They actually buy up front. If you look at the bottom of http://www.espruino.com/Order there are some rates for purchases in larger quantities, and they just work off those.
I started off doing sale or return, but quite quickly it got popular enough that I didn't have to.
Adafruit are particularly good at keeping their markup low, and I think they make more money off extra stuff sold along with the boards.
However some other companies put large markups on the sale price - to the point where some might be making maybe 3x more money off each device sold than I am!
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