"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."
"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."
Taken from here - http://www.wisegeek.com/what-is-factory-direct.htm
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