How To Make Money Online: The Manufacturer (Direct) Business Model

The Manufacturer Direct Business Model entails a manufacturer selling its products directly to the consumer. This business model stems from the evolution of e-commerce.  The ability to sell directly from a website has been taken advantage of by many manufacturers who are now skipping the process of going to a retail outlet to sell to customers, instead of selling directly to customers by setting up an online store.

The business model is based on the efficacy of the manufacturer being able to sell directly to the customer while removing the middleman; the retailer. This shortens the distribution channel.

The manufacturer direct business model has several advantages. Besides allowing a manufacturer to skip over a retailer, advantages to the direct model include lower distribution costs since products do not need to be shipped to a retail location first. This leads manufacturers to allow for better pricing. Another advantage of the direct manufacturer business model is the unique direct customer relationship, which previously lacked. It also allows manufacturers to gain inputs and feedback from customers directly as opposed to relying on the retailer discussing how the consumer was reacting to a product.

However, there are disadvantages to the direct model. The manufacturer will now have to set up an online store, which cost money. The manufacturer will also have to market the online store and deal with SEO, social media, and other marketing efforts to make sure that the website is fully functional and marketed correctly. Another disadvantage of the manufacturer direct model maybe that the consumer is accustomed to buying the product on credits, and the manufacturer may have to offer credit terms rather than sell out right as it has done in the past to retailers.

When speaking of the direct manufacturer business model, the reference company seems to be Dell incorporated. Prior to the innovations of Dell incorporated, computer manufacturers relied on retail outlets to sell their computers and hardware. Dell incorporated allowed customers to shop for computers directly from their website, adding customization options to purchases. Bypassing retailers allowed Dell incorporated to keep the Profits otherwise lost by wholesaling to retailers.

The manufacturer direct business model can be used for all types of products. A manufacturer can choose to sell the product out right allowing someone to purchase the item on their webpage. A manufacturer can also least goods or rent goods on their website. Some developers or manufacturers of software programs allow for licenses on their websites.

In short the direct business model by the manufacturer is selling a product directly to the consumer, while skipping the retail portion of the distribution process.

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Author: Nicholas Coriano

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