Who Is a Distributor and How Can a Store Choose a Reliable Supplier?

A distributor purchases and distributes a manufacturer’s products, while the parties’ specific obligations are set out in their contract. For a retail store, a supplier’s reliability depends on verified authority, product origin, delivery performance, and clear rules for payments and defects. Before placing a first order, check the counterparty, agree on written terms, and calculate the shipment’s profitability, including expenses.

The legal provisions below apply to Ukraine and purchases made for business purposes. A practical supplier selection process can follow these steps: define the cooperation model, check the documents, compare the total cost of offers, and arrange a trial delivery. After that, the store can assess the supplier based on actual performance.

What role does a distributor play?

In a purchase-and-resale model, a distributor buys goods and takes ownership of them before selling them to the next buyer. The distributor is the seller under the store’s contract, so the store should agree with them on the product range, delivery dates, price, quality, and how to raise claims. The transfer of ownership is covered by Article 655 of the Civil Code of Ukraine, while Article 712 of that Code governs the supply of goods for business use.

By agreement, a distributor may also store products, arrange delivery, maintain the product range, and help promote the goods. The store should clarify which of these services are included in the purchase price and for which the supplier will issue additional invoices. A manager’s promise to arrange delivery or accept unsold stock should be included in the contract or an agreed addendum.

Buying for resale, agency services, and commission

To determine the cooperation model, find out whose name the party uses to enter into the transaction, whose account they act for, and who takes ownership of the goods. In a direct resale model, the supplier earns from the difference between the selling price and their expenses. In an intermediary model, their income may be an agreed fee for arranging the transaction or sale.

The word “agent” in a commercial offer does not, by itself, explain all the terms. If a party asks the store to pay the manufacturer but promises to issue documents from another company, agree in writing on each party’s role before making payment. Likewise, the phrase “goods on consignment” should be defined in the contract: it could mean a supply with deferred payment or another cooperation model.

What do “official” and “exclusive” status mean?

Read any confirmation from the manufacturer or brand owner within the scope of the authority it specifies. To verify official status, ask for a document that names the supplier, products, territory, and period for which the authority is valid. If the right to supply was transferred through another partner, ask for an explanation and confirmation of that relationship.

Check the terms of exclusivity separately: the territory, products, customer categories, and sales channels it covers. An official partner may operate alongside other partners of the brand. Even a document granting exclusive rights may contain exceptions, such as direct sales by the manufacturer or sales through certain retail chains.

Practical step: Contact the manufacturer using official contact details you found independently and ask them to confirm that the specific legal entity’s authority is current. Include its full legal name, registration code, and the product group you are interested in. Keep the reply with the supplier’s documents.

How to check retail pricing terms

An exclusive agreement does not automatically authorize a supplier to fix resale prices. Article 6 of the Law of Ukraine “On Protection of Economic Competition” prohibits anticompetitive concerted actions, including actions concerning price fixing and market allocation that restrict or may restrict competition.

If the supplier sets a minimum retail price, approves every discount, or makes delivery conditional on compliance with a particular price, seek a legal assessment of the specific terms before signing. Check territorial and online sales restrictions separately. The word “recommended” in a price list does not explain how the requirement will work in practice or what consequences may follow if it is not observed.

How to check a supplier before making the first payment

We recommend creating a short counterparty check record and assigning an employee to gather supporting evidence. The store owner can then see which questions have been resolved and which remain open. Repeat the check if the legal entity, signatory, bank details, or documents confirming authority change.

1. Compare registration details. Check the full legal name, code or registration details of the individual entrepreneur, registration status, and information about the manager in the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organizations of Ukraine. Compare these details with the contract, invoice, and delivery note.
2. Check the signatory. Ask for documents confirming their authority to sign the contract. If a representative is signing, check the term and scope of their authority, including any limits on the transaction amount or types of agreements.
3. Check who will receive payment. If another party is to receive the funds, ask for documents explaining the arrangement. Confirm any change of bank account using a supplier contact you have already verified.
4. Confirm authority for the brand. Compare the legal entity named in the manufacturer’s confirmation with the entity entering into the contract. Check the products, territory, sales channels, and validity period of the document.
5. Check delivery performance. Ask for contacts of customers who have agreed to provide a reference. Find out how the supplier has handled delays, short deliveries, and quality complaints.

When to check for a licence

Distributor status does not mean there is a universal licence for supplying any product. Licensing depends on the type of activity and product category. For example, Article 7 of the Law of Ukraine “On Licensing of Types of Economic Activity” provides for licensing wholesale and retail trade in medicines, while other specific categories are covered by special legislation.

Before purchasing goods in a regulated category, find out what authorization is required for the planned transaction and check the supplier’s relevant details. Assess these goods in light of the special rules governing their circulation. A document confirming a brand partnership does not prove compliance with licensing requirements.

Which product documents and characteristics to check

Start by identifying the product precisely: name, manufacturer, model, SKU, configuration, unit of measure, and quantity per package. If needed, include the batch number, serial number, production date, and remaining shelf life. These details should match across the order, documents, and actual delivery so the store does not accept a different model or stock that cannot be sold.

Article 673 of the Civil Code of Ukraine requires goods to be of proper quality and, when sold according to a sample or description, to match that sample or description. Goods must also meet any quality requirements set by law. The specification should therefore describe the goods precisely enough to check them on receipt.

The list of required documents should be determined for the specific product category. Do not require the same “quality certificate” for the entire product range: first establish which requirements apply, then agree which documents the supplier will provide with the shipment or make available for inspection. If the product requires a conformity document, check that it covers that specific product.

• Ask for delivery notes and other agreed documents that link the shipment to a specific seller.
• Check the manufacturer information shown on the product. For imported goods, ask the supplier to explain their origin and supply route.
• Compare the marking, instructions, warranty terms, and contents with the model ordered and the applicable requirements.
• Record packaging, storage, and transport requirements if they affect whether the goods remain fit for sale.

A practical approach is to split the check into two stages: obtain agreed sample documents before payment, then compare them with the specific shipment on receipt. A delivery note confirms the transaction it describes, but on its own it does not resolve every question about the product’s authenticity or compliance. Resolve any discrepancies before putting the goods up for sale.

What to agree on in a supply contract

Under Article 627 of the Civil Code of Ukraine, the parties determine the contract terms subject to the law and the principles of reasonableness and fairness. For a store, it is useful to turn a commercial offer into specific rules for processing orders. The list below is a practical guide for negotiations; the final wording should reflect the goods and cooperation model.

How to distinguish returns of unsold stock from claims for defects

Agree directly with the supplier whether good quality goods that have not sold can be returned. Specify how the supplier will inspect their condition, who pays for transport, and when the store will receive a refund or credit. This helps the store assess the risk of ordering a large shipment before placing the order.

For goods of inadequate quality, Article 678 of the Civil Code of Ukraine provides, among other things, for claims to reduce the price proportionally, have defects remedied free of charge, or be reimbursed for the cost of remedying them. If the quality requirements have been materially breached, the buyer may choose to withdraw from the contract and receive a refund or have the goods replaced. The Article applies unless the Code or another law provides otherwise.

On receipt, we recommend photographing any damage, recording the SKU, batch, and number of affected units, and notifying the supplier using the agreed method. Keep goods with unresolved defects separate from saleable stock. The store’s arrangements with its supplier should be considered separately from its obligations to the end consumer.

How to compare profitability: markup, margin, and contribution toward expenses

The difference between the purchase and selling prices does not show net profit. To compare suppliers, put their offers on the same basis: include delivery, mandatory service fees, and expenses related to the sale. Apply the same approach to taxes and amounts across all options; do not mix different methods.

Illustrative numerical example; it does not reflect market prices or rates. The store buys a product unit for UAH 800, and the allocated delivery cost per unit is UAH 40. For this management calculation, the purchase cost including delivery is UAH 840. The selling price is UAH 1,200, and additional variable expenses for this sale are UAH 60 for payment processing and UAH 30 for packaging.

Contribution toward expenses shows how much remains after the variable expenses included in the calculation to cover rent, the fixed portion of payroll, and other fixed expenses. These expenses have not yet been deducted in the example, so UAH 270 cannot be called net profit. Markup and margin also use different bases, which is why their percentages differ.

If the store offers a 10% discount in this same illustrative example, the price will be UAH 1,080. Assuming the other listed expenses remain unchanged, contribution toward expenses will be 1,080 − 840 − 60 − 30 = UAH 150. It will fall by UAH 120, or approximately 44.44%, so the impact of a discount should be calculated before approving a promotion.

When comparing offers, include the minimum order quantity and payment term in your calculation. A lower price may require the store to buy more units than it expects to sell before the next payment is due. In that case, assess separately the amount of cash tied up in stock and the potential cost of storing or marking down those goods.

How to place a trial order and choose a supplier

It is a good idea to build the trial shipment from products whose demand the store can assess and whose completeness and quality it can check. Before placing the order, set your own criteria: acceptable delivery time, shipment completeness, packaging condition, document accuracy, and response time to enquiries. These are management decisions for the store, and the specific thresholds depend on the product range.

1. Send a written order with SKUs, quantities, and agreed prices, and obtain confirmation.
2. Record the promised delivery date and actual arrival date, as well as the number of units ordered and accepted.
3. On receipt, check the goods and documents using the same checklist you plan to use going forward.
4. If there are discrepancies, follow the agreed claims procedure and record how the supplier handled the claim.
5. After sales, compare actual profitability with your calculation, taking returns, discounts, and additional expenses into account.

It is useful to record the results in a single comparison table covering all candidates. Alongside the price, note the minimum order quantity, payment term, actual delivery completeness, and any unresolved issues. If a required document or quality check has not been passed, resolve the issue before increasing the order volume.

How to replenish stock without overordering

For regular orders, consider average sales, the actual delivery lead time, and safety stock to allow for variations. A basic reorder point can be calculated as follows: average daily sales × lead time in days + safety stock. This is a practical planning method and should be adjusted if demand, seasonality, or delivery times change.

Illustrative example. The store sells an average of 3 units per day, delivery takes 7 days, and the selected safety stock is 9 units. The reorder point is 3 × 7 + 9 = 30 units. If demand or delays increase, this level will need to be reviewed.

Before placing a new order, account for saleable stock on hand, confirmed deliveries in transit, and reserved goods. Suppose there are 18 units in stock, 12 in transit, and 4 reserved: the calculated inventory position is 18 + 12 − 4 = 26 units. At the same time, check separately whether the 14 units actually available will last until the delivery arrives, since goods in transit cannot yet be sold from stock.

If the store chooses a target level covering 14 days of sales plus safety stock, it will be 3 × 14 + 9 = 51 units. The calculated need is 51 − 26 = 25 units. If the packaging multiple is 6 units, round the order up to 30, then check the budget, storage space, and shelf life.

For important products, it is a good idea to check a backup supplier in advance. Agree on the characteristics of acceptable substitutes and the approval process so that an urgent order does not result in a different product. Record delays from the primary supplier: the actual delivery time will be needed to calculate future stock levels.

How to reconcile deliveries, returns, and outstanding balances

It is a good idea to reconcile regularly and before making a large payment. For each transaction, compare the order, delivery note, goods actually received, returns, and payment. First, set the list of documents and the date for which you are comparing the records; otherwise, a delivery or payment near the end of a period may create a discrepancy.

• Quantity: compare the number of units shipped and received, short deliveries, and recorded returns.
• Value: check prices, discounts, delivery, and other agreed charges.
• Payments: compare transfer dates and amounts, and find out which documents they were credited against.
• Unresolved claims: record separately any claims for which the supplier has not yet agreed to compensation or an adjustment.

A working balance calculation can start with the agreed opening balance: add goods received and agreed charges, then subtract payments credited and documented reductions. Keep advances and disputed amounts separate. If the records do not match, identify the specific transaction and agree on a correction before the next reconciliation.

For deferred payments, keep a calendar of due dates for each delivery and monitor the available credit limit. If the forecast shows a cash shortfall, discuss a payment schedule or a smaller next shipment in advance. Record the agreement in writing so both parties understand the deadlines and terms for future deliveries in the same way.

Tracking distributor stock and sales in Torgsoft

In Torgsoft, the “Склад → Стан складу” (“Warehouse → Stock status”) mode displays product quantities, selling prices, and costs, lets you review stock movements, and filter items by supplier. To replenish stock, you can set a minimum stock level and use the filter for products running low. A practical process is to set the required stock level first, then review the filtered items while taking deliveries in transit into account, and only then approve the purchase.

According to the official licence comparison, stock monitoring is available in Старт and Ультра (“Start” and “Ultra”), while supplier orders, multiple inventory centers, and transfers between warehouses are included in Ультра (“Ultra”); each workstation requires the relevant licence. Automatic stock calculations are a separate paid option for the full version.

The “Реалізація” (“Sales”) mode lets you add products by barcode or SKU and generate a product report for a selected period. You can use this data to review sales velocity before placing a repeat order. For accurate analysis, employees need to record receipts, sales, and returns promptly, while the owner checks discrepancies and adjusts stock settings. When choosing a configuration, note that retail sales are included in Старт and Ультра (“Start” and “Ultra”), while wholesale trade is available in Ультра (“Ultra”).