Distributor Vs Sales Agent In New Zealand

If you want tight control over pricing, customer relationships and brand promises, a sales agent is usually the better model. If you want another business to buy from you, resell in its own name and carry more of the day-to-day sales risk, a distributor is usually the better model.

The tricky part is that both models can look similar from the outside. Someone is out there promoting your product, talking to customers and helping you grow. But legally and commercially, the difference matters a lot.

When you compare a distributor vs a sales agent in NZ, focus on five things: control, liability, payment flow, customer ownership and Fair Trading Act risk. Get those right early and your sales channel is much easier to manage.

What Is The Difference Between A Distributor And A Sales Agent?

A distributor buys your products or services and resells them to customers, while a sales agent usually sells on your behalf and earns commission. That one difference affects almost everything else in the relationship.

With a distribution agreement, your customer is usually the distributor. The distributor then has its own customers. It sets up its own sales process, invoices buyers and makes its profit from the margin between its buy price and resale price.

With a sales agency agreement, the end customer usually contracts directly with your business. The agent helps find or manage the sale, but the sale belongs to you. You invoice the customer, you usually set the price and the agent receives commission or another agreed fee.

Here is the practical difference:

• Distributor: Buys from you, resells in its own name and usually owns the customer relationship.
• Sales agent: Introduces, negotiates or closes sales for you, and you usually own the customer relationship.
• Reseller: Often similar to a distributor, but common in software and tech where the reseller may resell licences, subscriptions or implementation packages.
• Channel partner: A broader label that can cover distributors, resellers, referral partners, implementation partners and agents.

Labels aren't enough on their own. If your contract calls someone an agent but they buy stock, set their own prices and sell in their own name, the relationship may operate more like distribution. Your distributor or sales agency agreement should match what is actually happening.

Which Model Gives You More Control Over Pricing And Customers?

A sales agency model usually gives you more control, because the customer is dealing with your business directly. That can be a big advantage if your brand, pricing and customer experience need to stay consistent.

With an agent, you can usually decide:

• the prices or approved discounts offered to customers
• the sales script, product claims and marketing materials used
• which leads are accepted or rejected
• what customer data is collected and how it's handled
• what happens after the sale, including onboarding, support and renewals

With a distributor, you usually give up more day-to-day control. The distributor may want freedom to choose customers, bundle products, run promotions and manage the sales process in a way that suits its market.

There's one important limit: if your distributor is reselling goods, you need to be careful about resale price maintenance under the Commerce Act 1986. In plain English, you generally can't force a reseller to sell at or above a set minimum price. You can usually provide a recommended retail price, as long as it's genuinely only a recommendation.

Customer ownership is another key point. If you want to build a direct database, run renewals yourself or upsell customers later, an agency model may suit you better. If you're happy for the partner to own the customer relationship in exchange for taking more commercial risk, distribution may be fine.

Who Gets Paid, And Who Carries The Liability?

In a distributor model, the distributor usually pays you and then collects from its own customers. In an agency model, the customer usually pays you and you pay the agent commission under clear customer contracts.

Say Maia runs a Wellington skincare brand. She is choosing between a distributor and a sales agent for gyms and salons.

Distributor Example

Maia sells 1,000 units to a distributor at $20 plus GST per unit. The distributor owes Maia $20,000 plus GST under the wholesale invoice and agreed credit terms, then resells each unit for $39 plus GST. If some salons are slow to pay, that's usually the distributor's credit risk, not Maia's, unless the contract says otherwise.

The distributor also has more control over its resale margin. Maia can protect her brand through approved marketing rules, quality controls and trade mark licence terms, but she may not be able to control every customer interaction.

Sales Agent Example

Maia appoints an agent on 15% commission. The agent brings in 1,000 sales at $39 plus GST each, so Maia invoices customers $39,000 plus GST. Maia then pays the agent $5,850 plus GST if GST applies to the agent's services.

Maia keeps the customers, but she also carries more responsibility for fulfilment, returns, customer service and payment collection.

Your contract should spell out who is responsible for:

• bad debts and chargebacks
• delivery delays, damaged goods and lost stock
• customer complaints and refunds
• product warranties and consumer guarantees
• insurance for stock, public liability and professional advice
• commission timing, clawbacks and GST treatment

Without a clear payment clause or commission plan, you may end up arguing over whether commission is earned when a lead is introduced, when the customer signs, when the invoice is issued or when the customer actually pays.

How Does Fair Trading Act Risk Change Between The Models?

Your Fair Trading Act 1986 risk changes depending on who is making claims to customers and whose name the sale is made under. Either way, you should control product claims carefully.

The Fair Trading Act prohibits misleading or deceptive conduct, false representations and unsubstantiated claims. That matters if your partner is making claims about performance, health benefits, environmental credentials, pricing or availability.

In an agency model, the risk often sits closer to your business because the agent is speaking for you. If the agent exaggerates what your product can do, customers may see that as your representation. You can reduce that risk by giving the agent approved scripts, current product information and clear rules on what they can't say.

In a distribution model, the distributor sells in its own name, but your business can still be exposed. For example, if you supply misleading brochures or packaging, or you know the distributor is making false claims and you let it continue, you may still face consequences.

If your products are sold to consumers, the Consumer Guarantees Act 1993 can also matter. A manufacturer or importer can have obligations to consumers even where sales happen through a distributor. You should check product warranties, refund processes and who handles consumer claims.

For standard form small trade contracts, the unfair contract terms rules under the Fair Trading Act can also apply. This can affect one-sided renewal terms, broad termination rights, automatic rollovers, penalties and clauses that let one party change key terms without a proper reason.

The Commerce Commission enforces the Fair Trading Act. In practice, that means your agreement shouldn't just allocate risk after something goes wrong. It should help prevent misleading claims from being made in the first place.

Is A Reseller Agreement Different From A Sales Agency Agreement?

Yes, a reseller agreement is usually different from a sales agency agreement because the reseller typically sells to the customer in its own name. An agent usually sells for you.

Reseller and sale of goods terms are common for software, equipment, courses, subscriptions and packaged services. The reseller may buy licences from you at a discount, or it may have permission to resell your product and keep the difference between the customer price and your wholesale or partner price.

A reseller agreement should deal with things like:

• whether the reseller can use your trade marks, logos and marketing materials
• whether the reseller can describe itself as authorised, certified or preferred
• whether customers receive support from you, the reseller or both
• whether the reseller can bundle your product with other products
• how renewals, upgrades and subscription cancellations work
• what happens to customer data and account access if the relationship ends

If you're using a channel partner agreement in New Zealand, be clear about what type of partner you're appointing. A single channel partner agreement can work, but it shouldn't blur the legal role. A referral partner, reseller, distributor and agent each create different risks.

Trade marks need special care. If your brand is registered with IPONZ, your agreement should say exactly how the partner can use it and when that permission ends. If your brand isn't registered, you may still have rights, but they can be harder to enforce and manage.

For privacy, check who is collecting personal information and why. If the partner collects leads or customer data for you, your Privacy Act 2020 obligations may be involved, including having a clear privacy policy and proper controls around use, storage and disclosure.

What Should Your Distributor Or Sales Agency Agreement Include?

Your agreement should match the commercial model you have chosen, not just use a generic template. Templates often miss the parts that make your channel model work in real life, so a lawyer should tailor the document before you use it.

Use this outline as a starting point for what to fill in:

1. Parties And NZBN Details: Record the correct legal names, company numbers and NZBNs where relevant.
2. Appointment: State whether the partner is a distributor, reseller, sales agent, referral partner or another channel partner.
3. Territory And Exclusivity: Set the geographic area, customer segment, online channels and any exclusivity limits.
4. Products Or Services: List what the partner can sell and whether new products are automatically included.
5. Pricing And Payment: Set wholesale prices, commission rates, invoicing, GST, payment timing and currency.
6. Sales Rules: Include approved claims, marketing rules, quote approvals and discount limits.
7. Customer Ownership: Say who owns customer accounts, leads, renewal rights and data.
8. Stock, Delivery And Returns: Allocate freight, stock risk, delivery timing, defective products and returns.
9. Intellectual Property: Cover trade mark use, copyright in materials, confidentiality and brand guidelines.
10. Compliance: Cover the Fair Trading Act, Consumer Guarantees Act, Privacy Act and any industry rules.
11. Targets And Reporting: Set sales targets, reporting frequency, forecasting and audit rights.
12. Term And Exit: Include start date, renewal, notice periods, termination rights and what happens to pipeline sales.

If your sales agent is an individual rather than a company, also think about contractor status. The Employment Relations Act 2000 and the Employment Relations Amendment Act 2026 changes, including the contractor gateway test, can be relevant where a working relationship starts to look like employment. A written contractor-style agreement helps, but your actual working arrangements still need to line up with that model.

How Do You Choose The Right Model?

It depends on what you want your partner to do and how much control you need to keep. A practical way to decide is to map the sales journey from first lead through to renewal, then decide who should own each step.

Ask yourself:

• Do you need price control? If yes, agency may be safer than distribution.
• Do you want the partner to fund inventory? If yes, distribution may work better.
• Do you want direct access to customers? If yes, agency or referral may be a better fit.
• Do customers need ongoing support from you? If yes, avoid hiding behind a distributor unless the support process is clear.
• Is your product highly regulated or claim-sensitive? If yes, keep tight control over scripts, marketing and approvals.
• Are you offering exclusivity? If yes, tie it to clear sales targets and review rights.

Exclusive arrangements can be valuable, but they can also lock you into the wrong partner. If you give exclusivity, consider a probation period, minimum sales targets, territory carve-outs, online sales rules and a right to convert exclusivity to non-exclusivity if targets aren't met.

Also think about your growth plan. If you want to raise capital, enter new markets or onboard several partners, clean channel contracts help investors and future partners understand how revenue is generated and what risks sit with your business.

The right answer may be a blended model. For example, you might use referral partners for early lead generation, sales agents for key accounts and distributors for regions where you don't want to manage fulfilment yourself.

Key Takeaways

• A distributor buys from you and resells in its own name. A sales agent usually sells for you and earns commission.
• Agency usually gives you more control over pricing, customer relationships and brand promises.
• Distribution can shift more stock, credit and sales risk to the partner, but you may lose direct customer access.
• Fair Trading Act risk depends on who makes claims to customers and what materials you provide or approve.
• Reseller and channel partner agreements should clearly state the partner's role, especially for software, subscriptions and brand licensing.
• Your agreement should cover payment, exclusivity, customer ownership, IP, privacy, compliance and exit rights.

If you'd like help with choosing the right partner model, preparing your distributor or sales agency agreement, or tightening your channel partner terms, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.