MOQ is short for Minimum Order Quantity. This term is often used by suppliers for online sellers to determine the least amount of product they are willing to supply or manufacture in a single order.
MOQ is set either on the cost or on units.
The suppliers are sometimes flexible to alter MOQ, depends on the negotiation between the supplier and retailer to maintain a long-term relationship with each other.
The suppliers set the quantity is not universal; it is based on supplier and business type.
What’s Use of Having a MOQ?
You may be thinking why do suppliers set a MOQ. It is only going to make business harder them as well the retailer negotiation with them.
What if I want a 90 unit and supplier do not agree to give me less than 100 units, a significant loss for both parties, right?
Yes, it seems somewhat like this from our perspective, but to understand this matter, we need to broaden our vision and get into the shoes of the suppliers.
MOQ is essential for suppliers that provide an assurance that the production cost would be recovered and the minimum profits will be generated.
When a supplier set the MOQ on the product, he has already done all the accounting, how much does the production cost and how much units he needs to sell to start making profits. Without MOQ, the suppliers cannot make profits selling fewer units could end up in loss.
Chinese manufacturer works at a very low-profit margin, sometimes just 3 or 4 percent for that they need a large volume to sell to make profits.
MOQ is sometimes based on the size of the factory that produces a minimum quantity in the single production run.
Another reason for setting up a MOQ is that the item is sometimes too cheap to be sold in a single unit.
Understand the importance of MOQ with an Example
A supplier has the raw material that produces 1000 units in one production, and you just want 500 units, then the suppliers waste its other 500 units.
The margin is also very let’s say it costs the supplier to $70 in the production of 1000 units and he earns $100 in selling total units in wholesale, so he needs to sell all at once to get profits quickly and keep the cash flow running. Otherwise, he has to wait for months to reach the break-even.
The Minimum Order Quantity ensures that a supplier does not result in losses.
Is the Minimum Order Quantity Cannot be Changed?
MOQ helps the supplier to earn minimum profits, but suppliers are very cool in alter the MOQs for special clients and to become a special one for the supplier you need to kick off an engaging conversation to come up with a win-win situation for both parties.
To discuss a MOQ rate with the supplier a simple email. Just get the latest rates from the supplier.
And just need to write your quantity requirement and wait for the supplier to reply, so you can have a detail conversation to make them understand with your need.
As I have mentioned earlier, MOQ is not universal it varies from suppliers to supplier you are bad in negotiations or could not break the ice in the conversation, you can surf different platforms where you might get a supplier with a preferable MOQ. Some suppliers set the MOQ in hundreds or even thousands (depends on the product) while some set it in tens.
It is a very diverse market all you need is the dedication in searching for the supplier that is best for your business.
As you can tell, this is a pretty diverse area. You’ll need to dedicate yourself to finding a supplier that produces the number of goods you require, at a price you can afford.
3 Hacks to Negotiate MOQ
Here are some tactics that you can use to negotiate the minimum order quantity.
Ask Them for Sample – Show yourself as First Time buyer and ask them for samples that you need to test the market and the products. This may increase the cost per piece but as long as it is not a burden on your finance, it is totally worth it.
Look Out for That Does Not Require Manufacturing – Keeping the inventory is the primary issue for most of the Chinese suppliers that are the reason why most of the manufacturers only manufacture a product when it is required which is the also lead to setting up a MOQ. But, there are bulks of products that are already produced and could not proceed for some reason, so you can get those products by having a negotiation with the supplier without a fixed MOQ.
Order in Group – Sometimes having a competitor is a blessing. You can contact the retailer who is selling the same product as you are and you can get the product together from the manufacturer and divided the cost. This does not have to be your competitors it could be anyone who needs the same items, although you need to work on the schedule.
See You Again
I hope the concept, existence and the importance of the MOQ must have clear to your now. Well, in case you still have some doubts about it feel free to tell us in the comments below or you can join 4000+ ecommerce entrepreneur community to share your thoughts.