How Do Sales Reps Work?

The holiday season is an incredibly busy time for us — and probably you.  So in lieu of writing a brand new post, I want to post excerpts from one of my most read articles:

WHAT ARE SALES REPS (representatives)?

Independent commission-based sales representatives, more formally referred to as “manufacturers’ representatives,” or more commonly, just “reps”, are a dominant force in many industries, and especially the wholesale gift industry.

Unlike wholesalers or distributors, who take actual possession and ownership of merchandise at discounts from the wholesale price, sales reps are a contract sales force representing the company or companies they work for. Typically they are paid a percentage of the wholesale price on the accounts they open, or to all accounts in their exclusive territories, the month after an invoice is paid by the retailer (wholesale account).

It works like this:

  1. Reps travel (and/or run a showroom in a gift mart) and present merchandise for the lines they represent.
  2. If an order is taken, the information is forwarded to the manufacturer, who then ships the merchandise, subject to the manufacturer’s terms and conditions.
  3. After payment is received, the manufacturer then cuts a commission check to the rep, usually the month following payment.

Standard commission rate in the gift industry is 15%, although some companies pay more or less than the standard amount.

Sometimes distributors also hire reps, although usually, the commission rates are lower, in the 10 to 12.5% range. Because distributors carry a lot more products and usually offer catalogs and other sales materials, the lower commission still results in excellent income to the rep, due to larger average orders.

For gift shops, purchasing from a rep offers many advantages, including:

  • You get service right to the door of your establishment, and a dedicated advocate if there is a problem with your order or customer service issue with the manufacturer.
  • You never pay more for the onsite services of a rep, the wholesale costs are the same. If you find that a company is trying to get you to go around the rep for a lower price, you are working with a disreputable company, and you should contact your rep immediately with the information.

On the other side of the coin, retailers who try to go around the rep, and request a better deal, are operating unethically.

Remember that sales reps, just like employees and spouses, vary widely in commitment, follow-through, and service. Please give your rep a chance to serve you before making snap judgments based on a lousy past experience.

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