Direct From The Factory?

We get email here all the time asking us why Internet Retailers shouldn't just buy the products they sell, directly from the Factory at wholesale.

People write and say, "I'd rather go right to the Manufacturer and buy from them. Why should I go through a Wholesale Supplier?

One gentleman wrote to us yesterday and said, "I buy things online (as a consumer) directly from Sony all the time. Why shouldn't I be able to buy directly from Sony at wholesale (as a Retailer)?"

This has to do with a common misconception about manufacturers, folks. Most people are (understandably) of the opinion that a manufacturer would jump at the chance to sell their products to you and me (online Retailers) at wholesale. You'd think they would see it as a way to sell more products.

Well, that's not the way it works, for many good reasons. To the gentleman who asked about Sony, yes, it DOES seem like he's buying products directly from Sony as a consumer, when he goes to their web site. However, that's actually something of an illusion.

You see, manufacturers have their hands quite full just manufacturing their products. That's a very full-time business just in itself.

Let's try a little role-playing here. Let's say that you have invented a revolutionary new Eyebrow Plucker. This little machine is really cool. You set it for the shape you want your eyebrows to be, slap it on your forehead, and press a button. Your invention does all the plucking for both eyebrows at once, and your eyebrows are instantly plucked to the shape you want. Of course, it's a little painful, and one of the settings still leaves your eyebrows looking as if you're suffering from a bit of constipation, but you're working those problems out. You rent a small building, and start manufacturing your new Eyebrow Plucker.

In order to do that, you have to go through the lengthy legal process of Patenting your invention. Then you have to find suppliers of raw blocks of surgical-grade steel. You have to buy and set up machines that will form and stamp out the parts of your Eyebrow Plucker. You have to set up the logistics of creating and manufacturing the circuit board that goes into it. You have to create an assembly line process, work out quality control, and then create some plastic Test Foreheads that you can test your invention on before boxing each one up. But wait! You can't box them up without going to a graphic artist who's going to create a logo for you, then build the color screening that will be printed on your boxes. Of course, you need the boxes too, so you have to contact a Packaging Expert who will design your box and internal packaging, then have a box manufacturer die-cut the custom boxes and packaging for you.

That's just a small sample. There are a hundred other details a manufacturer must work out in order to create a product and turn it out on an assembly line, ready to sell.

One night, you're coming home tired and frustrated from working so hard on your manufacturing process. You have a bruise on the right side of your forehead, and half your right eyebrow is missing. As you get out of the car, you run into your neighbor, Mike. Mike wonders why you look so bedraggled. You tell him about your invention, and all the work you're doing to manufacture the product. Then you tell him that you're even more worried about how to get the product to your potential consumers.

Mike's face lights up, and he says, "Hey, I own a Wholesale Supply company. I sell manufactured products to thousands of large chain stores all across the country. I can buy your Eyebrow Pluckers from you in large quantities, and distribute them for you, and you won't have to worry about that part of it at all!"

At this point, you can answer Mike in one of two ways:

Answer Number One:

"Gee, Mike, I don't know. I think I'd rather spend years trying to create business relationships with thousands of retail stores. Then I'd like to pay for another warehouse where I can store my product, and lease trucks or contract with a freight company in order to deliver the product. I'd also just love to pay a fortune for warehouse employees, a sales force, a sales office, and basically spend a great deal of time re-inventing everything that you've already had set up and running for years, in your wholesale distribution business!"

Answer Number Two:

"Hey, Mike, that sounds great! You already have the warehouses, the delivery mechanisms, the sales force and contacts with thousands of retail stores. I can simply sell my product to you by the truckload, and you can sell it to the world. I can concentrate on my manufacturing operation, and leave the wholesale distribution headaches to you. I think we have a deal!"

Do you see where we're going here? Product manufacturers have enough to do without re-inventing an entire Wholesale Distribution system that already exists. Manufacturers would have to be crazy to want to take on that kind of additional load! They can sell their products, in huge quantities, to existing Wholesale Distributors, and never have to worry about the distribution process at all.

That's why you will probably never buy directly from a manufacturer. If you ever do, it will most likely be from a very small company that either does not make enough product, or is too small in the marketplace, to attract the attention of existing Wholesale Distributors.

Wholesale Suppliers are the place everybody buys from, folks; even the big guys.

I said earlier that the person who wrote to me about buying consumer goods directly from Sony was seeing an illusion. That's true. It's a harmless illusion, though, and isn't meant to fool anybody on purpose. When he goes to an official Sony web site and buys consumer goods "directly from Sony", that's not really what he's doing. He's buying from an existing wholesale/retail supply company that Sony either happens to own, or has a contract with. That's why they can use Sony's name. It's a completely separate operation from the "manufacturer". This wholesale/retail operation will be a separate "unit" of the Sony Corp. It will have it's own offices, staff, and delivery system, probably very far away from Sony's manufacturing facilities.

So, why can't you go directly to a manufacturer and buy wholesale products to sell on the Internet? Because it's just not cost-effective for a manufacturer to even want to do that.

About the Author: Chris Malta, Worldwide Brands, Inc.

Chris Malta is a Microsoft Certified Systems Engineer. He has worked with computer Systems for 19 years. He's been involved in eCommerce systems, networking and site design for more than 8 years. He's taught college-level computer courses in Western NY. He founded Worldwide Brands, Inc., creators of The Drop Ship Source Directory, The Light Bulk Wholesale Directory and The Market Research Wizard. Chris's Business Articles and other materials have been published in several languages all around the world.