Alternatively, MOQs can be defined by currencies. By this we mean, the consumer has to spend over a certain threshold on products to meet the MOQ. For example, this might be as little as $50 or as much as $10,000- all depends on the factory in question.
MOQs help to ensure manufacturers only take orders that are profitable for them.
Image credits: Shutterstock
What does MOQ Mean and What's the Point of Having an MOQ?
You might be wondering whether there's any point of a supplier setting an MOQ. For some entrepreneurs, these figures will seem somewhat arbitrary and inconvenient. However, they're usually set in place to cover the manufacturers overall production costs. Without them, they wouldn't be able to make a healthy profit each time they launched a production run.
When a supplier sets their MOQ, the supplier has to take into account how much it costs them to produce a unit. Therefore, if suppliers are forced to build fewer units than their MOQ, they could make a loss- not cool!
MOQs are sometimes set according to the scale of the supplier's factory; they may genuinely have a minimum number of units they have to produce in a single production run.
Also, even smaller manufacturers tend to produce items in bulk, so they have to purchase lots of materials. In light of that, it's not always cost-effective for them to set up their machinery unless they're guaranteed compensation of a certain amount.
However, that doesn't mean all MOQs are non-negotiable. In fact, there's usually some degree of wriggle room. However, it's down to you to kick off these conversations and come to a reasonable arrangement that suits all parties concerned.
It almost goes without saying, MOQs differ depending on the supplier. Some have massive MOQs going up into the thousands, whereas some are as low as the tens and hundreds.
However, if you're ordering bespoke merchandise, you may even enjoy an MOQ as low as one unit- so really and truly, it all comes down to what you're trying to stock and how much of it you need.
As you can tell, this is a pretty diverse area. You'll need to dedicate yourself to finding a supplier that produces the number of goods you require, at a price you can afford.
The Benefits and Drawbacks of MOQs
The main advantage of using a supplier with an MOQ is that you usually enjoy the best possible price per unit (when you buy in bulk). So, the more you buy, the better value the deal is.
This is amazing for larger companies who need to stock large quantities of merchandise- not to mention; you'll also benefit from a more significant profit margin- win-win!
However, despite all these savings, be prepared to pay for all of these goods upfront. For most entrepreneurs, this is a massive outlay, especially if you're a fledgling business!
Unfortunately, the costs don't stop there- more often than not, these fees don't even include shipping. Plus, if you're ordering stock from across the globe, you'll need to shell out for the paperwork to get your merchandise through customs.
So, don't forget these hidden costs as you go about negotiating prices with suppliers.
What If You Only Need a Small Amount of Stock?
Often new businesses only need small numbers of units to get going. As such, they can't afford the MOQ's set by the manufacturer. If you can relate to this dilemma, get in contact with them and be frank about the number of units you can afford.
However, if you can't negotiate terms that suit your needs, you'll have to find an alternative supplier that complements your business model.
There are tons of suppliers who offer low MOQs; you just need to find them. However, depending on the industry you're working in this might not always be the wisest choice (more on that later).
However, if you decide that's something you want to pursue, you'll need to commit to doing plenty of research. Take to Google and scroll through the numerous directories of online supplier's.
If after all this research you find you're no further forward, you're probably better off with a wholesaler like AliExpress. Typically, you can place an order based on a unit-by-unit basis, thus removing the obstacle of an MOQ all together- how awesome is that?!
Yes, this has its drawbacks. Namely, wholesalers aren't usually as cost-effective as manufacturers, but for startups, this is often a more viable option.
Plus, business owners take far less of a risk purchasing products as they need them rather than buying heaps of products upfront- not only is this a financial burden but if you're new to commerce you can't guarantee the product will even sell!
Should I Go with the Supplier Offering the Lowest MOQ?
Like we've just alluded to, although choosing the company with the lowest MOQ may seem to make the most sense- it doesn't necessarily mean you'll get the most value.
There are a few things you need to consider:
- Whether the supplier meets the product safety requirements specified for your niche
- Whether the factory has a good track record on fulfilling orders on time
- Whether their customer support team offers a premium service
You should also note:
When you drive a supplier's MOQs too low, they're more likely to produce products of inferior quality. This is hardly surprising because they'll try meeting the lower MOQ by using poorer materials. After all, its the only way they'll manage to launch a production run at a profit.
Also, you want a good relationship with your suppliers, and if you drive their MOQ too far down, it'll cut into their profit, and if there's one thing suppliers hate, it's losing money. So, if business picks up for them, you'll be on the first of their list of clients to drop. They're also far less likely to prioritize your production run over higher-paying clients. Needless to say, relationships in business are crucial, so don't jeopardize them.
Supplier Directories with Reasonable MOQs
If you haven't started your research yet, below are a few resources you should use to kickstart the process:
- Manufacturers Directory: Here you'll find a diverse range of MOQ requirements, from one unit to thousands.
- Wholesale Directory: The same is true of the manufacturer's directory as it is for this wholesalers list.
- Clothing Manufacturers Directory: If you want to start a clothing line, this is a great place to find MOQs as low as one unit.
- Dropshippers Directory: Dropshippers often don’t have any MOQs, which makes this business model amazing for new brands.
Is There a Maximum Order?
Obviously, the overarching MOQ meaning is just a set minimum number of units a supplier can produce at any one time. However, if you need more units than their MOQ, it usually isn't a problem for the manufacturer.
All you have to do is reach out them directly and let them know how many units you're interested in. That way you can ensure they have everything you need to set the wheels in motion to launch a production run.
However, you should note, some suppliers, do have a maximum number of units they can produce at any one time. This is especially common in smaller factories- this is just another reason why clear communication is vital. You need to ensure you're all on the same page before you hand over any of your hard earned cash.
How to Find the Right Manufacturer with the Right MOQ for You
If you need a helping hand finding the right producer, then follow the below advice:
Get to Know Your Industry
First things first, get to grips with your industry. There's a good chance you'll have connections working in your niche. If so, message them to find out where they source their produce from and how much they're paying.
Knowledge is power, and you need to be armed with the facts before heading into negotiations with a potential supplier.
You need to establish all of the following:
- Whether the supplier specializes in creating products for your industry
- Whether the factory has the resources to make your products
- Whether their prices are negotiable
- Whether the manufacturer works with a heavy supply chain- if so, this might increase costs
- Whether they keep their MOQs consistent
You get the idea!
MOQ Meaning: Conclusion
We hope this piece has given you a better idea of the overall MOQ meaning and its purpose.
As we've said time and again throughout this piece, MOQs are set for a reason. So, although negotiation is expected you need to ensure what you're asking for is reasonable.
Remember, MOQs are set in place to cover the costs of doing business. So, if the supplier’s demands are entirely out of your reach, then its best to contact a different supplier.
Alternatively, if you're at a stage in your business where you can't afford to buy products from any supplier, consider using wholesalers or drop shippers instead. Entrepreneurs love these business models because they can buy products one by one rather than shelling out for a massive number of products in one go.
Have you got any experience using a supplier? What are your thoughts on MOQs and how did you negotiate these rates? We'd love to hear your views on the subject in the comments box below. Speak soon!