When thinking about how to start an eCommerce business, how to run a wholesale business, and how to run a wholesale distribution business is the last thing most people get excited about is the paperwork. Many folks would rather read eCommerce books or dropshipping books than spend any length of time on legal documentation. Paperwork takes time out of your day, may involve paying a fee, and can be complicated and confusing.
Completing paperwork can seem like a lot, especially at the beginning, but it’s designed to insulate you from law-induced headaches and create the foundation to sell online. Whether you’re selling liquor online or looking for new, high demand products for your eCommerce store, your hard work can disappear overnight without the right legal protections.
Common new business paperwork includes applying for your eCommerce business license and eCommerce business insurance. If you’re learning how to become a wholesaler, it also includes a wholesale purchase agreement contract.
Let’s look at what a wholesale purchase agreement is, an example of one, and how to use it.
What Is a Wholesale Purchase Agreement?
A wholesale purchase agreement is a document that transfers the ownership of products from a seller to a buyer. In some cases, the seller may be a supplier; in other cases, they may be a wholesaler. The purchase agreement is used to achieve specific outcomes at various stages of the eCommerce supply chain.
To better understand how wholesale purchase agreements work, it’s helpful to know why they’re used. Here is a general overview of a wholesale purchase agreement’s stages:
- A manufacturer sells goods to a wholesaler. This may be raw materials inventory, manufacturing inventory, or merchandise inventory, depending on the wholesale items the business sells. Manufacturers sometimes have their own product assignment or purchase agreements to be signed before wholesaler purchases are complete.
- The wholesaler becomes the owner of the goods upon purchase. They assume all legal liabilities and responsibilities as a result of buying the goods (and often later selling the items to another entity).
- A wholesale purchase agreement is drafted by the wholesaler. The wholesaler may later use this to assign or sell ownership of their products (sometimes finished goods inventory) to a buyer. The buyer may be a distributor, retailer, or a public consumer. This stage influences wholesale vs. retail price, as well.
- The wholesaler later uses the purchase agreement to lawfully transfer product ownership and liability to the buyer. Depending on the type of documentation used, it may be accompanied by an assignment agreement. However, assignment clauses are often present in a singular purchase agreement.
- The entity buying from the wholesaler now owns the goods purchased and all the benefits and liabilities associated with them. This is key in preventing unwanted lawsuits as a wholesaler as well as other legal concerns.
This information is extremely useful if you are currently a wholesaler or are researching how to find vendors. First, you should read up on how to get a wholesale license, how to buy wholesale goods, and determine a wholesale directory or wholesale marketplace where you can list your products. Once those steps are complete, developing a purchase agreement will help you protect the wholesale sales you make.
There are additional factors to be aware of when creating or signing a purchase agreement:
- If you are a wholesaler, ensure your supplier’s contract doesn't include the prohibition of future assignments. This would prevent you from selling to various entities in the future and risks legal accidents on your part.
- Make sure the products you’re selling are allowed to be resold, both now and in the future. Some local laws and product restrictions prevent goods from being sold or being resold within a particular period of time.
Wholesale Agreement Example
If it’s your first time learning what is wholesale, you may be surprised by the amount of work involved. There are supplier relationships to build, quality products to source and sell, warehousing to optimize, and inventory management to handle.
With all of these important tasks on your plate, paperwork is often the first to be forgotten. When you do start researching examples of wholesale agreements, it can be difficult to know which kind applies to your business.
The details of any contract will depend on the local laws governing an agreement that is struck as well as the parties executing it. That being said, it’s helpful to have a framework for what your own agreement may look like.
Any wholesale agreement you develop, modify, or enter into should have the following sections at a minimum:
- The goods being purchased, who is buying them, and who is selling them.
- Quality standards for goods and means for seller-provided remedies.
- Shipping policy and services.
- Payment policy and any payment gateway providers.
- Any applicable taxes and governing laws.
- Default policy.
- Conditions, limitations, and means for modification(s) of agreement(s).
Occasionally you may come across a contract that doesn’t seem quite right or makes a request you don’t want to agree to. Most purchase agreement contracts include a section for requesting modifications if need be. This shows that the majority of sellers are equitable and want each buyer they work with to feel assured in working with them.
If you don’t feel comfortable signing an agreement, don’t do it. It’s better to move slowly than move fast and wish you had made different decisions later, especially in business. Always review any legal documentation independently, and seek the counsel of an experienced commercial lawyer if you have questions.
Wholesale Agreement Template
When you’re starting an eCommerce business, there are dozens of things to do. Between developing an eCommerce marketing strategy and working to increase eCommerce sales, giving buyers more paperwork to fill out sounds burdensome.
While it may seem inconsequential, having a wholesale retail agreement template on hand is a wise move. Instead of creating a brand new document from scratch, you can fill in the blanks for each of your clients. This frees up your time for more important responsibilities, like eCommerce marketing automation, keeping your fill rate high, and improving the order fulfillment process.
Give yourself the easy button with BlueCart’s wholesale agreement template. After downloading the file to your computer, you can print it out and fill in details for as many buyers or sellers as you have.
Putting Together the Perfect Purchase
Working on company paperwork like your eCommerce business plan, wholesale marketing plan, and wholesale purchase agreement isn’t the most exciting, but it is necessary. These documents make it simple for many types of eCommerce businesses to do what they do best--sell phenomenal products to enthusiastic customers.
Finalizing your new purchase agreement contract fulfills multiple needs in one fell swoop. It clearly and concisely assigns product responsibility between parties, protects you from unneeded lawsuits, and gives you all-around peace of mind. For even more strategies on how to get the most out of your wholesale business, read our wholesale management guide.
Disclaimer: This information does not function or serve as a replacement to legal reference materials. It is intended for educational or informational purposes for personal use only. Conduct your own research or consult with a lawyer to make sure your business and any affiliated operations are in full compliance with every federal, state, and local law.