“MOQ meaning” is a popular search term among those who have started looking at using platforms such as Amazon or Alibaba to buy and sell online. It’s essential that you get to know as many of the basics as possible before you become an online entrepreneur.
So, what is MOQ? Well, MOQ is an abbreviation for minimum order quantity. It’s a term that you might come across when you’re buying and selling online. Understanding terms such as this is vital because most suppliers have a MOQ in place when taking on new buyers and resellers.
Here is everything you need to know about MOQ to get started.
MOQ Meaning: What is MOQ?
Minimum order quantity (MOQ) is used almost every time bulk online sales are involved. Suppliers or sellers will set a minimum number of units that need to be ordered before they can start preparing your stock. The number of required units vary, with some MOQs reaching several thousand units for certain products.
A MOQ is usually set according to costs such as minimum delivery fees, factory running costs and operational overheads.
Why Do Suppliers Have MOQs?
A factories running costs will revolve around the efficiency of their production and shipping. Suppliers set a MOQ to make sure they can cover these costs and make a profit. If wholesale suppliers begin to produce or sell fewer units, they may not be able to sustain a profitable business.
Basically, it’s a way for sellers to ensure that they don’t suffer a financial loss as a result of covering the costs to produce units that don’t end up getting sold.
Some suppliers can also set a MOQ at the lowest amount of units they produce in a single run. A lot of manufacturers produce their goods in bulk, which means bulk-purchasing occurs for materials too. To compensate for the cost and time that is involved in getting materials and producing goods, a MOQ is required. A lot of suppliers who operate on platforms such as Alibaba and AliExpress have a minimum order quantity for exactly this reason.
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What MOQ Means for You as a Retailer
MOQ can affect new online retailers since they will not be able to place wholesale orders with certain distributors or suppliers. Retailers will have to work with smaller, less economical suppliers who don’t have huge MOQs. This means that retailers will have to bear the burden of higher costs since these suppliers will have a higher per-unit price to compensate for the costs involved with production.
If you are looking for low MOQs, you need to consider selling items that have little to no competition. It can be challenging for online retailers to find the right products due to these restrictions. If you sell items that are competitive but can’t afford large quantities, you will eventually be taken over by bigger retailers who are comfortable with bulk purchasing. These restrictions can make it more difficult for retailers to earn bigger profits and expand their businesses.
Another disadvantage is that you may find it challenging to maneuver the high entry barrier of starting a business. If you are met with a $4,000 cost before you’ve even sold an item worth $1, it might be impossible to place a bulk order.
Recommended Read: A Guide to Finding the Right Products to Sell
Negotiating MOQs: Is It Worth It?
Dealing with MOQs as a private label owner can be a headache-inducing job. Even if you want to place large orders for inexpensive items, buying a minimum of a thousand units can break the bank. This can quickly turn into an unaffordable investment, which can sink a business.
It’s for this reason that it’s crucial to learn to negotiate with suppliers, your aim is to create a win:win situation for both sides. Here are some basic tips that can help you in this situation:
- Ask the vendor to substitute some materials for lower-quality alternatives during the production process. This can decrease the cost of production for you.
- Coordinate with another buyer who is interested in the same product as you. This way, you can divide the acquisition costs, lowering the burden on your wallet.
- Select items that suppliers manufacture often. They may be able to reduce the MOQ for you if the product you choose is produced regularly enough.
- Some suppliers even work on installments. You can negotiate by telling them that you are willing to purchase the entire MOQ, but you want half the products at once and the rest a few months later. You will be able to split the cost this way.
- Find investors who may be open to funding your purchase in exchange for profit.
- Suppliers like the prospect of long term business.
- Be polite and upfront with your supplier, the business relationship should be thought of as a partnership, manners go along way.
If none of these tips work, you may need to look into other options. Doing ample research on local suppliers is always a good idea before making any final decisions. You may just be able to find the low MOQ you’re looking for.
While it’s vital that you don’t just go ahead with just any MOQ and risk hurting your business for a single product, you cannot go for low-quality products either.
Completely backing out without negotiating and selecting low-quality products can hurt your business before it even gets off the ground. If you are investing in low-quality alternatives, you may end up with faulty or questionable products and this is going to result in unhappy customers.
You should have two primary goals, happy customers and healthy profit margins. Purchasing low quality items is incredibly short sighted, you may damage your brand’s reputation and diminish customer loyalty forever. It’s best to be careful when it comes to negotiating and what you want your end goals to be.
Remember, there are thousands of potential products out there, you just need to take your time.
Going with high MOQs just for the sake of getting a high-quality product isn’t always a good idea for new retailers. You need to be careful about the items you are selecting and how much competition they have. However, investing in low-quality products can also hurt your business. It is important to find a happy medium that will appease both sides. Your suppliers will be thinking about their production costs, whilst you want happy customers and a healthy bank balance.
Now that you know what MOQ is, you can use it to your advantage.