First of all, let's get clear on what Sale or Return is so we can understand how it can benefit both the maker/brand and the stockists because that is really what it's all about.
In a nutshell, sale or return is an agreement between a stockist who agrees to sell and market a maker/brand's products with the promise of being able to return the goods if they don’t sell. Let’s break it down.
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Sale or Return or SOR traditionally works like this:
1. Stockists place an order at wholesale prices with the maker/brand.
2. The maker/brand confirms the order, if they think the stockist is over-ordering or ordering something that is not a great seller they will inform the stockists and they will agree on the final order.
3. Stockist pays according to the maker/brands payment terms, this can be proforma (payment upfront), in which case they won't be working on the order until they received the payment.
4. Order is processed and shipped.
5. Stockist displays the range and hopefully sells out :).
6. If the stock doesn't sell, after a pre-arranged time limit/time frame, the stockist will package it up and return it at their cost to the maker/brand or let them know that it's ready for collection depending on what was agreed.
7. The maker/brand checks all the stock, checks that there are no stickers or price tags or damages, and issues a credit to the stockists that can be used for other orders or issue a refund.
Benefits of SOR
The benefit of SOR is that a stockist can try new suppliers with confidence and at very little risk; therefore, they are more likely to give your brand a try. It can be an excellent way for a maker/brand to “get in there” with a stockist and it can lead to a great long-term partnership that works equally well for both parties. SOR can be useful to new brands with products that are untested or for when times are economically challenging.
Challenges of SOR
The challenges with SOR arise when stockists expect makers/brands to supply stock without any commitment from them at all. If a maker/brand supplies a store with stock and no payment or invoice is issued and the stockist has had to pay for other items in the store, the incentive to give space to the range bought on SOR is less than to promote the stock bought on a firm sale agreement. It can also be challenging to get products back and in a good condition but once you work with a few different stockists on a SOR basis you will start to find out which of them are worthwhile working with.
Will it work for me?
The terms have gotten very muddied for SOR so my advice to you is that if you are going to offer this, have a good think about how it will work best for your business and set out clear terms between yourself and the stockist. This will help both of you and should not be sales preventative. Be especially clear on payment terms and review dates including dates of returning the products to avoid chasing.
If you have a new product or you are a new brand then offering SOR to stockists is a lot more attractive to them and could lead to an amazing partnership in the future. You can get first-hand feedback from the stockists on what is selling as anything that isn’t selling will be coming back to you so you will also receive valuable sales analytics at the same time. Finally, just like everything else in wholesale you need to know where to draw the line and that’s different for every brand so make sure you do your research before jumping into any agreements.
If you want to find out more about how Sale or Return can work for you and wholesaling in general, then let’s have a chat today! Drop me an email at firstname.lastname@example.org and I will get back to you personally.
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