The MOQ meaning may be an unfamiliar term for some people, so in this short article we’ll be defining what a MOQ is, why MOQ’s are important, why suppliers set MOQ’s, the advantages and disadvantages, how to meet and exceed the minimums, as well as how to negotiate them.
Stay tuned to the end of this article for a word of warning about MOQs so you can safeguard yourself from potential consequences.
Let’s jump into it.
Video Overview of MOQ
MOQ Meaning (Minimum Order Quantity)
MOQ stands for “Minimum Order Quantity” and refers to the least amount of products or units that a supplier is willing to produce at one time. MOQs are set by suppliers to cover their cost of production and ensure that they make a profit off of each production run.
MOQs are sometimes negotiable, within reason, but it’s up to a business to be able to meet a supplier’s MOQs or negotiate a reasonable MOQ in order to do business with them.
MOQs differ from supplier to supplier. Some suppliers will have large MOQs such as 100,000 units, other suppliers may have low MOQs such as 100 units. Occasionally, suppliers that produce custom orders or bespoke products may even have MOQs as low as 1 unit.
What is MOQ
MOQ is a supplier’s Minimum Order Quantity which is defined by the minimum amount of units they’re willing to produce (or sell) at one time. MOQs are most often defined by the amount of units produced in a production run, such as 100 units or 10,000 units, for example, but sometimes MOQs can be defined by currencies as well, such as $1000 or $10,000 of product.
MOQ is calculated by each supplier independently and depends on what it costs them to produce each unit. MOQs cover the cost, effort and energy it takes to produce a production run and ensures that the supplier will be able to earn a profit as well.
Why MOQs are Important
MOQs are extremely important for suppliers because it determines which businesses they’re willing and able to do business with. By setting MOQs, suppliers can easily communicate with businesses how many units it takes for them to be able to work together.
Some businesses operate on a small level and need a very low amount of units produced. These businesses need to find a supplier that can comfortably match their low MOQ requirements. Other businesses operate on a large scale and need hundreds of thousands of units produced. These businesses need to make sure they find a supplier that can meet their demand and have the materials, machinery and personnel available to product the amount of units they need.
Why Suppliers Operate with MOQs
Suppliers set Minimum Order Quantities because it costs them a certain about of money to produce a production run, and the MOQ they set ensures that they’re able to cover all the costs of production, plus make profit. If suppliers were to produce fewer units than their MOQ they may not be able to cover the cost of their production, or make a profit.
Another reason why suppliers set MOQs is because the amount that they set may actually be the fewest amount of units they can produce in one single production run. Since manufacturers produce items in bulk, they purchase their materials in bulk as well. It may not be time or cost effective for them to set up their materials and run their machinery unless they’re guaranteed to be compensated for a certain amount of units their production run produces. Because of this, they set their MOQ to match what it’s worth for them to set up a production run both time and cost wise.
Advantages & Disadvantages of MOQs
The biggest advantage of MOQs is that they give you the best possible price per unit available. Oftentimes, the more in bulk you buy from a supplier, the more it drives down the cost of each unit. This means you’ll be paying less per unit that gets produced so you can maximize the profit you earn when you actually sell that product.
The biggest disadvantage of MOQs is the upfront cost required to be able to get your units produced. For example, 1000 units at $10 per unit means that the production run will cost $10,000 upfront, which, if you’re a new business may be intimidating or impossible to meet. This cost also doesn’t cover other costs related to doing business with your supplier such as the cost of shipping the products to you once the production run is over, or the necessary paperwork required to get the products through customs, etc. It’s just the cost of actually producing the items.
How to Meet MOQs
If you’re just starting out as a new business, meeting MOQs can be frustrating. Oftentimes as a new business you only need a small amount of units produced and can’t meet the MOQ requirements of many manufacturers. If this is the situation you’re in, your best option is to communicate very directly with manufacturers about the amount of units you need and what you can afford. If you can’t meet a supplier’s MOQ requirements and they’re not able to negotiate down to the amount of units you need, then your best option is to move on and find a different supplier with MOQs that fit your requirements.
There are plenty of suppliers who offer low, or no, MOQs, it’s just a matter of finding those suppliers. Do lots of research and investigate into the depths of Google and supplier directories to find suppliers who can meet your MOQ requirements. Depending on what products you’re looking for, another option may be to source wholesale products that you can purchase unit-by-unit so you don’t actually have any MOQs to meet. AliExpress is a great resource for this.
This may be a less cost-friendly option in the long run but it means that you can purchase products as and when you need them instead of buying lots of products upfront that you then have to then figure out how to sell.
Check out our supplier directories to find suppliers with MOQs you can meet:
- Manufacturers Directory: The manufacturers listed in this directory have a diverse range of MOQ requirements ranging from one unit to thousands of units.
- Wholesale Directory: The wholesalers listed in this directory also have a diverse range of MOQ requirements, ranging from one unit to thousands of units.
- Dropshippers Directory: The dropshippers in this directory are a great option for business’ who are having trouble meeting MOQs as they often don’t have MOQs at all. If you’re new to dropshipping, check out our Guide to Dropshipping to learn more about dropshipping as a business model and why it’s so advantageous for new businesses.
- Clothing Manufacturers Directory: This directory is tailored specifically to help businesses looking to start a clothing line find the right suppliers, and it features clothing manufacturers with MOQs as low as one unit and as high as the hundreds of thousands of units.
MOQs are set by suppliers to define the minimum amount of units they’re able to produce at one time, but that’s just their minimum. If you want to produce more units than a supplier’s set MOQs, usually it will be no problem for the supplier to accommodate your requirements.
Communicate exactly how many units you’re interested in producing with each supplier you’re considering working with to make sure they have the materials, equipment and personnel to make your production run happen. Depending on the supplier, they may have a maximum amount of units they can produce at one time if they’re not a large factory, so make sure they have the resources to complete your production run if you want to produce more than their MOQ.
How to Negotiate MOQs
If you’re having difficulties meeting supplier MOQs, these tips may help you out:
- Pay the MOQ price but ask for the specific number of items you need. This option won’t save you money, you’ll still have to pay the full price of the supplier’s MOQ upfront, but you’ll get your preferred amount of units which can save you from managing inventory you don’t want or having more products than you’re able to sell. With the leftover inventory that the supplier produces you can tell them to do what they want with it (they can sell it, offload it to a wholesaler, keep it, or throw it away). This option may not make sense for every business, but it may be worth keeping in mind.
- If you’re having trouble meeting a supplier’s MOQ because you can’t store that amount of inventory at one time, you can’t pay for it all upfront, or you just don’t need that amount of inventory all at once, see if the manufacturer will produce the entire production run and give you half of the products first and then the rest in a few months. Not all manufacturers may be open to this idea, some may not have the storage space for it, but others may be willing to help you if they know you’re serious and you’ll become a regular customer of theirs.
- See if there’s a lower quality material that can be substituted for the materials they would originally use so you can drive the price of production down, and thus, the amount of the MOQ.
- This is less of a negotiation tactic and more of a strategy on how to meet MOQs if you don’t have the budget available to meet a MOQ upfront. Crowdfunding and selling pre-orders is one of the best ways to acquire funding for your products upfront so you can meet the MOQ of your supplier without having to fork over the cash straight from your own pocket, and it means that you’ll order the appropriate amount of product that you have demand for. Orchestrating successful crowdfunding campaigns like those on Kickstarter or Indiegogo takes a lot of effort and isn’t for the non-serious or unprepared business person, so make sure you have the know-how and resources to be able to pull this off for it to be a successful means to meet MOQ requirements.
A Word of Warning
It may be tempting to drive supplier’s down to the lowest MOQ they’re willing to go, and some suppliers may want your business so much that they’re willing to drive down their MOQs just to keep you as a customer, but this may come at a cost to you. While low MOQs may seem like a great situation for you, it’s very important to consider the potential consequences:
- By driving down supplier MOQs too low, you may force suppliers to compromise on the quality of the products they produce. In an effort to meet the low MOQs while covering the cost of production, they may use the lowest quality materials so they can still afford to complete the production run and make a profit. This can make your products seem low-quality or make them less durable.
- If you drive down the MOQs too far and it cuts into the supplier’s profit, they may resent doing business with you which may make them less likely to work with you in the future, or else they may just not prioritize your business over other clients. Remember that suppliers also need to make a profit and MOQs are put in place to cover their own costs, so try to be understanding of that, even if it’s less favourable for you in some ways. Relationships in business are paramount, so compromising your relationship with your supplier because of MOQs may come with more consequences in the long run, so take that into consideration.
MOQs are put in place for a reason, so it’s important that you abide by them and negotiate reasonably with suppliers if you do feel that you need to negotiate. While it may be frustrating for you to meet MOQs, or flat out impossible if you’re just starting your business, remember that MOQs are put in place by suppliers to cover their own costs of doing business, so if you can’t meet a supplier’s MOQs then you need to find a different supplier or make other adjustments. In any case, find a supplier’s MOQ which you are able to meet, and if there’s none, try sourcing your products through wholesale or dropshipping so you can purchase products one-by-one, as you need them.