Is there a difference between factory direct and wholesale?
These two terms "factory direct" and "wholesale" seem to be used a lot in posts, and the question is: Is there any difference?
The short answer is that there is a massive difference. Let me explain.
Many suppliers offer "factory direct" prices, trying to give the impression that those prices are as low as it is possible to buy. Dropship suppliers often use that term on their websites, yet it is obvious that those suppliers are not manufacturers.
It is important to understand that, with some exceptions due to issues of surplus stock, overruns, slightly faulty goods, distress sales, or mistakes in manufacture such as wrong colors causing rejection by QC, the manufacturer can always provide the lowest price.
Wholesalers buy from manufacturers. Wholesalers are in business to make profits - therefore they add a margin to the price they pay the manufacturer. They then sell at that higher price to people who buy wholesale.
Manufacturers sell to wholesalers. The price they charge is the factory direct price, more correctly referred to as the ex-factory price. That, apart from exceptions noted above is the cheapest price available.
Those resellers who are not hung up on the idea of buying wholesale can also enjoy the huge profit margins enjoyed by wholesalers plus their own retail margin when they sell the goods to the public. The profit difference can be mind boggling.
Summing Up:
The short answer is that there is a massive difference. Let me explain.
Many suppliers offer "factory direct" prices, trying to give the impression that those prices are as low as it is possible to buy. Dropship suppliers often use that term on their websites, yet it is obvious that those suppliers are not manufacturers.
It is important to understand that, with some exceptions due to issues of surplus stock, overruns, slightly faulty goods, distress sales, or mistakes in manufacture such as wrong colors causing rejection by QC, the manufacturer can always provide the lowest price.
Wholesalers buy from manufacturers. Wholesalers are in business to make profits - therefore they add a margin to the price they pay the manufacturer. They then sell at that higher price to people who buy wholesale.
Manufacturers sell to wholesalers. The price they charge is the factory direct price, more correctly referred to as the ex-factory price. That, apart from exceptions noted above is the cheapest price available.
Those resellers who are not hung up on the idea of buying wholesale can also enjoy the huge profit margins enjoyed by wholesalers plus their own retail margin when they sell the goods to the public. The profit difference can be mind boggling.
Summing Up:
- Factory direct prices are the prices charged by the actual manufacturers.
- Wholesale prices are the much higher prices charged by wholesalers.
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