The Minimum Order Quantity (MOQ) is one of the most fundamental guidelines for running a successful business, whether it’s conducted online or off.
This comprehensive FAQ guide will explain everything you need to know about minimum order quantities (MOQs), including their purpose, benefits, drawbacks, and room for negotiation.
If you don’t want to miss any crucial details about MOQ, it’s best to keep reading this article while connected.
So, let’s get this party started.
What Is an MOQ?
Minimum order quantity, or MOQ, is the smallest possible order that can be fulfilled. A majority of readers may understand the abbreviation without the explanation, but it’s still a good idea to provide one.
A supplier may have a minimum order quantity (MOQ) of products that must be met before a sale can be finalized.
The term “minimum order quantity” is commonly used in corporate settings. This term is most common in business-to-business (B2B) contexts, where a manufacturer or supplier organizes or produces goods in bulk for sale to another company.
When selling to other businesses, as opposed to consumers, most vendors adhere to minimum order quantities (MOQs).
The minimum order quantities are expressed in a variety of units of measure. Here are a few examples of how to refer to minimum order quantities.
Kilograms Square Meters Pieces Sets Boxes Pairs
Units of measure for the minimum order quantity
Some retailers have a minimum order value before they’ll ship anything. For instance, in order for a purchase to be processed, an order totaling more than $100 would be required.
Why Is MOQ Important?
There are a number of reasons why a minimum order quantity is crucial for a manufacturer or supplier.
Chinese manufacturers and wholesalers frequently focus on volume over profit. For this reason, most Chinese suppliers in B2B models impose MOQs.
Producing less than that quantity is not feasible for the manufacturer, so he requires a minimum order before he will begin making the product.
Suppliers will often impose MOQs because they prefer not to sell items individually at a loss due to the lower price.
To fully grasp the idea of a minimum order quantity (MOQ), you need to put yourself in the manufacturer’s position.
To illustrate, pretend for a second that you work in manufacturing. Let’s pretend you’ve got a machine that can crank out a thousand organic shopping bags at once.
Can you sell less than 1000 of the shopping bags now that you know you can make that many?
If that’s the case, you’ll also need to consider the other factors that affect profitability.
Even if you figure out a way to sell the shopping bags in pieces, you might not want to. Doing so would make clearing the stock you produce in one go more time-consuming and cumbersome.
However, the manufacturers or suppliers also provide the option of purchasing the products in patch form.
Keeping in mind that you can cover the cost of production and your margins by selling either 100 pieces to 10 buyers or 500 pieces to 2 buyers, you can safely set the minimum order quantity for your shopping bags at 100 pieces.
However, if the manufacturer sets a very low MOQ, it could hurt their business. It may be difficult and time-consuming to sell one thousand units if he sets the minimum order quantity at just one. That’s a technique more common in B2C or retail settings.
The minimum order quantity (MOQ) may be as low as one unit; however, such a low MOQ usually results in a higher unit price.
The Alibaba MOQ as an Example
From the manufacturer’s perspective, this is just one way in which MOQ is evaluated. Many factors require a minimum order quantity for a manufacturer to remain profitable.
To illustrate, say a manufacturer receives 1,000 orders for a product he can easily produce. If his factory has the capacity to produce 10,000 units per day, but he only needs to supply 1000 units, he cannot afford to run the entire facility.
This will reduce the profit at his factory and drive the supplier out of business.
How a supplier chooses to establish minimum order quantities is entirely up to the supplier and their business practices.
For convenience and efficiency, some vendors stick to a basic business model. One minimum order quantity (MOQ) is set for all products produced in a single run.
They act this way because they would rather deal with other businesses than with regular people. That’s why prices drop for higher MOQs.
We have summarized the key points of MOQ to help you better grasp its significance.
Importance of MOQ for a Seller
Facilitates ease of life.
Easy manipulation of the system.
Constructing went off without a hitch.
Good returns on investment.
Having a relationship with a company for many years.
Importance of MOQ for a Buyer
Discounted prices that drastically reduce the overall price of each product.
The shipping costs can be reduced by buying in bulk.
Continuous dealings with the vendor over time.
assuring uniformity of quality within a single production run.
Possibility of making a profit from selling a single unit or a smaller quantity of the product in a specific region.
More on the benefits and drawbacks of MOQs is coming up, but first, let’s examine their significance.
What Does Low MOQ Mean?
Minimal order quantity (MOQ) refers to the minimum quantity of an ordered product. There is no guarantee that customers will want to buy in bulk.
Businesses that operate on a smaller scale and need fewer orders than those operating on a larger scale may not be able to accommodate a low minimum order quantity (MOQ).
The price per unit rises with decreasing MOQ. With a higher minimum order quantity, unit costs decrease. Starting out businesses often favor lower MOQs.
This could be because they are merely curious about the products’ efficacy for themselves. These companies are on the lookout for vendors who are either flexible enough to sell with low MOQs or who can meet them halfway.
Suppliers and manufacturers who offer products in specialized categories can help with this. Assume a manufacturer has produced 1,000 units of a product and is selling to ten different companies, each of which has a minimum order quantity of 100 units.
Meaning of a Low Minimum Order Quantity
In this way, both the supplier and the businesses that prefer lower MOQs can benefit from the situation. So, it’s a win-win for both parties involved.
What Does MOQ Mean in Dropshipping?
There are many shades of dropshipping. The success or failure of a dropshipper’s business is entirely up to the dropshipper himself.
Most dropshipping operations follow a business-to-customer (B2C) model, which typically has no minimum order quantity (MOQ). But there are dropshipping stores where MOQs are specified.
There are some retail outlets that require relatively small minimum order quantities (typically between 2 and 10 units).
Some dropshipping businesses combine business-to-business and business-to-consumer approaches. There will be products where MOQ would be as low as 1 piece per order along with products with higher MOQs.
What Is the Minimum Order Quantity (MOQ) for Dropshipping?
Such dropshipping stores tend to attract every kind of customer including the businesses.
Businesses, both online and offline, as well as consumers or end-users, would want to purchase a novel, cutting-edge, and fashionable product.
So, the dropshipping store may either mention MOQ for that product or can offer special pricing for the buyers who buy that product in larger quantities.
A bulk discount per item would then require a minimum quantity purchase.
When it comes to dropshipping, the minimum order quantity (MOQ) isn’t the only consideration. Once a drop shipping business has proven itself, the owner will begin ordering goods directly from a wholesaler.
Minimum order quantities (MOQs) are typically attached to such purchases. Dropshippers are required to adhere to MOQs set by suppliers, which means they will stock products but only offer them for sale in bulk quantities.
Since making a profit is central to any business, they would sell those items at a premium.
In regards to minimum order quantity (MOQ) in dropshipping, Alibaba is a common choice.
What Is the Purpose of MOQ in the Supply Chain?
In the supply chain, minimum order quantity (MOQ) plays a crucial role. Due to the comprehensive nature of the supply chain, which begins with the procurement of raw materials and culminates in the final delivery of a finished product to the customer, minimum order quantities (MOQ) may be involved multiple times.
The minimum order quantity (MOQ) serves primarily to maintain equilibrium between supply and demand throughout the supply chain.
The supply chain as a whole could be jeopardized if a single link in the chain, the buyer, is unwilling to meet the minimum order quantity (MOQ) requirements of the seller.
In a similar vein, the supply chain process for a product could be disrupted if the seller is rigid about his MOQ and is unwilling to be flexible with his MOQ conditions.
To What End Does the Supply Chain Use Minimum Order Quantity?
Suppliers and customers need to be on the same page in order to enjoy seamless supply chain operation.
We’ll use the supply chain process of dropshipping as an example to illustrate how a MOQ may be involved multiple times throughout the course of the supply chain.
Your minimum order quantity (MOQ) is something the manufacturer will have set.
In addition, the supplier may have minimum order quantities (MOQs) he must meet before he will purchase the raw materials for your products or ship them to the location of your choice for use in your dropshipping business.
This is due to the fact that many parcel shipping and logistics companies impose a minimum order requirement.
As a result, the entire Private Label dropshipping operation is at risk if the MOQ requirement is not met at any point in the supply chain.
You can now see why Minimum Order Quantities are so crucial to the supply chain as a whole.
The typical MOQ steps involved in the supply chain process of most businesses are outlined below for clarity.
MOQs in Planning
Supply chain planning is essential. In addition, the optimum quantity of products that a company should stock is a function of careful preparation.
In other words, the planning division accounts for the minimum amount of products or the number of products to be kept in inventory when calculating the minimum number of goods to be sold.
Because of this, minimum order quantities (MOQs) have emerged as a means of regulating the behavior of both buyers and sellers.
MOQs in Procurement
If a company wants to avoid either an undersupply of or an overabundance of a product, it’s up to its procurement department to make sure it always has enough on hand.
Accordingly, they should ideally establish a MOQ to be acquired at predetermined intervals.
MOQs in Manufacturing
Minimum order quantities (MOQs) have already been covered. Manufacturers need to establish a minimum order quantity (MOQ) for products to be manufactured to ensure the smooth and economical operation of their factories.
MOQs in Shipping
MOQs are also applied to shipping and logistics. When shipping products via a logistics firm, businesses are typically required to adhere to the logistics firm’s minimum product shipment requirements.
MOQs in Warehousing
Particularly in the e-commerce industry, warehouses or fulfillment centers play a crucial role in the distribution process. There is typically a maximum number of items that can be kept in a given warehouse or distribution center.
What Does Minimum Order Quantity Mean in the Supply Chain?
In short, minimum order quantities (MOQs) come in many forms, but all businesses require them to function.
How Do You Negotiate a Minimum Order Quantity?
Herein lies the greatest challenge. Few businesses are adept at the art of negotiating a minimum order quantity.
To be able to negotiate the minimum order quantity with a supplier, you must either be in good standing with him or a regular customer of his.
Nevertheless, there are other avenues open to you for engaging a supplier in discussions about a minimum order quantity (MOQ).
Is There Any Way to Reduce the Minimum Order Quantity?
Below are some common traps and tricks that suppliers use when negotiating minimum order quantities. The minimum order quantity (MOQ) and some of the ways to meet it without placing a full MOQ order have also been covered.
Ask for Sample
A customer has the right to request a free sample of a product, especially if he or she plans to place a large order. Nobody in business would ever buy a lot of something they couldn’t examine first.
Thus, it may be prudent to request a sample of the product before negotiating the MOQ with a supplier. Typically, vendors are hesitant to give out free samples to every single potential customer.
Getting samples of products requires approaching the sellers in a businesslike manner. Tell them you need to see a sample of the product to make sure it’s up to the standard you set for your company.
You should ask the supplier to reduce the MOQ if you encounter any resistance from him when requesting product samples, even after you’ve established his credibility and shown him actual photos or videos of the goods in question.
Although this strategy is effective with many vendors, it’s worth trying alternative approaches if a vendor remains inflexible on the minimum order quantities (MOQs).
Make Them Realize about the Size of Your Business
An effective strategy is to make the supplier understand the scope of your company. You can gain a supplier’s trust by providing comprehensive information about your company and its scope of operations.
It’s possible that a supplier would be willing to lower the MOQs just to get started doing business with you if they were confident that you would place larger repeat orders of the products.
Be Strictly Professional
Please don’t go hurling loose balls at the vendor. It’s important to maintain a businesslike demeanor when communicating with suppliers to show that you’re serious about doing business with them.
If your supplier gets the impression that you aren’t taking things seriously, they may treat you like a new customer and refuse to negotiate on the MOQs.
Check the MOQ from Other Sellers on the Same Platform
Before approaching the supplier with the intention of negotiating the MOQs, you should first conduct some research. When it comes to a given product, multiple sellers typically populate a given marketplace.
Learn the Minimum Order Quantity from Other Vendors Utilizing the Same Marketplace
Have a look at the above image, especially the highlighted MOQs. Although they share the same platform, the minimum order quantity (MOQ) for these two products is different. Alibaba
Verify the minimum order quantities (MOQs) offered by competing vendors. It’s possible you could locate a vendor with a lower minimum order quantity. You should mention the price differences to the vendor you are negotiating with after you have calculated them.
Warn the vendor that you can find the same product with lower minimum orders elsewhere. That way, a supplier would have to reevaluate the minimum order quantity (MOQ) he’s proposing in light of the MOQs proposed by competing vendors.
Check the MOQ from Other Platforms
Many other marketplaces and wholesalers offer much lower minimum order quantities (MOQs) than the one you’re considering doing business with.
Don’t forget to mention alternate sources with lower MOQs to the one you’ve settled on.
The point of any purchase is to get as much value as possible for your money, so stocking up in bulk is essential. In a platform environment, choose the provider who provides the best bundle.
Specify to prospective vendors exactly how their bids compare to those you’ve received from other venues.
Even in China, you can find a wide variety of B2B exchanges. Places like Alibaba, Global Sources, DHgate, MadeinChina, etc., are just a few of the many online marketplaces where you can find wholesale goods.
Check for Products that Don’t Require Fresh Production
Try to find items that don’t have to be manufactured from scratch every time. You can accomplish this through conducting soft research or contacting the relevant suppliers directly.
Talking to wholesalers of the product in question is another option for confirming its availability. Items are purchased in bulk by wholesalers, who then sell them to retailers in smaller quantities.
However, they might still be using MOQs. Talking to them could reduce the MOQs, but it could also raise the price of a single unit.
Ask for a Combined Production
Get in touch with the manufacturer and see if they can combine your order with that of another customer who needs the same thing. Everything is possible. Simply put, you need to try it out.
You probably aren’t the only person in the world who needs that service or item. A rivalry exists between all groups. Now is when you begin to reap the unheralded rewards of competition.
Make an effort to inquire with your supplier as to whether or not he could produce the product in tandem with the products that other buyers have ordered.
The supplier may request more time for production in order to ensure he receives the bare minimum he needs to stay in business. However long you are willing to wait for that product to be produced is entirely up to you.
Go for a Combined Procurement
Be sure your rivals aren’t buying the same thing at the same time. The presence of a rivalry serves as yet another positive outcome. You can get in touch with rival businesses and discuss the possibility of placing joint orders.
Consider a Joint Purchasing Agreement
Your rival may very well be experiencing a similar problem. By placing a combined order to your supplier, you can create a win-win situation for both parties involved.
Interesting fact: a higher minimum order quantity (MOQ) may actually work out cheaper in the long run. You should compare the unit cost of both the low MOQ and the high MOQ. Consider the numbers and make a call based on your own calculations.
It’s possible that a lower minimum order quantity (MOQ) would result in much higher costs compared to a higher MOQ that would allow for greater profit margins.
In the event that you are still unable to reduce your MOQ after trying the aforementioned strategies, you should contact wholesalers in your area that carry similar products and see if you can strike a deal with them.
You can recoup some of your investment by selling the surplus quantity to them at a discount.
Both you and your local wholesale partner stand to benefit from this arrangement.
You’d be able to unload the surplus of goods without incurring any kind of loss. On the other hand, your wholesale partner would save money by not having to import the goods at all.
To confidently agree to the MOQ, however, you must do this work before placing an order with a seller.
What Are the Pros and Cons of MOQ for Suppliers and Customers?
Having a minimum order quantity (MOQ) in business has both benefits and drawbacks. A supplier and a buyer or customer each experience different outcomes related to minimum order quantities (MOQs).
That’s why we broke down the benefits and drawbacks of minimum order quantities (MOQs) for both businesses and consumers.
Some benefits and drawbacks of using MOQs are listed below.
Pros of MOQ for a Seller
Gives a Clear Room for Mass Production.
For a manufacturer, mass production is nirvana. That is why manufacturers have minimum order quantities (MOQs).
Easy Sale of Larger Quantities.
Having a minimum order quantity in place opens the door to selling in bulk with little effort. They aren’t as concerned with individual sales as stores are.
Easy Shipment of the Products in Batches.
Establishing a minimum order quantity makes shipping products to specific addresses much simpler. Because of their uniform dimensions and volumes, these goods are packaged and shipped in bulk.
Long-Term Business Relationship with Buyers
One of the less obvious advantages of doing business with other companies is the chance to build and maintain positive relationships with distributors, retailers, and wholesalers over time.
Unlike the B2C model, where consumers typically make a small number of purchases and then move on, B2B customers invest in the company over the long term
Cons of MOQ for a Seller
May Not Attract Many Buyers
Reduced supplier demand is a common result of minimum order quantities (MOQs). It’s obvious that the only customers the vendors are targeting are businesses. This is why business-to-consumer (B2C) sales are more popular than the MOQ system.
Consumer Sales Not Achieved
Setting a minimum order quantity has the additional downside of virtually eliminating sales to individual consumers. Naturally, a consumer may need multiple units of a given product, but this is not typical in business-to-business transactions.
Some customers may need multiples of an item, but even they would rather use a business-to-consumer (B2C) site to complete their purchase.
Lower Margins Per Product as Compared to B2C
The margins per product sold are lower for suppliers with minimum order quantities (MOQs) compared to those in B2C marketplaces. This is due to their preference for volume over per-item profit margins.
Buyers Ask for Samples
Samples are necessary for buyers who need to place orders with a greater number of minimum quantities. The manufacturers aren’t too confident there because it’s inconvenient for them to send out just a few products as samples.
Pros of MOQ for a Buyer
When purchasing a product in large quantities, you can always expect to pay less than the suggested retail price.
Good Stock Keeping
In order to maintain a steady supply, it is wise to make bulk purchases of a product. Having a well-kept stock on hand will help you bring in repeat customers.
Avoiding Product Shortages
If you buy a product in bulk, you won’t have to worry about running out every day. In some cases, this is the primary reason why startups fail so rapidly. The orders have been fairly consistent, so the product deliveries have had to be as well.
Customers will have more faith in your company if you order and keep a certain minimum quantity on hand. To put it simply, you can’t afford to go the long haul without this.
Special Campaigns Avenues
You’d be able to think more quickly thanks to the greater variety of options available to you. As a result, you’ll have the opportunity to run promotional campaigns for the specific goods you’ve purchased in bulk.
When ordering a product that is in high demand, it makes sense to stock up. Having that product on hand in large quantities allows for the possibility of launching a promotional sale at various times.
One way to undercut rivals is to sell their products at much lower prices than you did when you bought in bulk. If you’re looking to save money per item, bulk purchasing is the way to go.
As a result, you have a large margin within which to reduce the product’s price and still turn a profit, allowing you to undercut the competition.
You will also reap a further benefit for your company as a result of the aforementioned factors.
Increasing sales of all of your products is a side effect of running a successful marketing campaign that attracts more customers than your competitors’ campaigns do.
You can be sure that your customers will assume that the prices of other products your company sells are similarly low.
This would open up a door for you to cross-sell additional items in addition to the ones you’re promoting.
Getting an MOQ of any product could turn out to be a lucky break for a startup.
There are times when you need a jolt from somewhere beyond yourself, something intangible that keeps you moving toward the prize of achievement.
A Person Who Starts a Business
Because of the minimum order quantity (MOQ), if you purchase 1000 units of a product, your mind will immediately begin to consider ways to dispose of the surplus inventory.
With this, you’ll be able to zero in on your company’s goals more clearly. If you don’t narrow down your options, you might have to sell everything. Most businesses fail because their owners try to do too many things at once rather than concentrating on a single product.
There’s no denying the benefits of product variety, but if you’ve got a minimum order quantity for some items, you’ll naturally put more emphasis on moving those products than any others.
Cons of MOQ for a Buyer
Higher Business Capital Injected
Budget constraints are a fact of life for any company, but they are especially acute for startups and other small businesses. It’s possible that a sizable portion of their budget will go toward buying the products in bulk in order to meet the minimum order quantity requirements.
As a result, they may not have enough money to pay for essentials like advertising, portfolio management, and marketing.
Increased Business Fatigue
Purchasing surplus goods could lead to burnout in the workplace. In order to meet purchase minimum order quantities, smaller businesses would need to manage quantities that are beyond their current capacity.
The Increasing Exhaustion of Business Professionals
In order to deal with the influx of products, they may need to hire more people or invest more money.
Increased Inventory Maintenance Costs
Costs associated with stocking and storing an increased quantity of goods must be paid. There will be storage fees until the products are sold, and these fees may vary depending on the product type.
Maintaining the products safely and preventing spoilage or damage will incur additional costs on top of the storage fees.
Limited Options to Try Different Products
When you keep a large supply of a single item, you can’t easily test out different products to see which ones sell best.
That’s why it’s always smart to order a small quantity of a product to test it out first before placing a larger order.
However, product testing is an ongoing process, and you may have to make sacrifices if you decide to invest heavily in a small number of products and then have trouble selling them.
Opportunity Cost to Miss out on Trending and Seasonal Products
New, fashionable, and seasonal items are big sellers at specific times of year. Businesses that capitalize on these trends at the right time see huge increases in sales and healthy profit margins.
This is especially common in the world of dropshipping and online retail.
Your ability to take advantage of such in-demand products may be hindered if you are required to maintain a minimum order quantity (MOQ).
Imagine a businessman who missed out on the global craze for fidget spinners because he was committed to another product that received steady demand but was nothing like the global craze.
Therefore, you need to have a certain amount of capital on hand to take advantage of such hot and appealing products that occasionally take the internet and social media by storm.
Minimum order quantities (MOQs) are standard practice in any serious enterprise, especially those operating on a grand scale. In this article, we’ve done our best to define MOQ and illustrate its meaning with examples.
We trust that this comprehensive FAQ guide on MOQs has answered most of your questions.
Please let us know in the comments or via email if there is anything else you need clarified about this topic or if there is anything else you’d like us to elaborate on in regards to MOQs.
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