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What is Factory Direct?

Mary McMahon
Updated May 17, 2024
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When a consumer purchases goods directly from the manufacture, it is referred to as buying factory direct, or making a direct buy. The factory direct option was facilitated in the 1990s by the development of e-commerce and through distribution of catalogs. Major factories, like Dell Computer, started marketing products directly to their market, rather than going through a traditional tiered sale system. Some consumers prefer to buy goods factory direct, as they tend to be less expensive.

Traditionally, a manufacturer makes items and sells them to a distributor. The distributor, in turn, sells the product to retailers. Each step in the chain increases the end cost of the item, and it also serves as insurance for the step before. For example, a factory can confidently invest a great deal of money in developing and manufacturing a product, because it knows that distributors will purchase it, allowing the factory to recoup its costs immediately. Likewise, a distributor sells to a retailer, covering their expenses, leaving the retailer to sell the product to consumers.

Some wholesale distributors skip the retailers, selling directly to consumers from their warehouses. This is known as wholesaling, and it can be an excellent way to get a good deal on products, if consumers are willing to visit wholesale warehouses and look for bargains. Most discount stores operate in this fashion, purchasing products from the manufacturer directly and offering them to consumers at a price which is cheaper than retail. Most of these businesses also have online storefronts, but actually visiting the warehouse is more likely to yield a deal, as the stock changes constantly.

When a consumer buys a product directly from a factory, it is assumed that it will be cheaper, because it has not traveled through the retail chain. This is not actually always the case. In the instance of a manufacturer which specializes in factory direct sales, the products will be held at a cheap and affordable price. But if the manufacturer also sells to distributors and retailers, the prices may be artificially inflated so that the manufacturer is not competing with the companies which retail the product. Some investigation should be undertaken before buying factory direct for this reason.

In many cases, consumers do not actually go to the site of the manufacturer to buy factory direct, but order it through phone, mail, or Internet catalogs instead. 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 amenable to returns on products which do not meet customer needs, while others do not accept returns, or will not offer full credit unless the merchandise is clearly damaged.

In other cases, a manufacturer will set up a storefront for factory direct sales. These outlet stores often feature surplus and older products, although they are in perfectly usable condition. Unlike a retail store, an outlet store will not necessarily stock a wide variety of colors, sizes, or designs, as the focus is on moving available merchandise, rather than creating an assortment of stock for consumers to choose from. As with mail ordering, consumers should take note of return policies.

About Mechanics is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a About Mechanics researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments

By icecream17 — On Jan 24, 2011

Wow, I always thought that the factory direct prices were the lowest possible price.

I know that there are many factory direct furniture companies in North Carolina that allow you to order furniture directly from them.

Most of these companies are in High Point, North Carolina and they even offer tours of these companies.

Most of the furniture available is at least 65% off the retail price and they will offer you a quote via fax or email.

They also deliver nationwide which is also nice. I had a friend who purchase a dining room set that way and she not only saved a lot of money, but she said that the furniture was excellent quality.

They also offer interior design services if you need them. It is really worth looking into.

Mary McMahon

Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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