Legal Definitions - distributorship

A distributorship is a business arrangement where a company or individual is granted the right to sell another company's products, typically within a specific geographic area. The distributor acts as an intermediary, purchasing products from the manufacturer or supplier and then reselling them to customers, which can include individual consumers, retailers, or other businesses. This arrangement often involves a formal agreement outlining terms such as sales targets, marketing responsibilities, and territorial rights.

• Example 1 (Consumer Goods): A regional company secures the exclusive right to distribute a popular brand of organic snack foods to grocery stores, convenience stores, and health food shops across three Midwestern states. The distributorship involves managing inventory, logistics, and sales relationships with these retailers on behalf of the snack food manufacturer.

  This illustrates a distributorship because the regional company is an independent entity selling another company's products (organic snack foods) within a defined territory (three Midwestern states) to various retail customers.

• Example 2 (Industrial Equipment): A specialized firm holds a distributorship for a particular brand of industrial-grade welding equipment and supplies. This firm sells these products directly to manufacturing plants, construction companies, and vocational schools within a large metropolitan area.

  This demonstrates a distributorship as the specialized firm is authorized to sell specific industrial products from a manufacturer to business customers within a designated geographic region.

• Example 3 (Technology): An IT solutions provider in a specific country obtains the rights to distribute a foreign software company's enterprise resource planning (ERP) system. The IT provider then sells, implements, and provides support for this software to large corporations within its national borders.

  This shows a distributorship where the IT solutions provider acts as the local seller and service provider for a foreign software product within a defined national territory.

A dual distributorship occurs when a manufacturer or supplier not only sells its products through independent distributors but also operates its own sales channels, such as company-owned stores or an online direct-to-consumer platform, that compete directly with those independent distributors at the same market level. This means the supplier is simultaneously a vendor to its distributors and a competitor in the marketplace.

• Example 1 (Apparel): A well-known athletic wear brand sells its clothing and footwear to numerous independent sports retailers and department stores nationwide. However, the brand also maintains its own chain of branded retail stores and a comprehensive e-commerce website, both of which sell the same products directly to consumers, thereby competing with its independent retail partners.

  This is a dual distributorship because the athletic wear brand (supplier) sells to independent retailers (distributors) but also sells directly to the end consumer through its own stores and website, competing at the same retail level.

• Example 2 (Home Goods): A manufacturer of high-end kitchen appliances distributes its ovens, refrigerators, and dishwashers to various appliance showrooms and luxury home goods stores. At the same time, the manufacturer operates its own factory outlet stores and an online portal where consumers can purchase the same models directly, often at competitive prices.

  This illustrates a dual distributorship as the appliance manufacturer supplies independent retailers but also competes with them by selling its products directly to consumers through its own retail channels.

• Example 3 (Automotive Parts): A company that manufactures specialized aftermarket performance parts for cars sells these parts to independent auto parts stores and custom modification shops. Concurrently, the manufacturer also runs its own online store and a few flagship retail locations where it sells the exact same performance parts directly to car enthusiasts and mechanics.

  This demonstrates a dual distributorship because the manufacturer of automotive parts sells to independent retailers while also directly selling to the end-users and small businesses through its own online and physical stores, creating direct competition.