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Monday, June 15, 2009

Lesson 7 - Affiliates and Licensing

This is a response to somebody who asked about licensing laws and where coffee affiliates stand - I've added to this article as it was getting a big 'drawn out' on their comment page! :-)

Disclaimer: this is just my opinion (based on using various ecommerce methods in UK and USA - like International eBay sales, dropshipping accounts, Affiliate and Distribution/Reseller accounts) and you are best checking with a legal adviser, small business advice center or local government for your own County or States laws for professional advise.

Re. licensing - from my understanding a person that promotes an Affiliate program isn't 'directly' selling so doesn't need a license to promote a product or service or using online or off-line 'networking' to spread the word about it.

- An Affiliate lets people know about a product or service available to buy *at a merchants website* (a merchant is responsible for complying with the laws/licenses etc. that allow certain goods to be resold in a particular country etc.).

If you brought packs of the product (as stock), at wholesale then resold them at retail price directly to the public, your County or State would have licensing laws you'd need to follow, which might be covered in the distribution agreement/ license / terms from the company/ merchant you get on signing up.

However - with Affiliate programs you don't usually stock/directly resell the product you recommend, an Affiliate has a different role to a Reseller - some programs offer a mixture of both.

Offering a low cost/free sample for potential customers to try ( from your own personal supply - if you want) then *directing them to the website* (via flyer/ business card etc.) so they can order the full amount, and /or getting them signed up to the affiliate program has greater advantages in some ways.

- a website reselling example -

I can resell website hosting setting by own price, taking the money (setting up a paypal button), setting up the domain name for the client, setting up their e-mail account and / or manging their whole site for them (if they pay me!) or I can direct people to my webhosting providers affilite program and earn a commission that way.

If you had local people that wanted to buy direct from you rather than the merchant, you could 'dropship' the product to them i.e they go to your own .com website, buy the product out of the shopping cart - when you receive their money you order from the merchant and they ship the product, you keep the difference between wholesale and retail price - that isn't direct selling either as far as I know - as they are getting the goods direct from the merchant rather than yourself - however if the customer wants a refund they will have to send the product back to you (in some cases) although some dropshippers will deal with refunds from your customers - it varies

The thing to remember - is *an Affiliate recommends* they promote and guide a potential customer to a merchant, it's the merchant that makes the direct sale, financial transaction and delivers the product.

On a scale of 1 to 5 (5 being the most likely to need a license I'd score it like this

1. customer
2. affiliate
3. dropshipper
4. distributor / reseller
5. Merchant / Wholesaler

Note: if you are a distributor (or 'offical reseller') you could choose not to 'directly' sell as such (for example if but use an affiliate or dropship method - many websites offer to send the product to another address than on the credit card during the checkout process, when it asks where you want the package shipped to you add the customers address, signed for/insured/tracked delivery is best then you have proof the item was delivered.


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