How distributors manage ‘ship and debit’ rebate agreements
What are ‘ship and debit’ agreements?
Ship and debit is the term for an agreement between suppliers and distributors where specific products are distributed (shipped) to customers at a lower price than usual. The difference in price is then claimed (debited) from the supplier to protect distributor margins.
A ship and debit agreement enables suppliers to sell their goods at a uniform price, while distributors can react to local market conditions and lower the price they use to sell to customers without the risk of losing their profit margin. Once the sale is made, distributors can debit the supplier who usually credit the amount back as a rebate.
Ship and debit is widely used in the technology and electrical supplies sector. If an OEM sells laptops at $1000 and has agreed a $100 rebate for every unit sold, the distributor will pay $1000 per laptop to bring them into stock, and for every unit shipped, they will debit the OEM $100. In other words, they will claim $100 back from their supplier.