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MOQ Meaning: Everything You Need To Know About Minimum Order Quantity
By Rodney Laws | Ecommerce
By Rodney Laws | Ecommerce
When you’re looking for suppliers for your ecommerce business, one term that’s likely to come up is ‘MOQ’ or ‘minimum order quantity’. It can be a bit confusing if you’ve never heard the term before.
Knowing what MOQ means will help you find the right suppliers to work with and negotiate the best deal to suit your business.
In this article you’ll find everything you need to know about MOQ meaning, why they’re so important, the advantages and disadvantages, as well as how you can meet them.
MOQ stands for minimum order quantity, which refers to the smallest number of products or units that a supplier is willing to sell at one time. The MOQ is set by suppliers and manufacturers to ensure that any orders placed with them are big enough to cover production costs and ensure they make a profit.
The MOQ can vary hugely between different suppliers — some may require orders of 100,000 units or more, while others will only require you to order 100 units. The amount and the cost will depend on the product, the manufacturing process, where they’re based and a number of other factors.
Sometimes it is possible to negotiate with a supplier on their MOQ, but this will depend on their profit margins and whether they can guarantee they’ll still make money. For example, you might be able to get a lower MOQ if you agree to place future orders with them.
Not only do MOQs mean that the supplier or manufacturer covers their costs and makes a profit, but it’s also a way of ensuring that they find the right businesses to partner with. With a set MOQ, they can establish the scale of their business and the size of businesses that they can work well with.
Large businesses that require thousands of units on a regular basis need to find suppliers that can meet that demand. If a manufacturer’s MOQ is high, they’re going to have the materials and resources to produce enough products.
On the other hand, smaller businesses only need a few hundred units or less each time they order — so it’s important that they find a supplier that can work with those units and keep supplying a smaller amount on a regular basis.
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The main advantage of MOQs is that they are likely to give you the best price per unit or product. Because you’re buying in bulk, the manufacturer is usually offering a significant discount on the price it would cost for an individual product.
In most cases, the higher the number of units you buy, the lower the cost per unit will be — so if you’re definitely going to be able to sell something, you can maximise your profits by buying in bulk.
However, this does mean that you have to have the finances to cover the upfront costs of your products. For suppliers with a high MOQ, this could mean that you need thousands in cash to pay, which is sometimes difficult for new businesses. And if you can afford to buy large quantities, you need to be sure that you’ll be able to sell the products and make a profit.
Minimum order companies are especially difficult when you’re starting out as a retailer. If you find a supplier for the products you want but can’t meet their MOQ either because of the upfront cost or because you can’t store the inventory, then it’s often worth talking to them to find a way to make it work:
It’s always worth asking to establish if one of these is a viable option for you and your business. However, there are a few things you need to consider when negotiating.
It’s always important to remember that for most suppliers their MOQ is there for a reason — it’s the best price that they can produce those products at to run their business.
If you do manage to negotiate the minimum order quantity or price down, there’s a good chance that they’ll have to make the money back in another way. This could mean that they use cheaper materials that lower the quality of your product, or they try to make them more quickly, so there’s more likely to be problems or mistakes.
It can also damage your relationship with the supplier if you push too hard to get a better deal. They might agree to work with you this time but in future, they’ll be less likely to or they’ll prioritise other clients. It’s important to establish a good relationship with suppliers so that they’re willing to offer you good deals in the future and keep producing high-quality products.
Alternatively, you could try offering products to pre-order to your customers. This means that you can get the money from your customers before placing an order with the supplier so that you don’t have to front any of the costs involved.
However, this requires you to effectively promote your products. You need to make sure that your products are something shoppers are willing to pay in advance for and you also need to make it clear that they won’t receive the products straight away — it could be weeks or months before you’ve made enough sales to place the order with your supplier.
If the supplier you want to work with isn’t able to negotiate on their MOQ and you really can’t meet it, then there are plenty of other suppliers and manufacturers out there. Go back to Google and dig deeper for alternatives or use a supplier directory and find ones that will be able to work with your requirements.
There are a lot of suppliers that have a low MOQ or don’t have one at all. And you can also find wholesale products on sites like AliExpress, where you can purchase them as individual units. These costs might be slightly higher for each unit but it’s a more accessible way of sourcing your products as an entrepreneur or new business.
You could also try looking at other ecommerce businesses that are similar to you in size and in the same niche or selling the same type of products. Investigate which suppliers they use for their products and get in touch with them.
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If you’re just starting out and don’t have a lot of money to invest in your stock upfront, then you might be tempted to just pick the supplier with the lowest MOQ. However, there are a few other important factors to consider:
You’ll often have to find a balance between a supplier with an MOQ that fits your finances and capacity, but also provides you with good quality products, on time, that you can make a profit on.
MOQs are often one of the key deciding factors when it comes to choosing a supplier.
Consider all these points, and spend some time looking for suppliers that can meet your requirements, but don’t try to drive their MOQs down too far. Remember there are plenty of suppliers out there, so you will be able to find one that works for you.
