Factory direct
Encyclopedia
Factory direct is a term used to explain when a manufacturer sells directly to the end-user
of a product. Most products bought and sold by consumers are purchased through intermediaries and in many cases can include two tiers made up of distributors and reseller
s.
Each selling tier adds cost to the product. While many manufactures have no ability to service and support end-users and thus use distribution channels, increasingly the Internet
and eCommerce capabilities have increased the number of manufacturers who sell factory direct.
There are two common factory direct channel strategies. The first sets the price artificially high so as not to aggressively compete with the manufacturer's various channel partners. Thus, this is a very profitable channel but frequently misleads the customer who assumes the best price for a product comes when they purchase directly from the manufacturer. The second offers a "wholesale" price typical of what a reseller or distributor might pay.
Popularized by Dell Computers, and utilized by companies such as c3controls
, a factory direct channel is one where the price is typically lower than one would pay buying through a multi-tier distribution channel.
End-user
Economics and commerce define an end user as the person who uses a product. The end user or consumer may differ from the person who purchases the product...
of a product. Most products bought and sold by consumers are purchased through intermediaries and in many cases can include two tiers made up of distributors and reseller
Reseller
A reseller is a company or individual that purchases goods or services with the intention of reselling them rather than consuming or using them. This is usually done for profit...
s.
Each selling tier adds cost to the product. While many manufactures have no ability to service and support end-users and thus use distribution channels, increasingly the Internet
Internet
The Internet is a global system of interconnected computer networks that use the standard Internet protocol suite to serve billions of users worldwide...
and eCommerce capabilities have increased the number of manufacturers who sell factory direct.
There are two common factory direct channel strategies. The first sets the price artificially high so as not to aggressively compete with the manufacturer's various channel partners. Thus, this is a very profitable channel but frequently misleads the customer who assumes the best price for a product comes when they purchase directly from the manufacturer. The second offers a "wholesale" price typical of what a reseller or distributor might pay.
Popularized by Dell Computers, and utilized by companies such as c3controls
C3controls
c3controls , formerly known as Control Concepts Corporation, is a U.S. manufacturer of electric controls sold worldwide. The company manufactures its products to primarily be sold directly to its customers. Its line of products includes disconnect switches, contactors, overload relays, pilot...
, a factory direct channel is one where the price is typically lower than one would pay buying through a multi-tier distribution channel.