If you’ve recently established an eCommerce business and you’re looking to get up-to-speed with industry standards, you should consider familiarizing yourself with MOQ.
But what exactly is MOQ and how can it help your business?
What is MOQ?
MOQ stands for Minimum Order Quantity. It is used to represent the minimum quantity of products a manufacturer is willing to produce, or that a wholesale supplier is willing to sell.
Suppliers usually convert MOQ into a minimum spending figure as a guideline for consumers, using MOQ calculations to work out the least a customer can spend for the transaction to be financially viable.
For example, there might be minimum order quantities when importing from China, which you’d have to factor into your decision to collaborate with international companies.
Why Do Suppliers Set a MOQ?
Most manufacturers/suppliers sell in bulk, meaning less profit per unit. By setting a MOQ, suppliers can cover the cost of production. The concept of MOQ is that if a company fulfils an order below this predetermined figure, it’ll be losing money.
Who Should You Purchase From?
Many bigger manufacturers that sell in bulk have an understandably high MOQ. With this being said, if you’re only looking to buy in the thousands or less, you should consider collaborating with wholesale suppliers.
These act as middlemen that usually operate using a lower MOQ, meaning they’ll cooperate with your smaller purchases. On the other hand, if you’re looking to buy in bulk, you can purchase directly from manufacturers at a lower price but a higher MOQ.
MOQ can be a restrictive factor for new businesses, where you can feel discouraged as you try to grow in competitive industries. MOQ can seem unfriendly since you’ll have fewer choices at your disposal, but it’s important to remember there will always be other options within your budget.
Once you’ve identified a profitable product line that will help your business grow steadily, you can work toward getting products from manufacturers at a lower price and higher MOQ. You’ll then be more competitive within your market.
Some Examples of MOQs
MOQ varies depending on the type of supplier in question, so let’s break down some typical examples to give you an idea of what to expect:
Many small businesses aspire to skip the middleman and buy directly from manufacturers, but this isn’t realistic because it’s hard to get a low MOQ at the lowest price. If you’re new to eCommerce and can’t take the risk of holding large inventory, your best bet will be a small factory, reliable wholesale supplier, or perhaps even a dropshipper.
Once you’re more established and in a position to take on more risk, you can consider purchasing from the same factory that suppliers do.
How to Negotiate a Lower MOQ With Suppliers
MOQ is more negotiable than you’d think, so here are some top practical tips you can use to achieve a win-win situation:
Communicate with Suppliers Frankly
Negotiate with intent, explaining your situation in a clear and upfront fashion. It’s important to be firm and to the point, because suppliers will appreciate concise communication that tackles your exact needs.
If you’re looking to import from China, it’s important to realise that most Chinese suppliers will be willing to decrease their MOQ. A great way to negotiate is by explaining it’s your first order and that you’d like to place a small order to test the market at a fraction of the MOQ in question.
They can only say no, but the chances are you’ll be able to negotiate something favourable, even if they come back with a counteroffer.
Communicate With Suppliers From Their Perspective
It can be difficult for suppliers to see things from your perspective, so it’s often beneficial to empathize with their predicament. A positive outcome is based on win-win cooperation, so it helps to talk about your desire to build a long-term relationship.
You can communicate in a way that’s understanding of supplier difficulties, which will also boost your reliability as you’ll seem like an industry authority. Openly explain your business model and situation, why you’re looking to buy this type of product, your business plan, advertisement budget, and so on.
By doing so, they can observe your professionalism and better understand your requirements.
Exert Pressure on Suppliers
You’ll need for your supplier to feel wanted, that they’re the best option available to you. This is a great way to get on good terms. However, it’s also important to let them know that there are other suppliers at your disposal. By introducing an element of competition, it will invoke urgency in the supplier to commit to a lower MOQ or risk losing your custom entirely.
Don’t Act in a Rush
It’s important to negotiate and then give your supplier time to consider your offer. You can tell them that they can contemplate the deal you’ve proposed over the next few days, to create a level of flexibility that’s conducive to a beneficial outcome.
Negotiate Other Expenses
During the negotiation period, you should focus on communicating difficulties so you can better understand how to meet them on their terms.
For example, if you find out your supplier is spending lots on operating machinery, you can offer to undertake a proportion of the cost. If you’re seeking specific components, you’ll often face higher MOQs because the supplier will need to buy customized products. Again, if you face this situation you can offer to pay a portion of the costs.
Another consideration is to offer a higher prepayment in exchange for the MOQ you’re seeking. You can potentially arrange a 60-70% payment to encourage suppliers to accept a lower MOQ and meet you on your terms.
If you’re seeking advice on receiving the lowest MOQ possible, and ultimately securing a favorable deal with suppliers, you should consider working with an elite professional. Companies like Easy Imex can tackle things like sourcing, quality management, shipping, and more. They can help you negotiate great terms and reduce the overall risk involved.