when it comes to paying hard cash for your goods. Be vigilant and don’t be afraid to ask questions – The supplier will be doing exactly the same to you about your production processes and quality!


Another way to check on credit is to contact two or more of your suppliers “Factors” and enquire about how much limit your customer has etc. Factors are responsible for the actual monetary transaction, therefore, will give you much more reliable credit information. If your supplier has been declined credit, ask why?


Definite reasons why you should NOT sell to a retailer
Before you engage in any trade with a retailer you should check out if any of the below pointers hold true – If they do then run a mile!

– The store is being investigated for poor working conditions
– The retailer has been declined for an unfavourable set of financial accounts
– The store is in administration
– The store has been declined credit with multiple Factors

All of the above reasons could mean that a retailer is in a poor financial situation and may not be reliable when it comes to paying your invoices.


Discounts and markdowns
In the fashion industry, there will be times where your retail customers are disenchanted with your product and feel that they deserve some sort of discount or markdown compensation for the fact that they have not sold out. If you have made no sell-through agreements with your customers, you have no obligation whatsoever to provide such discounts – The retail outlet decides how much they buy and how much they think they can sell – It is not up to you to sell the end product for them, you are simply providing them with a quality product to sell.

In most cases it is unwise to grant discounts to your customer for their poor sales unless you have provided a faulty product – That is their problem to deal with in short and up to their sales and marketing team to develop more efficient selling strategies.


Reliable Partners = Reliable business
In the fashion industry, it is imperative to run an efficient business that has strong relationships and favourable deals with its partners in order to be successful. Yes, you may have an amazing sense of creativity and design running through your veins, but if you have no business acumen to back this up, you may struggle.




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