By Frances Harder, March 27, 2016
“Finding a sales representative is like finding a good husband or wife! It takes time and even then things can go wrong!"
What does a sales representative do for the company? They are responsible for finding the right customers for your product and for presenting your line to the buyers. They are also responsible for writing the orders and negotiating the terms of sales. Good sales representatives are usually well paid for their job, either salary, salary plus sales commission, or commission as a percentage of sales. Commission varies from 0% (for salaried representatives) to as much as 25% of sales, depending on the product, territory, and experience of the representative.
The average percentage of commission for clothing is somewhere between 10% - 15%, depending on volume and the type of product. Accessories are usually 15%. Commission is paid on orders shipped to and accepted by the retailer. (Not all orders are shipped due to cancellations from the buyer, or because the orders were not large enough for the manufacturer to produce).
If they conduct their sales by going to the various stores and boutiques to show the lines, they are referred to as “road reps”. Most road representatives are paid on a commission basis and are usually responsible for their own expenses; including the cost of operating, and running a car and any other expenses incurred while on the road selling your product.
Sales representatives who run their own showroom, and represent multiple lines “independent sales representatives” will often also charge some rent or showroom participation fee to help cover the cost of rent, plus a commission fee.
Sales representatives have their own territory and they will demand exclusive rights to them. If they have a showroom, they will also have a territory, and you should inquire as to what it covers and if they have other showrooms in other cities (See example of sales reps contract at Fashion for Profit and Forms for Profit).
In-House Sales Representatives
Larger companies may have their own in-house representative who will only represent their company. They are usually on salary and maybe a small commission.
Multiple Line Representatives
Small start-up apparel manufacturers will usually look to independent sales representatives who represent multiple lines. They often charge monthly showroom participation toward their rent, plus commission.
Benefits of a GOOD Sales Representative
A good representative can help build your company, merchandise your product, and give very helpful business advice.
Choosing a Sales Representative
It is important that the chosen sales representative has the right contacts for your product. Find out who is their customer base, and decide if that matches your specific product(s) and target market. All aspects of their client base needs to be considered when choosing a sales representative:
Type of territory
Potential conflict of products
Do they have insurance for theft, fire, water damage, earthquake, (may be classified as an act of God) and other possible losses? Inquire about the type of insurance the representative carries also, if your samples are covered, and for what cost.
It is your right to request the list of customers to which your representative sells. They are not always happy about this, but it is a good idea to fully understand the type of clients they sell to. (The more that you both understand about one another the easier it should be to work together.)
How do you find a sales representative?
There are several ways to find a sales representative:
Run an advertisement in a trade paper or circular.
Ask the buyers of your targeted stores.
Go to the nearest clothing apparel mart and check out the showrooms. Most marts will have notice boards or in- house newssheets that usually carry ads from sales representatives looking for new lines to represent.
Trade shows are another place to find a representative for your company. If you are showing your own line at a trade show and it looks like you are busy, it is very possible that a sales rep will find you.
Make sure that the representative you choose has good references.
Contact other companies they represent and check their references. Follow up with the stores they sell to, to make sure that they are trustworthy and will work for you to your advantage.
Contract of Agreement
You will sign a contractual agreement with your sales representative. This contract is usually for six months to one year, and the dates of this agreement should be part of your understanding. Clearly understand the content and the terms of commissions to be paid and any other payments that will be required from you. Like showroom participation month fees can be anything from $300 to over a thousand dollars. When in doubt consult Fashion Business Incorporated.
Either party can terminate their contractual agreement in writing and send it via certified mail. It is usual to take sixty days to come into effect. Make sure that the contract agreement does not include commission for sales after the termination of the contract.
Resolving a Dispute
If you have the misfortune to become involved with any unfortunate deeds committed by your sales representative, arbitration is by far the best way to resolve any disputes. Taking matters to court can be excessively costly and no one wins but the attorneys. Build this agreement into your contract and make sure that any arbitration is binding.
Terms of Payment to the Sales Representative
Terms are normally paid within 15 days of shipment. It is a good idea to forward a copy of your invoice to your representative when the goods are shipped. If there are returns from the retailer or charge backs, this commission will be subtracted from the sales representatives’ invoice for the next sales made since commission is not paid on returns.
It is common practice for the sales representatives to request an advance against the commission due. Be cautious not to pay the full amount of the commission as the final order could be reduced due to returns.
Sales Representatives in New York or California paid on commission require a written commission agreement with specific terms. Companies that do not have the required agreement are exposed to double damages!