The time has come, the drawings are done and the sketches are ready to become a reality. The only thing missing now is…who is going to buy the product? Of course in many situations, this question comes up well before the design stages, but regardless of the stage of development that you are in, it is a question that needs to be answered.
For many designers and producers, a distribution agreement is the key to being able to commercially exploit a product. But before signing away the products that you’ve worked so hard on, it is important to have a grasp of what these agreements will mean for you and your product. Are you giving away too much? Are you being robbed of any credit? And of course, are you getting the maximum compensation and exposure possible?
How you obtain the distribution deal depends greatly on your goals, your product, the market and most of all, your connections. Once you have engaged the distributors and the deal is in motion, there are several important considerations to keep in mind.
Similar to obtaining the deal itself, whether or not this distribution will be exclusive (either on your part or on theirs) depends on many factors. A larger distributor will likely have a multitude of designers and will not be exclusive to you. However, depending on the product line, you may be exclusive to them. This favors the distributor in that they know that because this product is being made exclusive to them, that they may be able to charge their clients more for the exclusive product and that they will have some leverage against you since you are not able to sell the product to anyone else.
The term of the agreement will let you know how long this relationship is to last for. The term can be anything from just a season to several years. In addition to the initial term, there may be an automatic renewal of the term or it may need to be negotiated once the first term ends.
As with most other things in this agreement, the purchase order depends on several things such as who the distributor is and what kind of product you are designing. In certain cases, especially when you are held to be exclusive to the distributor, the contracts may be either a “requirement contract“ or an “output contract.“ A requirement contract is a contract where the designer or owner delivers to the distributor as much of the product as they “require.“ An output agreement is one where the distributor will purchase everything that the owner is able to produce.
The purchase price is usually what gets the designer or owner’s attention. These deals are often straight purchase orders for a bulk amount of the product either based on a unit price ($2 per shirt for instance) or based on the bulk amount ($2,000 for 1,000 shirts). These figures may vary depending on what kind of purchase order the distributor is putting in.
There are of course many other provisions that you should be aware of including quality control, storage, marketing, advertising, and credit. Each of these topics, like the rest of them, depends on who the parties are and what the product is. One of those provisions that a designer often regards as being important is credit. Depending on the product itself, there may not even be any credit provisions or they may be one that just requires that credit be provided on the product itself. Others may have requirements that the designer be provided credit in the area in which the product is being sold (think of the clothing department at a major retail store that says “designs by ______” or “by ______”).
What it all comes down to is that there are many deal points in distribution or licensing agreements and unless you are competent to negotiate each of these provisions, it is best to have an attorney who has experience with fashion distribution agreements to take care of this agreement for you. For assistance with your fashion legal needs, contact Biletsky Law.