There is nothing wrong if you are also unfamiliar with the term MOQ. MOQ denotes the minimum order quantity that a supplier can deliver at any given time, or the number of units he is able to produce at a given time.
The MOQ might be 1,000 MOQ units or 1,000 MOQ currency amounts. Thus, some suppliers may have a certain product number or currency amount as an MOQ. In this section, we’ll explain what MOQ is, how it works, and everything else you need to know.
There is a general rule that suppliers have a minimum order quantity (MOQ) they have to meet before production and shipping your product. Unlike other industries, manufacturing is a comparatively costly process without high-profit margins. Therefore, suppliers set a minimum while still making a profit.
What is MOQ (Minimum Order Quantity)?
MOQ, as the name implies, is the minimum order quantity. This refers to the lowest number of units that you can purchase at one time. Using MOQs, suppliers will ensure that they are able to cover their production costs and ensure they make a profit on each production run.
MOQs are set independently by each supplier and depend on how much it costs them to produce each one. As a result, MOQs add to the supplier’s profit, since they cover the costs, effort, and energy needed to produce a production run.
When it comes to eCommerce, retailers set the minimum order quantity. It used to be that businesses would sell their products to other businesses that would buy in bulk, generating profits through sales of many products. In the end, if an MOQ exists, chances are that your order amount will need to exceed that particular number.
As an example, there are many brands that require you to purchase at least a certain number of units from a certain style of production. Chances are high that you will be required to pay an advance amount or a certain amount based on the nature of the production. If you don’t, you won’t be able to place the order.
It is often difficult to source products for your eCommerce business when suppliers have their own minimum orders.
Even if you were to meet the minimum amount of cash, what would happen if you didn’t have enough cash? You may be unable to buy the product from the most competitive suppliers in many cases. Instead, you’ll have to pay a higher unit price. To put it bluntly, poverty is costly. But MOQs are more like a guide than a strict rule.
Why MOQs Are Important?
An MOQ is simply the number of units that will be produced at a time. As we have seen, MOQs are the minimum number of units produced in a production run, such as 50, 100, or 200 units. Each supplier sets its own minimum order quantity based on the cost of producing each unit.
The MOQ includes the costs and effort involved in producing a production run and making sure the supplier can earn profits through the production process. Each retailer or supplier may have a different MOQ. Some retailers or suppliers may have large MOQs while others may have less.
MOQs: Why Suppliers Require Them
In the case of suppliers, minimum order quantities are required since there are costs associated with producing a production run; therefore, they ensure they cover that cost as well as making a profit. For suppliers who produce fewer units than their minimum order quantity, it may be difficult to cover their costs or make a profit.
Secondly, suppliers may set MOQs based on the fewest number of units they can actually produce during a single production run. In light of the fact that manufacturers produce in bulk, they purchase their materials in bulk as well.
The cost of setting up their materials and running their machines may not be cost-effective unless they have a guarantee that they will be compensated for the number of units produced by their production lines. In order to provide the maximum number of products at the minimum cost, they set a MOQ proportional to the amount of work and costs involved in setting up a run.
Benefits of MOQs
A major benefit that MOQs offer is that they provide you with the best price per unit possible. It is often assumed that MOQs are helpful because you will get bulk items or products at a lower price, effectively increasing profits.
The problem with competition doesn’t always arise if you have an original product. The goal of every business is to always remain one step ahead of their competitors.
With a supplier, you typically save the most money per unit when you order many in bulk since it is less expensive for them to produce.
When you order in bulk, you also have to take into account shipping. The time it takes for some shipments to reach you can be weeks, so ordering in bulk allows you to have all of your inventory at once, which will keep your customers happy and prevent you from running out of inventory.
How to Meet MOQS?
Starting a new business can be frustrating if you don’t meet the minimum order quantities. It is rare for a brand new business to need to produce large numbers of units. Manufacturers often have minimum purchase requirements. Whenever this occurs, you should discuss both your budget and the amount of units you need directly with manufacturers. If you cannot meet the supplier’s MOQ requirement, and they are unable to negotiate with you, then you should find a different supplier that has MOQ requirements that meet your requirements.
Many suppliers have low or no minimum order quantities; all you have to do is find those suppliers. Utilize Google and supplier directories to find suppliers who can meet your minimum purchase order quantity. There is also the option to source wholesale products so that there is no minimum order quantity requirement.
Although long-term these will be more expensive, but you will be able to purchase only what you need, instead of purchasing a lot in advance and then trying to sell it.
Keep in mind that MOQs have a purpose, so adhere to them and negotiate sensibly with suppliers if needed. As a new business, it might seem frustrating or even impossible to meet MOQs, but you need to understand that MOQs are simply a way for suppliers to cover costs, so you need to find a different supplier or make some adjustments.
Do you need help understanding MOQs? M-Connect Media can help. We provide eCommerce consulting services to help you understand minimum order quantities (MOQs) and order products. Get in touch with our friendly team now!