Industry buy is continuously evolving
According to Merriam-Webster, the definition of progress as an intransitive verb returns in two main entries:
- to move forward/proceed
- to develop to a higher, better, or more advanced stage
When the world was bigger, working with wholesalers was a necessity. To connect with clients, manufacturers needed a substantial, complex infrastructure, hard to obtain and even harder to maintain.
Using a mediator was often the only financially viable way to introduce products to target groups. Wholesalers were the linking solution, with human resources, a support system, and often a retail space.
Along with the broadband internet came the expansion of e-commerce. Widespread online retail gradually changed the customers’ perception of the trading chain, including relationships between manufacturers and wholesalers.
Digitalization led to shifting towards a customer-centric business model where the distributor role is no longer inevitable.
Manufacturers keep adopting the B2C model in order to lower expenses, improve margins and enhance customers’ user experience.
This approach leads to broader expansion and more purchasing options with diverse benefits for the clients, which returns in stronger relations and more rooted brand loyalty.
Buying directly from manufacturers is an advanced stage of retail commerce, in other words: progress.
Retail purchasing vs buying directly from manufacturers
Retail purchasing and direct purchasing are two different categories.
The first option implies obtaining merchandise through retail outlets and/or from wholesalers.
Direct purchasing means trading directly with manufacturers. Both solutions come with pros and cons, which depend on several conditions, including the type of merchandise.
What is retail purchasing?
Retail items can pass through one or more mediators before reaching the customer. This supply chain is based on connections between wholesalers and distributors, where each of them typically adds to the – initially lower – base cost.
At the same time, retail providers can give consumers the benefit of broader item selection based on parameters such as quality, price, and style.
Retail shopping may offer a more personalized experience, allowing customers to compare products and search for alternatives prior to making a decision.
Purchasing goods from wholesalers and retailers also eliminates shipping and other related costs.
What is direct buying?
Buying directly from manufacturers means bypassing the whole supply chain, thus eliminating additional costs that add up between intermediaries.
It’s a more budget-friendly alternative, but consumers typically have fewer options to select from.
In the old model, manufacturers often made only a fraction of the profit, compared to wholesalers’ margins. They also needed the validation of an established retailer to get recognized and drive sales.
Elimination of intermediaries brought a significant advantage of direct buying – decreased initial price. Still, a customer needs to calculate with everything from transport, through warehouse handling and packaging, to retail display and marketing.
When to use wholesalers?
Purchasing directly from manufacturers features a surplus of advantages; however, in certain instances, it’s still more efficient to employ a wholesaler and take advantage of existing infrastructure.
- When neither manufacturer nor customer possesses sufficient infrastructure and/or management expertise. In such a case, difficulties might overpass the advantages of a lower initial price.
- When the manufacturer’s trade model is built on high volume bulks, the retailer can’t sell within a reasonable timeframe and/or have to be stored in an external warehouse with high storage costs.
- When merchandise delivery takes long and comes with increased expenses and duties.
- When wholesaler’s price is considerably lower than buying directly from manufacturers, due to higher volume discounts.
Buying directly from manufacturers is a convenient, budget-friendly solution for avoiding adding up additional costs between intermediaries. Retail shopping offers benefits of broader choice and more alternatives. Each prospect has its strong pros and cons regarding shipping, customs, and other related expenses.
Is it better to buy directly from manufacturers?
Buying directly from the manufacturer comes with benefits for both parties. Manufacturers can use a number of advantages from connecting directly with people who want their goods.
Apart from increasing profits, direct relations create stronger connections, a chance to provide an excellent user experience, and increased brand awareness.
Customers have the benefit of choice. They can get access to specific items that may or may not be available in stores, under privileged conditions.
Manufacturers can offer instant access to diverse inventories with authentic items, immediately available. That allows customers to compete in the broader market, including products that wholesalers did not find interesting to include in their – typically more mainstream and generic – offerings.
Location can have a substantial effect on the final price. According to Business 2 Community, the benefits of using a territorial sales representative heavily depend on the representative’s territory.
The customer is obliged to take the offer from the assigned representative, which sometimes results in a higher price. The real loser in this case is the company itself.
For that very reason, many manufacturers now turn to the establishment of their own branches overseas, as a functional solution that also cuts both shipment and customs costs.
For instance, buying chemical ingredients or powder detergent from China – directly or through a wholesaler – is obviously a convenient option for clients from Saudi Arabia, the United Arab Emirates, or even Jordan.
However, a buyer from Kenya may also be surprised to find more benefits in purchasing directly from the Chinese manufacturer over, using its branches in Angola, Tanzania, or Ghana, or a mediator who ships from India or Malaysia.
The local infrastructure and traffic conditions can significantly raise the price of inland shipping and make it less economical than ordering from overseas.
Online retail possibilities have significantly simplified the direct purchasing process, from finding the right manufacturer to all communication levels.
When considering buying directly from the manufacturer, it’s good to ensure that they possess sufficient experience, followed by appropriate infrastructure and staff expertise. That will help to prevent or minimize possible issues with quality, reliability, transport, and deadlines.
Buying directly from manufacturers raises convenience factors while lowering stress levels
Although wholesalers can sometimes offer a better price, direct purchase often takes the higher ground in reliability, support, and control.
Flexible quantities and prices
Without using an external supply chain, savings are possible on retail space costs, transport, and wholesaler fees.
Costs of infrastructure, personnel, transportation, and storage can be shared between the contracting parties with a benefit for both. Manufacturers can also offer smaller quantities or extra large batches.
Transport and quality management
More often than not, manufacturers offer better shipping options, more control over transit, dealing with customs, and quality oversight in a direct deal.
Also, buying directly from the manufacturer ensures higher levels of authenticity.
Producers do not hold the same level of control with and without mediators. When a distributor is involved, the potential for quality issues and shipping delays increases.
Lead times are often more reliable when buying directly from the manufacturer, which means receiving the right products, in good condition, within the timeframe both sides have agreed on.
Directly purchasing from the manufacturer means having someone at the source. A person that is accountable to the client is responsible for providing its account adequate attention.
Direct communication leads to fewer mistakes and troubles. Also, it allows for faster information flow and more simple guidance from the manufacturer.
Direct communication helps to grow a steady, long-term relationship with multiple benefits for both parties.
Direct customer service
The manufacturer knows its product, and direct access provides a way to discuss the issues and ask questions, in order to obtain guidance and recommendations.
That helps to optimize product usage and maximize its benefits. Specific needs and concerns, such as modifications, customization, or service matters, can be quickly addressed and solved.
This arrangement also benefits the manufacturer – providing excellent customer service and overall user experience is a certain way to distinguish from the competition.
The key advantage of direct purchase is the manufacturer’s high level of control A to Z, from product quality to every segment of the supply chain.
Benefits of direct purchase from STPP Group
Buying directly from China has its own set of advantages, but there is always space for improvement. With our recently established, fully functional branch in Ethiopia, we have bypassed transport issues for local residents and ensured a steady supply of our branded products, with an accent on liquid detergents.
However, for other countries, buying from China and using ocean transport still remains the most efficient and cost-effective way of purchasing goods.
Our clients who wish to start their own production can buy directly from us and receive a full package of additional support in the process.
Buying directly from manufacturers is both time and cost-efficient, a reliable choice that can eliminate a whole set of issues in the process.
However, it’s essential to find a reliable partner, with its own stable network for supply & support.
At the same time, wholesalers still remain a valuable link in the chain, for all situations when a direct contract is not an option.