If you ever plan to sell products in your business, there are a few key terms you’ll need to know. One term you’ll come across time and time again is MOQ. MOQ stands for minimum order quantity and suppliers set them as a minimum it takes for them to create products while still making a profit.
Some suppliers have a certain product number as an MOQ while some have a currency amount, so you might see them as 1,000 MOQ units or $1,000 MOQ.
This article will go over how MOQ’s work, how to find out a timeline from a specific supplier, if you can negotiate them, the benefits of ordering single items vs. bulk, and more.
When it comes to finding suppliers for a product, there is usually a minimum order quantity (MOQ) they have before they will create and ship your product. Suppliers set a minimum so they can still make a profit while creating your order because often manufacturing is a costly process without high margins.
Tip: Every now and then you’ll see MQO from some suppliers, which stands for minimum quantity order and means the exact same thing.
Cost and timeline of MOQ’s
Cost and time can fluctuate with each supplier due to the materials needed, time to create the product, and cost of overall production. There are no set rules when it comes to MOQ, since MOQ’s can range from one singular item to hundreds of thousands at a time.
Some suppliers instead have a minimum price order instead of a minimum quantity. You’ll have to know what your budget and goals are for production before you decide to work with a particular company.
Most supply companies need to make a profit and creating more products in bulk helps improve their already low profit margins.
There are some suppliers who don’t have an MOQ, which can substantially help your business if you’re just starting out or you don’t know how many products you need. That way, you can order a handful of items at a time, giving you the ability to test before committing to a huge order, if you so choose.
You’ll often find that the more products you order per batch the overall cost of production goes down, due to suppliers being able to make them in bulk. Expect to pay more per item if you’re only ordering a handful of products at a time.
Why suppliers set MOQ’s
Just like for your business, everything costs a certain price to maintain profitability. Suppliers are no different. They’ve done the work to figure out how much production costs and by setting a minimum, they’re able to remain profitable.
If they dipped below their minimum, they’d start losing money on orders which wouldn’t make any sense for their businesses.
Keep in mind, an MOQ is simply a minimum order. If you choose to order more than the minimum, almost all suppliers will be happy to accommodate your order.
How to find a supplier’s MOQ
For the most part, to find a specific MOQ you’ll have to reach out to each individual supplier. By searching on Google, you’ll get a ton of results and contact information, which is a good place to start. There are also supplier directories you can use to find companies that match your requirements.
Through your research, it’s also a good idea to keep a spreadsheet of all the companies you have contacted and what they offer. This can save you a ton of time down the line if you end up needing a different supplier due to order size or budget. Ideally, you’ll want to keep track of MOQ, budget, shipping times, extra fees (which we’ll cover down below) and cost per unit.
Tracking shipping for your orders and other costs
One thing most businesses don’t know is that MOQ rarely includes extra fees such as shipping, getting your items through customs, or other factors to make sure you get your items on time. Keeping this in mind, you should also track these costs and factor them into your overall budget. Depending on what you need, these extra fees might have an impact on where you choose to order your products.
Currently, China is the world’s leading manufacturer and supplier for most products made, so when it comes to finding suppliers you’ll find a large percentage of them there. This can lead to longer shipping times than if you worked with a closer manufacturer, which is something you’ll want to keep in mind when you’re placing your order.
Can MOQ’s be negotiated?
Usually, an MOQ is the lowest a supply company will go for an order. Generally, manufacturers have a 3-4% profit margin due to how much materials and labor costs, so there isn’t much wiggle room. However, there is always the possibility to negotiate.
Suppliers know that building a long-term relationship with a growing company can benefit them down the line, so some might be open to different rates or proposals. If you can give a manufacturer more info on your business and your growth rate, there might be a chance to negotiate.
Keeping your request reasonable can help improve your chances of negotiation. If you’re looking to go from a 2,000 item MOQ to a 1,750 MOQ, there’s a higher chance they’ll say yes than going from 2,000 to 1,000.
There’s a chance that smaller suppliers will have more wiggle room for negotiation than larger, established ones. They’re usually more in need of business and establishing long-term contracts than their bigger counterparts so they can work with what you need.
If you need further details on negotiating MOQ’s, take a look at this video: https://www.youtube.com/watch?v=s0A-hk24Ma0
What you need to know before ordering from a supplier
Before you place an order or work with a supplier, you need to know a ballpark of how many products you need and your overall budget.
In your hunt for a good manufacturer, don’t completely overlook smaller companies. Usually, they can provide far more flexibility and have a stronger need for business than larger, established companies.
You will also need to know how they manage quality control. You should find companies that send out first samples and let you finalize them before you agree to pay for potentially wrong products.
Benefits of ordering in bulk
If you have a unique product, you don’t always have to worry about competition. (Although to be fair, every business should always stay one step ahead of competitors.)
Usually, the more you order from a supplier, the most your cost per unit goes down since it often costs them less to produce so many in bulk.
Shipping is another factor to consider when it comes to making a bulk order. Depending on where you order from, it can take weeks for some shipments to make it to you, so ordering in bulk gives you the chance to have all of your inventory at once so you don’t run out and upset your customers.
Benefits of suppliers with no or low MOQ
One thing you certainly want to avoid as a business owner is ordering tens of thousands of products only to discover that you can’t sell them. This will leave you with a ton of leftover products and no way to get rid of them.
To avoid that nightmare, you can do pre-orders for customers or find some way to figure out the demand for a product.
While it can be great to have a huge shipment all at once, another benefit of ordering from a company with no or low MOQ gives you the ability to thoroughly test the product. You can make sure it matches the quality you wanted in your product and make any changes before committing to a large order.
Overall, understanding MOQs will help you grow your business, order products, and start to create revenue for your business. Finding a supplier you enjoy working with can take quite some time, but overall it’s worth the effort.