MOQ is important for new businessmen. In this blog, I will introduce MOQ meaning in business with real examples in detail and teach you how to negotiate lower MOQ with suppliers. You will know everything including the most practical and effective negotiation tips about MOQ after reading this guide.
What is MOQ?
MOQ Means Minimum Order Quantity
The MOQ definition refers to the least amount of products that a manufacturer is willing to produce or a wholesale supplier is willing to sell. In real business, if you want mixed batches, many suppliers will convert MOQ into a certain amount of money.
What is MOQ Meaning in Supply Chain?
Unlike retailers and dropshippers, wholesale suppliers or manufacturers make money by selling products in bulk for the profit per unit is very low.
MOQ is important to the wholesale supply chain, including manufacturers and sourcing agents. The most important reason for setting MOQ in the supply chain is to cover the cost of production. If quantities are too small, it is difficult for manufacturers to operate the machine for production and decide quantities of raw materials or packaging materials.
What is MOQ Meaning in Business?
As a businessman, you may want to know more about MOQ’s meaning in business. This part will list some examples of online wholesale and supplier platforms in China, like Alibaba, DHGate, or Global Sources, to show you what MOQ means in business.
Traditionally, if you find suppliers on the market offline, you need to talk with suppliers or manufacturers face to face. They would tell you MOQ of the products you need and other detailed information.
But now, the e-commerce business is more popular. Many buyers are more likely to place orders online. E-commerce websites help order products well, but MOQ is still unavoidable in most cases. A good part of these websites is that it shows different order quantities with corresponding prices clearly.
For example, if you’re a new businessman and want to import water bottles in bulk from China, you need to learn about prices and market situation before you come to China. Then you can choose to look through suppliers on some websites.
MOQ on Alibaba, DHgate and Global Sources
If you’re a new businessman and want to import water bottles in bulk from China, you need to learn about prices and market situation before you come to China. Then you can choose to look through Chinese suppliers on some websites.
MOQ on Alibaba
If your order quantity is less than 500 pieces, the price is $2.72; if your order quantity is more than 499 but less than 3000, the price is $2.55; if your order quantity is more than 3000 pieces, the price is $2.21.
This is just a sample for your reference, and if you look through other products of Alibaba’s MOQ, you can find required MOQ is different. It does not mean you are limited in these quantities. Within the order quantity range, you can negotiate with the suppliers based on your real order to meet the suitable MOQ.
For example, if you want to buy 2000 pieces of bottles in this picture, you can negotiate with the supplier for a better price lower than $2.55. If the negotiation result is ideal, your final price may be just $2.40.
It is just an example, the MOQs listed on the product page aren’t final, you can always negotiate with suppliers to get better minimum order quantity and unit price.
MOQ on DHgate
If you find bottles on DHgate, prices of different quantity ranges are smaller. What’s more, order quantity is much smaller than the MOQ of Alibaba in general. But obviously, those prices are higher than that of Alibaba. It obeys a basic business rule: small profits but quick turnover.
If your MOQ is really small, you cannot always get the lowest prices on the market. If you’re a small businessman or startup, you can consider this kind of supplier, like DHgate, while Alibaba is not very suitable for you. Before using DHgate, please check everything about its safety.
MOQ on Global Sources
If you search bottle products on Global Sources, you would find their wholesale MOQ is quite large. But their prices are low as well. In most cases, if you’re a large business or you have a strong sales ability, you can choose Global Sources to wholesale your products.
There is a button “Inquire Now” for you. If you have the intention to buy, you can negotiate with suppliers or manufacturers for lower MOQ manufacturing and favorable prices.
Concrete tactics of negotiation will be talked about in the below part.
7 Tactics Tell You How to Negotiate Lower MOQ with Suppliers
Negotiation with suppliers is vital for you to realize your business goal. This part will conclude several tips and introduce 7 tactics to tell you how to negotiate lower MOQ with suppliers.
1. Communicating with Suppliers Frankly and Sincerely
If you’re a new businessman, many courses will teach you a solution that you can pretend to be experienced or a veteran. For example, if you negotiate with suppliers about the unit price at the quantity of 10,000 pieces, but actually you just want to buy 1,000 pieces.
In another case, if you’re an experienced businessman and your order quantity is little, some articles may tell you to pretend as a beginner so that the supplier would lower the MOQ for you at the first cooperation.
These two methods are useless and go against your business negotiation. For one thing, suppliers are not idiots. Mostly they are experienced enough to identify if you’re a veteran or a newbie.
For another, many Chinese suppliers are willing to decrease MOQ in the first cooperation with you. Of course, MOQ should be within their controllable range of cost. If you tell suppliers your real situation and the order quantity you want, the negotiation scope is wider than you choose the two false methods above.
When you cannot meet the MOQ of suppliers but still want to purchase the products, increasing the unit price partly is a possible way to realize your cooperation because obviously, you cannot get the smallest MOQ and lowest price at the same time.
2. Thinking from Suppliers’ Perspectives
Business is always built based on win-win cooperation, so it’s necessary for you to consider problems from the suppliers’ standpoint. You shouldn’t let suppliers compromise unilaterally.
As mentioned above, suppliers need to ensure their profits and cover their production costs. Their production costs are more complex than your thinking, including machine running, labor costs, materials costs and other necessary costs.
If you put yourself in suppliers’ position and understand their difficulties, your negotiation will be easier. You should also express your gratitude of cooperation to suppliers. You need to convince them of the truth that they won’t get any loss from the business with you. In this way, you can build long-term business cooperation with them.
3. Exert a Certain Pressure on Suppliers
Besides your sincerity and gratitude for cooperation, you should also exert a certain pressure on suppliers. This is a tip used commonly in business negotiation.
If you concentrate all hope on one supplier, you would be in a passive position. For one thing, you cannot compare the quantity, quality and price of products they provide. For another, if they give you the MOQ standard, you have no room to negotiate for lower MOQ or other better terms.
So you can tell suppliers that you want to cooperate with them, but you also have other suppliers to choose from. If they cannot give you the best terms of MOQ, you would consider other choices to cooperate with. It will increase their pressure of competition.
If they think they can still make some profits from your condition of orders, they would not miss the opportunity of cooperation, because if they refuse to cooperate with you, their competitors would take the opportunity. A smart businessman would never do such a thing.
4. Don’t Rush to Place an Order and Have Comparison
This tip is similar to the last one. You should give more time for consideration to suppliers and yourself. For one thing, you need time to compare different suppliers to seek the most suitable partner.
For example, the MOQ of the first supplier is 500, and you think it is within your acceptable range. But if you rush to place an order, you may miss the second or the third suppliers with lower MOQ. Remember, comparison purchasing, thinking again and again is the key in business.
For another, if you rush to place an order, the supplier would regard you have no other choices, and they won’t give any concession or preferential terms for you.
You can tell them to consider if they can decrease MOQ and inform you of the result in 2-3 days. During the period, you don’t need to urge them, just wait for the reply patiently.
Your attitude shows that you’re not urged to cooperate with the suppliers; they would regard you have other choices. This is more likely a psychological tactic.
5. Choosing Stock Rather Than Customized Products
If you purchase goods in stock, it’s much easier for you to lower the MOQ. The reason is that suppliers have a large inventory of products. Your order in 500 pieces or 1000 pieces has not much difference because they still have inventory left after your order.
So, if your quantity is just several hundred or thousand, you had better purchase existing products from wholesale suppliers instead of MOQ manufacturing.
However, if you customize products from the suppliers, it’s usually hard to lower the MOQ. To meet your demands, suppliers need to make a new mold or purchase specific partial parts to customize products.
The costs of making a new mold include design, process, modifying, machine operating, labor and test materials costs. From making a new mold to investing in production, customized products require more than goods in stock. So the MOQ is quite high.
In this case, if you can offer to pay for partial parts or undertake costs for mold making, suppliers may be likely to lower the MOQ.
6. Lowering Your Demand of Products
If you cannot lower the MOQ from the suppliers, you can choose to lower your requirement from the product itself, like patterns, styles or materials used. It may not change the MOQ a lot, but the total price of MOQ would be lower to some extent.
7. Change Your Payment Ways
The most common payment method is 30% prepayment when you place an order and 70% balance payment after you receive goods. To lower the MOQ, you can choose to increase your prepayment proportion or even full payment immediately.
In this way, suppliers would think you are sincere enough to cooperate with them and they would like to lower the MOQ to some extent to reach the cooperation.
What If You Fail to Negotiate Lower MOQ?
If you fail to negotiate for the lower MOQ with the supplier, the direct and easy method is to contact another supplier. That’s why I mentioned that you need to have more choices of suppliers and have a full comparison, just in case. If you still want to cooperate with the suppliers, I will tell you how to meet MOQ in the next part.
Another point is that you had better not let the negotiation end unpleasantly, even if you cannot make a deal with the supplier. The reason is that you may need to negotiate with him again in the future or the next supplier you contact maybe his friend.
How to Meet MOQ?
If you’re a new buyer or small startup, MOQ is usually hard for you to meet. But it does not mean the end of your business. There are still some methods to help you solve this problem.
When your order quantity is unable to meet the MOQ of suppliers, you can choose group purchasing. It means you can purchase the same types of products with other buyers jointly, and then receive goods separately in batches.
This method may increase the pressure of competition between the buyers in the later process. But at least you stand a chance to sell your products based on meeting MOQ.
What’s more, you can also communicate with other competitors for product marketing methods, because knowing yourself as well as the competitors is the key in competition.
If you still refuse to compete with other buyers you know but still want to meet the MOQ and purchase the products, you can choose the next method.
If you don’t have enough money, but you still want to meet the MOQ and also have the ability to reduce inventory without much pressure, you can choose advance sales.
Advance sale helps you collect part payment from your customers for goods, and then you can use this part of payments to meet the MOQ and place an order. In this way, you have many possibilities to meet the MOQ and reduce your financial pressure.
Pay attention. If you choose this method, you should be responsible for your customers and your cooperative partners. It requires high credibility, careful preparation and your serious attitude.
Partial Payments and Orders
If buyers are limited to their own conditions, including not enough storage space for holding the quantity of a single order, or can’t pay the full amount at once, you can negotiate with suppliers to deliver goods and pay in batches.
However, not all the suppliers would like to cooperate with you in this way, because it will increase their workload and make room to store these products.
At present, some suppliers choose this method to cooperate with new buyers; it also requires buyers owing a high degree of credibility to make cooperation successfully in the end.
Work with the most professional sourcing agent to help you get the lower MOQ
What’s the Importance and Impact of MOQ?
Some information may tell you the pros and cons of MOQ. However, to be honest, it has no absolute advantages or disadvantages to MOQ. To be exact, MOQ has different impacts on different groups of suppliers, manufacturers and buyers.
MOQ for Factories and Suppliers
Suppliers hope you can buy products as much as possible. Setting MOQ ensures they can make some profits, while it also helps them automatically pass some customers out of cooperation or service range.
According to this, they may change their sales methods, especially in some special periods. For example, some manufacturers may increase their MOQ temporarily to orient their target customers.
For example, Dasheng, one of the few manufacturers with NOISH N95 mask production qualifications, adopted the approach during the period of the Coronavirus. As they received many inquiries about N95 masks every day; however, some inquiries are true orders, and some are fake. So they increased their MOQ to $1,000,000.
MOQ for E-commerce Business
MOQ helps them find suitable suppliers in accordance with their quantity demanded. Some e-commerce business is small-scale, and each order is in small quantity. If such groups want to avoid higher costs, they need to find suppliers who can provide such low MOQs.
As Amazon sellers, I would advise you to choose products with less SKU to operate your business, For example, pulley block just has 3-4 models, without choices of colors or sizes. The direct benefit of doing so is there is less inventory stress on you, and you don’t have to prepare many SKUs in stock.
If without MOQ, the large-scale business also has their worries. They need suppliers to be capable of large production. If they choose multiple channels to purchase goods for meeting their large amount, the goods may be made from different materials with different qualities. It also means potential risks.
MOQ for Buyers or Merchants
Generally, MOQ is unfriendly to small businesses or new startups. If comply with suppliers’ MOQ, these buyers will have large inventory pressure in a period. It may cause a higher risk of investing.
Besides, you are limited to choosing the product styles you want. For example, if you intend to buy 3200 pieces of products in 10 styles, but the supplier sets the MOQ per pattern is 800 pieces. In this case, you can just buy 4 styles even fewer patterns to meet your order.
But the unit price of a product will get a certain discount from the order of MOQ. Some suppliers would wholesale with MOQ, and also retail in fewer amounts according to customers’ demands.
In this case, the unit price of wholesalers is lower than that of retail. If you wholesale more products, you are more likely to lower the unit price. It means you will make more profit on a single product.
Anyway, the weakness of MOQ for new buyers or merchants is hard to improve a lot. You need to find the necessary information on the market as much as possible, with lateral comparison to find suppliers suitable for your business sale. Or you can change your stock ways to balance costs and lower risks.
What Kinds of Products Require Higher MOQs and Why?
Usually, customized products require high MOQ. Their customizations involve many aspects, like adding a logo, changing colors, parts, materials, design and so on. Extra money and labor are invested in preparing materials and making new molds.
To be exact, different customized products also have different MOQ standards. Products in mass production have higher MOQ than products made in hand. For example,
- Glass articles
- Plastics articles
- Vacuum cups
They need to make new molds and take manufacturers a large sum of costs. The machines to produce these products are expensive, and costs for running and operating machines are high as well. Even for making a mold of a small lid, its cost reaches up to about $430-$1,000.
On the other hand, if you want to customize a backpack, it costs lower and requires low MOQs. It can be changed easily without using large machines. This kind of product is mostly made in hand, for example,
How to Calculate MOQ?
Some courses may tell you how to calculate MOQ in different formulas. However, it cannot be calculated exactly, and you can just consider factors in many aspects to decide your MOQ.
You can use different methods to estimate your sales status. Based on it, you should also consider some factors before you decide your profit and MOQ of products, including
When it comes to MOQ, it may be not easy to find a vendor that meets your pricing and quantity requirements. Don’t regard the lowest MOQ as the only aim; the key is that the price and MOQ of the suppliers are within your budget range.
We’re Jingsourcing, a leading sourcing agent in China. We have helped many businessmen, including small startups, Amazon sellers, retailers in Google and so on.