Introduction

Starting an online eCommerce business is not that easy. You have to take care of every aspect that is involved in this business. For instance, there are production costs, shipping, packing, and whatnot.

From the financial side of view, there is a term used MOQ. It is a notation that is used when you are in talks and negotiating with the supplier. If you are already talking to a supplier, we are sure that you have heard the term MOQ. But, what is MOQ, and why it is important?

In this blog, we are going to talk about MOQ’s meaning, its impacts, and how it changes your eCommerce business. Equator Shipping has incorporated each and every detail so that you don’t get stuck while handling the MOQ process.

What Does MOQ Mean? Why it is important?

Whenever you go through Alibaba, Aliexpress, and Global Sources, you will see a term called MOQ under every supplier’s profile. What does it mean? This section covers the details related to that.

Meaning of MOQ

MOQ means Minimum Order Quantity. But, what is a minimum order quantity? See, individuals like Wholesalers and suppliers make profits when the quantity of those products is large.

Since these suppliers have already fixed a lower profit percentage, they only get their profits when that amount has been reached. Whenever you see a supplier, on Alibaba or off, they will always ask you about the MOQ.

If your minimum order limit meets their MOQ limit, they will accept your order. Otherwise, they will try to negotiate or worst case can cancel your order.

Is MOQ Important?

Minimum Order Quantity is an important factor for the supplier as well as the buyer. From the supplier side, they are only depending on the quantity of the order. As for the buyer side, they have to make sure that their initial costs meet their own MOQ.

a. MOQ from supplier’s perspective

Why is it so much important for a supplier? Well, see, the suppliers in China are already offering you the lowest possible price of an item. The reason behind that lower costs is that they will make money when the order quantity is expected to reach a certain limit. You will see suppliers offering different ranges of MOQ and they will also have different price quotations. Typically, it is like this.

  • 500 items for $200
  • 300 items for $250
  • 100 items for $300

MOQ is directly proportional to price. If a supplier is offering a lower price, his MOQ demand will be large. MOQs are only there to make sure that a supplier is able to take out the machine/production costs and profits.

b. MOQ from buyer’s perspective

Talking about the buyer’s side, a buyer has to make sure that the MOQ given by the supplier meet’s his financial costs. Suppose, a supplier has given you a quotation of 1000 items for $2000.

Now, your total budget for that business is $3000. You will try to get a lower MOQ as well as a lower price. In the end, you will reach a deal where your financial costs will be met and you will be able to meet the product demand.

Minimum Order Quantity-Should It be there on not?

What is MOQ

As a supplier, you will always want to sell as many products as you can in every available variation. From the buyer’s perspective, a company that has a catalog of millions of products.

If there is a company that wants 5000 items of shoes in 3 different colors, there is a chance that the company will get 2000 items in 2 different variations.

We can say that MOQ is a nightmare for new businesses and startups. But, the bottom line is, that MOQ is there and will stay there because both suppliers and buyers have to work their way around it.

The best way for businesses is to go for products that have minimum variations. There are three advantages to that.

First, if you launch such products, your customers will have limited options, hence it won’t confuse them. Second, it will be easy for an Amazon seller to fill in the inventory. Third, you will get an optimum MOQ limit for each of those variations. It will be a win-win situation for all parties ( Buyers and Suppliers).

If I have problems of meeting MOQ, What should I do?

If you are a new startup, then there is a chance that you will not be able to meet the MOQ of the supplier. Yes, it is daunting. However, Equator has described some of the methods that can be used to avoid the problem of meeting the MOQ. Here are the methods that you can use.

Sell items in advance

One of the first and most effective ways is by selling the products in advance and using the advance payment to meet the MOQ. If you are short on money and want to meet the supplier MOQ, you can choose the advanced sales method. That is if you can reduce the inventory without having that much pressure.

Advance sales will help you in collecting some part of the money and you will be able to use that money to pay for the defined MOQ. This way, you will be able to meet the MOQ limit and lower the financial pressure.

Pay the supplier using partial payments

This is a method that is for sellers who are already doing business with a long-term supplier. However, if you are new and can convince the supplier, that can also work.

If there is a buyer who cannot afford the storage fees or cannot pay in full in advance, he can ask the supplier whether he can pay the bill in partial payments. But, there is a catch to this.

Not all suppliers will agree on this because they don’t have the storage to hold these products. Moreover, you will need a lot of credibilities to convince the supplier.

There are some suppliers working in China who will agree to partial payments because they are trying to get more customers.

Purchase in groups

If there is a supplier known for creating high-quality shoes, there is a chance that a lot of buyers are dealing with him. Now, that is to your advantage.

If you are not able to pay at once for a higher MOQ, ask the supplier whether he has details of buyers who are buying the same product. If that is the case, contact that buyer and ask him to purchase the next lot in a group with you.

There is an advantage to that. Since you and the other buyer will be buying from the same seller, the seller’s MOQ will meet the requirement and he will provide you with the products.

On a side note, you will be able to see what kind of products the other buyer is buying from the seller.

What Type of Factors Affect MOQ?

On Alibaba or any other eCommerce platform, you have seen high ranges of MOQ. They are there for many reasons. In this section, we are going to talk about the factors that affect MOQ.

Type of product

Type of products is the biggest factor that contributes to the higher and lower ranges of MOQ. For instance, if you are trying to buy products like pencils, pens, toothpicks, and pins, there is a chance that you will encounter a higher MOQ.

For this, if you are a seller dealing in glass items, plush toys, and notebooks, the MOQ will range between 500-1000. As for items like POS devices, and electronics, the supplier will give you a range of 20-50.

Customization

Custom-made products are the main reason why sellers give you a high MOQ. Consider a scenario, where you are dealing with a seller who makes plush toys. Now, the seller has regular materials to make a simple plush toy.

If you ask the seller to make customization like color, design, and brand label, he has to arrange more material for that. Since he has to arrange that, he will have to cover the costs. Now, to cover those costs, he will give you a higher MOQ.

Price of mold

Let’s say that you want a dove-shaped glass vase, but the seller only has a flower-shaped vase available. Now that you are asking for something unique, the seller will have to arrange the mold for that shape. So, he will give you a higher MOQ to make it up for the cost of the new mold.

Quality

Quality vs Quantity

The quality of the products is another parameter that leads toward higher MOQ ranges. Suppose, there is a supplier who is offering two types of qualities. The first one is A and the second is B.

If you select from A grade quality, the MOQ will be higher. For B, the MOQ will be a little bit lower. For A grade, the supplier will have to buy premium materials and to cover the costs of those materials, he will increase the defined range of MOQ.

Size of factory

Last, but not least, the size of the factory also depends on the MOQ war. If there is a small-sized factory, their MOQ range between 500-1000.

Whereas, the MOQ of larger factories will be around 5000-10,000. Large factories have to cater to production costs, bills, workers’ fees, and paperwork, so they will always give you a higher MOQ.

How to Negotiate Down MOQs with Wholesalers?

Negotiation for every part of the business is vital because the business’s foundation depends on it. Whether it is the price or quality, you have to negotiate in such a way that everyone gets happy.

The same is the case with MOQ negotiating. Here are the tactics that you can use to negotiate the MOQ.

Discuss MOQ Frankly and Sincerely with the supplier

There are many courses out there that will teach you to show the supplier that you are a professional and veteran. For instance, they will teach you to get the price of 10,000 MOQ and then order 1,000 pieces.

Moreover, some courses will tell you that you should make an impression to the supplier that you are a beginner. This way, the supplier will give you a lower MOQ.

See, both of the methods are wrong and can affect your long-term partnership with the supplier. Suppliers are not idiots. They are experienced individuals who can easily judge whether you are a new businessman or a professional one.

What you can do is talk with them in a sincere tone and tell them about your current condition. Most suppliers are understanding and will understand your situation. They will lower the MOQ in such a way that they will be able to control the costs. This method provides more scope rather than the methods mentioned above.

Think from the supplier’s side

Every business is built using win-win cooperation. So, it is important for you to understand the role of the supplier when negotiating the MOQ.

Suppliers need to ensure that their costs are meeting the product. Their costs are more complex than including machine running costs, labor pays, and bills. They do need to cover that.

And, if you tell the supplier that you understand what is at stake, the supplier will most likely give you a solution. Tell the supplier that he won’t face any losses doing business with you. Express your gratitude and you will be dealing with a supplier who will be your partner for a very long time.

Exert some pressure

Apply some pressure, but don’t be too hard. This is the tip that is commonly used in business negotiations.

If you try to win a single supplier, there is a chance that you will lose that supplier. Most of the suppliers don’t give you room to negotiate the MOQ. But, putting some pressure on them will make them think about their decision.

Tell the supplier that you are willing to get into a deal with them. However, do tell them that you have backup suppliers willing to offer lower MOQ. Don’t go into the details. This will increase the pressure on them because every supplier in China is trying to compete with their competitors.

If they think that they will make some profits from you, they won’t miss the opportunity. Otherwise, if that does not work for them, they will simply refuse to work with you. Make sure to have backup suppliers in case this happens.

Avoid customization for decreasing MOQ

In the above section, we talked about the customization of the products and their impact on the MOQ. Always try to get the item in stock shape.

If you are an Amazon private label seller, make sure that you are just asking the supplier to make small changes. Changes that won’t affect the supplier at all.

Increase per product price

This is not the method that we would recommend because it will lower your profit margins. What you can do is tell the supplier to increase the product price by a little percentage and lower the MOQ while meeting the maximum threshold.

Change the payment term

Typically on Alibaba, you have to pay 30 percent in advance and the rest when the products are ready. Whenever you are trying to lower the MOQ, tell the supplier that you will pay 100% in advance.

Now, that is a honey trap for the supplier. Since the supplier will be getting the total price at once, he will surely try to lower the MOQ.

But, there is a catch to that. And, that catch is, do this if you completely trust the supplier. You paying a supplier full payment can lead to the supplier never replying back to you.

MOQs of different types of Suppliers

Now that you have an idea about what MOQ is and how you can negotiate down minimum order quantity, let’s talk about what type of MOQ can you expect from different types of suppliers.

Small scale factories

Small-scale factories are the ones that can provide daily used items. They offer quantity in less than container mode. That means they offer a lower MOQ range. Typically, such factories offer an MOQ range between 1000-2000.

Large scale factories

Large-scale factories are the ones that provide a huge amount of quantity. They have a larger workforce and their turnaround time is also lower. These factories provide you with MOQ ranging from 5000-10,000.

Wholesale markets

Wholesale markets are the places where you can get many different items in bulk. The best part about such markets is that they offer a lower MOQ and can provide a huge quantity. Most of the time, wholesale markets have an MOQ of 20-30.

Alibaba

Alibaba is the biggest platform that contains a wide inventory of different types of suppliers. There are many reasons why you should buy from Alibaba. One of those reasons is MOQ. On Alibaba, the minimum MOQ is about 500 and that can up as far as 50,000.

It all depends on the product. The best part about Alibaba MOQ is that the suppliers have already included customizations in that MOQ. If you want anything specific and unique, then the MOQ range will be increased by the seller.

When Buy from Alibaba, DHgate and Global Sources, What is MOQ?

We will explain this section by using an example. Suppose you are buying door mats from China. Now, we will talk about the MOQs of each of the B2B websites that are mentioned.

MOQ in Alibaba

MOQ in Alibaba

The minimum Order Quantity in Alibaba is the same as the other giants. If you see in the given picture, the MOQ for a doormat offered by a supplier is 5000 pieces. See, if you ask for custom packaging, that MOQ remains the same.

And, if there is any customization, the MOQ offered by this supplier still remains the same. This is just a reference. MOQ always varies from supplier to supplier. The MOQs mentioned in this picture are not final. There is always a window for negotiating it.

MOQ in Dhgate

MOQ on DHgate

Talking about the MOQ in Dhgate, the minimum order quantity is smaller than provided by the sellers of Alibaba. However, there is a catch. The price is also higher than the prices given by the Alibaba seller.

If the MOQ is small, you will not get a lower price. If you are a new startup, you can go for sites like Dhgate because on Alibaba, the minimum order quantity is higher than on sites like Dhgate.

MOQ in Global Sources

MOQ on Global Sources

If you search for door mats on Global sources, you will find out that the MOQ is large, however, the prices are pretty feasible.

If you are a large established brand and can afford to buy items in larger quantities, then Global sources is perfect for you. And yes, there is always an option of negotiating down the MOQ with the supplier by using the tips that we have given above.

FAQs

What does MOQ mean

MOQ is defined as Minimum Order Quantity. It is a certain threshold defined by a supplier. It is the lowest number of units that a supplier is willing to sell. A MOQ is used by the supplier to take out the profit margins, production costs, and other costs related to the manufacturing of the product.

How can you ask for MOQ?

There are two ways through which you can get an idea about MOQ that the supplier is offering. The first one is by visiting the product page. MOQ is mentioned there by the supplier. Second, if MOQ is not mentioned there, you can directly ask the supplier for that.

What does MOQ mean in business?

In business, MOQ means the maximum number of units a buyer is willing to buy. That maximum number means that the buyer’s total investment covers the MOQ that is given by the supplier.

How can you lower the MOQ?

MOQ can be brought down by the buyer by using the techniques that are mentioned above. The idea behind getting a lower MOQ is to be sincere and talk politely with the supplier.

Conclusion

MOQ is one of the most important factors in the business of eCommerce stores. It may not be an easy step to find a supplier who offers lower prices as well as lower MOQ. Don’t just follow the path that you want a lower MOQ. The idea behind a good deal is that you get an optimum MOQ that matches your price range, while the seller makes some profit off it. This is an important step in the negotiation, so make sure you do it effectively.

If you are still not able to find the right MOQ and price, reach the Equator contact page. Our expert team will guide you towards the process and will find you a supplier that is perfect for your business.

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