Factory direct purchasing allows consumers to buy goods directly from manufacturers, bypassing traditional sales systems and potentially saving money. However, prices may not always be cheaper and consumers should investigate before buying. Some manufacturers offer factory direct sales showcases with surplus or older products, but consumers should still be aware of return policies.
When a consumer buys goods directly from manufacturing, this is referred to as factory direct purchase or outright purchasing. The factory direct option was facilitated in the 1990s by the development of e-commerce and catalog distribution. Major factories, such as Dell Computer, have begun marketing products directly to their marketplace, rather than going through a traditional tiered sales system. Some consumers prefer to buy goods directly from the factory, as they tend to be cheaper.
Traditionally, a manufacturer produces items and sells them to a distributor. The distributor, in turn, sells the product to the resellers. Each step in the chain increases the final cost of the item and also acts as insurance for the previous step. For example, a factory can confidently invest a large amount of money in the development and production of a product, because it knows that distributors will buy it, allowing the factory to recoup its costs immediately. Similarly, a distributor sells to a retailer, covering their expenses, leaving the retailer to sell the product to consumers.
Some wholesale distributors skip the resellers, selling directly to consumers from their warehouses. This is known as wholesaling and can be a great way to get a good deal on products, if consumers are willing to visit wholesale warehouses and look for bargains. Most discounters do this by purchasing products directly from the manufacturer and offering them to consumers at a cheaper price than retail. Most of these businesses also have online storefronts, but actually visiting the warehouse is more likely to lead to a deal, as the stock is constantly changing.
When a consumer buys a product directly from a factory, there is an assumption that it will be cheaper, because it hasn’t gone through the retail chain. In reality this is not always the case. In the case of a manufacturer specializing in factory direct sales, the products will be kept at a cheap and affordable price. But if the manufacturer also sells to distributors and resellers, prices can be artificially inflated so that the manufacturer doesn’t compete with the companies that retail the product. Some investigation should be undertaken before buying factory direct for this reason.
In many cases, consumers don’t actually visit the manufacturer’s site to purchase directly from the factory, but instead order through the phone, mail, or Internet catalogs. This means that the consumer has less control over the quality of the product, and it is advisable to understand the return policy on factory direct purchases before making them. Some manufacturers are susceptible to returns on products that do not meet the customer’s requirements, whilst others will not accept returns or will not offer full credit unless the goods are clearly damaged.
In other cases, a manufacturer will set up a factory direct sales showcase. These outlets often feature surplus and older products, although they are in perfectly usable condition. Unlike a retail store, an outlet won’t necessarily provide a wide variety of colors, sizes, or designs, as the goal is to move available merchandise, rather than create an assortment of stock for consumers to choose from. As with mail order, consumers should take note of return policies.
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