- The Merchant of Record buys stock from the brand and resells it on the marketplace in its own name.
- The brand avoids setting up accounts and structures abroad and deals with a single partner.
- In return it gives up part of the margin and some control over the account.
- It works best for testing new countries or marketplaces with modest initial volumes.
Selling on a foreign marketplace looks simple until the practical questions arrive: who invoices the customer, who handles returns, do you need a VAT number in that country? The Merchant of Record is a model that answers these questions by putting a third party between the brand and the marketplace. Here we look at how it works, how it differs from other arrangements and when it really pays off.
Who the Merchant of Record is
The Merchant of Record (often shortened to MoR) is the party that formally sells to the end customer. It’s the one shown as the seller on the marketplace, issues invoices, collects payment, handles returns, refunds and customer service, and takes on the obligations tied to selling in that country.
On marketplaces it usually works like this:
- the brand sells the goods to the Merchant of Record, with a normal invoice;
- the Merchant of Record resells them on the marketplace in its own name;
- it runs the account, logistics, customer service and the admin side of sales;
- the brand focuses on product, marketing and strategic decisions.
For the brand the relationship is similar to working with a distributor, but with more transparency and coordination, because the channel is managed together.
Merchant of Record, consignment and agency: the differences
These models often get mixed up. What changes is who owns the stock, who sells to the customer and who carries the risk.
| Model | Who sells to the customer | Ownership of stock | Who runs operations |
|---|---|---|---|
| Merchant of Record | The MoR | The MoR’s, once bought from the brand | The MoR |
| Consignment | Whoever sells on the brand’s behalf | The brand’s until sold | Usually the seller |
| Agency | The brand, with its own account | The brand’s | The agency, on the brand’s behalf |
With an agency the brand remains the seller: it opens the account, holds the necessary registrations, collects payment and answers to the customer. The agency works on strategy, content, advertising and operations. With consignment the stock belongs to the brand until it’s sold, and the risk of unsold stock stays with the brand. With a Merchant of Record the stock is bought, and the MoR takes on the commercial and operational risk of selling on that channel.
The tax and contractual implications of each model should be checked with your own adviser: here we’re only describing how they work.
The advantages for a brand
- No accounts or structure to set up: the brand doesn’t need to open accounts on foreign marketplaces or handle the registrations and compliance needed to sell in that country. The MoR takes care of it.
- A single point of contact: instead of dealing with marketplaces, logistics, customer service and suppliers in several countries, the brand talks to one party.
- Faster time to market: if the MoR already has accounts, processes and logistics in place, you can go live in weeks rather than months.
- More predictable cash flow: the brand invoices the MoR on agreed terms, instead of waiting for marketplace payouts and dealing with deductions.
- Less internal workload: no foreign-language customer care, no returns to process, no complaints to chase.
The limits you should know
It isn’t a model for everyone. There are clear trade-offs:
- Margin: the MoR buys at a price that has to leave room to cover its costs and risks. The brand earns less per unit than by selling direct.
- Control: retail prices, promotions and advertising are decided together, but the account isn’t the brand’s. You need a clear agreement on who decides what.
- Data: sales and customer data go through the MoR. Agree which reports the brand receives and how often.
- Dependency: if the relationship ends, you have to manage the handover of the account, reviews and remaining stock.
That’s why the contract matters so much: transfer prices, minimum orders, stock management, reporting, term and exit should all be in writing from the start.
When it pays off
In the projects we run, the Merchant of Record works well in a few recurring situations:
- a brand wants to test a new country or marketplace without setting up a local structure;
- expected initial volumes don’t justify the cost of registrations, advisers and dedicated staff;
- the brand has no in-house team for customer service, returns and operations in a foreign language;
- it wants to establish itself on a channel (a Central and Eastern European marketplace, for example) quickly.
It makes less sense when the brand already has a set-up for selling direct, high and stable volumes, and wants full control of the account and the margin. In that case it’s often better to sell in its own name with an agency’s support, as described on the page about our Amazon Seller and Vendor services.
An example to make sense of the numbers
Example: a brand sells a product at 20 euros retail, excluding VAT. Selling direct on a foreign marketplace, after fees, logistics, advertising, returns and running costs it keeps, say, 6 euros per unit, but it also has fixed costs: advisers, translations, customer service, team time. With a Merchant of Record it might earn less per unit, but without most of those fixed costs.
At low volumes, the fixed costs of selling direct weigh heavily and the MoR often wins. At high and stable volumes, the per-unit margin of selling direct matters more again. The point is to run the numbers on realistic volumes, not hoped-for ones.
Questions to ask before signing
- Which marketplaces and countries does the MoR sell in, and with what track record?
- How is the transfer price set and how is it updated over time?
- Who decides retail prices and promotions?
- Which reports does the brand receive, and how often?
- Who pays for advertising and who manages it?
- How are slow-moving stock, returns and damaged products handled?
- What happens to the account and the stock if the relationship ends?
The first step
List the countries and marketplaces where you’d like to be present but aren’t today, and for each one estimate what it would cost you to launch direct: accounts, registrations, logistics, people. Compare that cost with the margin you’d leave to a Merchant of Record. If the second is lower, at least for the testing phase, the model deserves a closer look. You’ll find how we apply it on the page about our Merchant of Record service.
Frequently asked questions
What's the difference between a Merchant of Record and a distributor?
The logic is similar: both buy the goods and resell them. A Merchant of Record on marketplaces usually works more closely with the brand on pricing, content and advertising, and shares sales data. A traditional distributor often has more commercial independence.
With a Merchant of Record, does the brand need a VAT number in the foreign country?
Normally not, because it's the Merchant of Record that sells to the end customer and handles the obligations tied to selling in that country. Every situation should still be checked with your own tax adviser, depending on how the flow of goods is set up.
Does the brand lose control of its trademark on the marketplace?
Not necessarily. Brand registration, content, prices and promotions can be governed by the contract, with clear rules on who decides what. It's also important to define what happens to the account and the stock if the relationship ends.