What Are the Differences Between a Merchandising Company & a Manufacturing Company?

The most significant difference between a manufacturing company and a merchandising business is that a manufacturer makes goods to sell and a merchandiser buys or acquires goods for resale. In developing a small business, it is critical to understand whether your strengths, available resources and environmental factors contribute to a manufacturing or merchandising setup.

Given their primary functions of either making or acquiring goods for resale, expertise is a core difference between manufacturing and merchandising. A successful manufacturing business features expertise in developing an operation that produces high-quality, efficient or high-value goods and then distributing them. A merchandiser owns strengths in acquiring goods, increasing their value and marketing them to buyers. A distributor buys items and then resells to retailers, consumers or business buyers. A retailer buys goods and then resells to consumers.

Manufacturers and merchandisers also have different roles in their interrelationship within a traditional distribution channel. The distribution or trade channel represents the flow of goods from manufacturer through distribution, retailer and on to the final customer. The manufacturer makes goods and traditionally sells them to the distributor or retailer. Wholesaling merchandisers are the traditional direct buyer of manufacturers, although retailers may buy directly from manufacturers as well.

Manufacturers typically use a combination of "push" and "pull" marketing strategies. Pull marketing occurs when the manufacturer promotes its brands to end customers. The idea it to create market demand and pull the products through the distribution process. Push marketing occurs when a manufacturer promotes goods directly to trade buyers, or merchandisers. This includes a mix of communicating benefits and offering trade incentives or discounts. Retailer merchandising businesses focus on promoting their company and product brands to targeted customers. They must attract customers to make sales.

For manufacturers, production inventory includes raw materials used in producing finished goods. Low costs and efficient use of raw inventory is key in manufacturing profitability. Once raw materials are converted, the manufacturer possesses a finished-goods inventory. A reseller buys finished goods and either holds its new inventory in a distribution center or in storage areas in stores. When floor inventory or merchandise grows low, stock is replenished by retail associates.