Selling through others, and being someone else's third party

Most of this section treats outside businesses as your third parties. This page turns it around. To your customers, you are the third party, a supplier they assess, audit and penalize.

To reach customers, you often sell through other third parties: manufacturer reps, buying groups, marketplaces, retailers who have you drop ship and procurement networks your customers buy through. Each channel adds rules and fees that your ERP has to follow, and each customer relationship now comes with a vendor risk review you should be ready for.

The channels at a glance

Each channel gives you something and takes something back in fees or rules.

Channel	Who the third party is	What they give you	What they take or require
Manufacturer reps	Independent sales agencies selling your lines (or selling a manufacturer's line through you)	Coverage in territories you cannot staff	Commission, territory rules, account protection
Buying groups and co-ops	Associations of independent distributors that negotiate as one	Better supplier programs, rebates, shared services	Membership fees, rebate sharing, program compliance
B2B and B2C marketplaces	Online platforms where you list products	Reach and demand you did not create	Commission and fees, listing rules, performance standards, seller verification
Drop ship for retailers	A retailer sells your products and you ship to its customer	Volume without your own consumer marketing	Strict vendor compliance manuals and chargebacks
Punchout and e-procurement	Your customer's procurement system or network	Being on the approved buying path for large customers	Catalog maintenance, EDI or cXML integration, network fees

Manufacturer reps and commission agreements

Reps sell on commission, usually a percentage of invoiced or paid sales in a territory. The agreement matters more than the rate, so settle these terms in writing.

Term	What to settle
Territory and accounts	Geography, named house accounts excluded, how new accounts are assigned
Commission basis	Invoiced or collected sales, net of returns, freight and rebates, or gross
Split commissions	How credit is shared when a customer is specified in one territory and ships in another
Timing	When commission is earned and paid, and whether it is clawed back on returns or bad debt
Termination	Notice period and commission on orders after termination (some states have sales representative statutes that set payment deadlines)

In an invented case, a rep earns 5% on $400,000 of annual invoiced sales in its territory, or $20,000. If the agreement pays on invoiced sales and $30,000 of that is later returned, the rep has been paid $1,500 on sales you never kept unless the agreement allows a clawback.

In the ERP, commission depends on clean territory assignment on the customer or ship-to, a salesperson or rep code on every order line and a report that ties commission to invoice and return lines. Build that report before the first commission statement, not after the first dispute.

Buying groups and co-ops

A buying group pools independent distributors' purchasing to negotiate better terms and rebates from suppliers. Many also offer shared marketing, training, private label lines and data services.

• Know which purchases count. Suppliers often pay group rebates only on purchases from preferred vendors, reported in a set format by a deadline.
• Report on time and accurately. Your purchase data goes to the group, which reports to suppliers. Late or wrong reporting loses rebates.
• Accrue group rebates like any other. Vendor rebates and special pricing covers the accounting.
• Read the data terms. The group sees your purchasing by supplier. Know what it shares, with whom and in what form.

Group purchasing and pricing can touch antitrust law. The FTC explains that the Robinson-Patman Act can apply when a seller charges competing buyers different prices for the same commodity, or grants allowances unevenly. Several legal tests apply (FTC Guide to Antitrust Laws, retrieved 2026-09-28). Supplier programs for groups are usually built with that in mind, but questions about it go to counsel, not to the group's sales rep.

Marketplaces

Selling on a B2B or consumer marketplace means the platform sets the rules: listing standards, shipping speed, return policy, fees and performance scores that can suspend your account.

Cost or rule	What to model
Referral or commission fee	A percentage of the item price, often varying by category
Fulfillment fees	If the platform stores and ships for you
Advertising	Paid placement often needed for visibility
Returns	The marketplace's return policy, which may be more generous than yours
Performance standards	Late shipment, cancellation and defect rates that can suspend selling
Seller verification	Identity, bank and tax information the platform must collect

Take an invented $100 item. It carries a 15% referral fee ($15), $8 of platform fulfillment, $5 of advertising per sale on average and a 6% return rate costing about $3 per sale. That is $31 of channel cost before product cost, so the item needs a gross margin above 31% to break even on the channel. Pricing and margin covers setting channel prices.

For consumer marketplaces in the U.S., the INFORM Consumers Act requires online marketplaces to collect, verify and in some cases disclose information about high-volume third-party sellers. Those are generally sellers with 200 or more sales of new or unused consumer products and $5,000 or more in gross revenue on the platform. Both counts are over a continuous 12-month period within the last 24 months (FTC, retrieved 2026-09-28). If you meet that threshold, expect the platform to ask for bank, tax and contact details and to verify them periodically.

Drop ship for retailers

In drop ship, a retailer sells your product and you ship directly to its customer, usually in the retailer's packaging style and with its packing slip. Retailers run this through a vendor compliance manual: a rulebook for EDI documents, ship windows, labels, packing slips, carriers and returns. Breaking a rule triggers a chargeback, a deduction from your invoice payment. The table lists common causes and how to prevent them.

Common chargeback cause	Prevention in the ERP and warehouse
Late or missing ship notice (EDI 856)	Send the 856 automatically on shipment confirm, and monitor the EDI queue daily
Ship notice does not match the shipment	Build the 856 from scanned cartons
Shipped outside the ship window	Order due dates and cancel dates loaded from the retailer's purchase order (850) and visible to the warehouse
Wrong label or packing slip	Retailer-specific label and slip templates, tested with the retailer before go-live
Wrong carrier or service	Carrier routing rules by retailer on the ship-to
Invoice errors	Invoice (810) generated from shipped quantities and PO prices

With invented numbers, suppose a retailer charges 3% of invoice value for a late ship notice. A distributor ships $50,000 in a month with every 856 late because the EDI job runs overnight. The chargebacks are $1,500 for the month. Moving the job to run on shipment confirm costs less than one month of penalties.

Track chargebacks by retailer and reason code in your ERP. Dispute the ones that are wrong within the retailer's deadline, and fix the process behind the ones that are right.

Returns from drop ship customers often flow through the retailer first, so agree how RMAs, credits and returned goods are handled. See Returns and RMAs. The EDI setup is covered in EDI for distributors.

Punchout and e-procurement

Large customers often buy through a procurement system. With punchout, a buyer clicks from their system into your web catalog and shops with their negotiated prices. The cart returns to their system for approval, which then sends you a purchase order. cXML is a common protocol for punchout, and cXML.org describes it as covering catalog content, punchout, orders, confirmations, ship notices and invoices (retrieved 2026-09-28). Other customers want a static catalog file loaded into their system, or EDI.

• Keep customer-specific pricing in the ERP. The punchout catalog and the order must show the same price, or invoices get rejected.
• Map units of measure and part numbers. Customer part numbers and units must translate cleanly both ways.
• Accept the order automatically, with validation. Orders from procurement systems should arrive in the ERP without re-keying, and flag price or item mismatches.
• Send confirmations, ship notices and invoices electronically if required. Many procurement networks reject paper invoices.
• Know the network fees. Some procurement networks charge suppliers per transaction or by volume.

Being assessed by your customers' vendor risk programs

As your customers mature their third-party risk programs, you will receive security questionnaires, insurance requests and contract clauses. Answering each one from scratch takes days. A prepared package turns it into hours.

What goes in your security package

A complete package holds these items.

Item	What it is	Notes
Security overview	A two to four page summary of how you protect systems and data	Written for a buyer to read
Key policies	Information security, access control, incident response, backup and recovery, acceptable use	Share summaries freely, with full policies under NDA
Insurance certificates	General liability, cyber liability, product liability, auto, workers compensation	Keep current certificates ready from your broker
Independent report, if you have one	A SOC 2 report or similar	Shared under NDA
Standard questionnaire answers	A completed industry questionnaire such as the Shared Assessments SIG or the CSA CAIQ	Send it in place of, or alongside, the customer's own form
Business continuity summary	How you keep shipping if a site or system is down	Customers care most about supply continuity
Your own third-party list	Critical providers that touch customer data (ERP host, email, EDI network)	Customers ask about your fourth parties
Compliance attestations	Conflict minerals, product safety, country of origin, sustainability, as your industry requires	Often the bigger burden for distributors than security

SOC reports

A SOC report is an independent CPA's report on a service organization's controls. SOC 2 reports address security, availability, processing integrity, confidentiality or privacy (AICPA and CIMA, retrieved 2026-09-28). Most distributors do not need one. A SOC 2 examination is a significant cost and makes sense mainly when customers repeatedly require it. Until then, a well-answered standard questionnaire and good policies are usually enough.

Standard questionnaires

Shared Assessments describes the SIG as a standardized vendor questionnaire that a vendor can complete once and use proactively instead of filling in many proprietary forms. The Cloud Security Alliance publishes the CAIQ as a self-assessment for cloud providers (both retrieved 2026-09-28). Filling in one standard questionnaire first gives you the answers for most customer forms.

Keep the package ready

Five steps turn the package into a routine.

1. Name an owner. One person collects questionnaires, answers them from the library and routes the hard questions.

2. Build the answer library. Complete one standard questionnaire honestly. Store the answers where sales and IT can find them.

3. Close the easy gaps. Multifactor authentication, tested backups, an incident response plan and access reviews answer a large share of questions.

4. Keep documents current. Update insurance certificates at renewal and policies yearly.

5. Answer honestly. A "no, with a plan and date" is better than a "yes" your customer can later prove false, which can become a contract breach.

Not legal advice

Rep agreements, buying group terms, marketplace contracts, vendor compliance manuals, antitrust questions and security representations in customer contracts are legal commitments. Have counsel review them, and never sign security clauses your operations cannot meet.

Questions to ask before you join a channel

1. What will the channel cost, all in: commissions, fees, advertising, chargebacks, returns and integration?
2. What rules does it impose, and can our ERP and warehouse follow them automatically?
3. Who owns the customer relationship and the customer data?
4. How are disputes handled: commissions, chargebacks, suspended listings?
5. What happens when we leave, and what do we owe?

Red flags

These signs mean a channel or a customer review is running without control.

• A compliance manual you have not read, signed as part of a vendor agreement.
• Chargebacks netted from payments with no reason detail.
• Commission paid on gross sales with no clawback for returns.
• A marketplace that is your largest customer and can suspend you without notice.
• Security questionnaires answered by sales, without IT and without a record of the answers.

Cost your largest channel first

Pick your largest channel or customer program and put a number on its real cost for the last year: fees, commissions, chargebacks, returns and the staff time to comply. Then build your security package once, so the next vendor risk questionnaire is a matter of sending documents you already have.