What is factory gate pricing?

The term factory gate pricing is defined as the pick-up price of finished goods sold by manufacturers to retailers or distributors. Factory gate prices do not include the cost of delivering products because the buyer collects the goods at the factory’s or supplier’s gate.

According to Logistics Bureau, large retailers or distributors with efficient transportation and warehousing systems who opt for factory gate pricing agreements benefit by consolidating product pickups from several local suppliers, thereby reducing the cost of transportation and insurance needed to transfer goods from suppliers' factories to their warehouses. The savings are then passed on to consumers via lower retail prices.