Whether it’s a brand new product for your bubbling new eCommerce store or the launch of your very first product that lays the foundation for the future, it can be easy to dismiss the minimum order quantity as irrelevant.
After all, your store will sell out in minutes, right? If anything, you should buy more than the minimum in anticipation of high demand.
While it’s great to have a positive attitude about launching a new product, it’s also important to be realistic. Below, learn more about the concept of minimum order quantity, why it’s so important to get it right, and how to negotiate with your chosen supplier.
Oh, and stop your partner from looking at you with disdain as they browse in and out of unsold products while trying to grab a drink in the kitchen.
What is MOQ (Minimum Order Quantity)?
First, let’s define exactly what MOQ is.
Luckily, in an eCommerce world full of complex jargon, the minimum order quantity (MOQ) is perhaps one of the simplest, as it covers the minimum quantity of your product that you can order at one time.
For example, if you run a beard supply business and plan to launch a new line of beard oil, you’ll probably want to order just a small quantity initially to test with your audience to see if there’s an appetite for your new product.
After all, you don’t want to be stuck with 1,000 unsold bottles of the stuff, slowly realizing that mango and tree bark might not be the industry-changing scent you once thought it was.
However, manufacturers also need to pay attention to their bottom line and ensure that your order is worth their time and effort, which is why they will likely set you a minimum order quantity of a certain amount.
Don’t skip: Here’s how to find a manufacturer that won’t burn you
Who dictates the MOQ?
As we just touched on above, your supplier will often set the MOQ, but that doesn’t mean it isn’t non-negotiable.
Remember: the more units a supplier can convince you to buy, the more money they make. Of course they want your product to sell so they can do repeat business with you, but worst case scenario they want the security of a large upfront payment.
So don’t let discounts or incentives entice you to buy more the first time you buy a product. If the product sells well and all the beards in your town smell like tree bark, you can make larger quantities and reduce your costs. However, at first it is best to proceed with caution until it is tested in the market.
What elements affect the MOQ?
Once you’ve received the minimum order quantity from your supplier, it’s important to ask a few follow-up questions before committing. Finally, almost every MOQ is negotiable and there may be elements you can tweak to further improve the price or volume.
“Maybe the minimum order for the actual product is 800 units, but you asked for some kind of color-matched box for packaging, which brought it to 5,000 units.” – Kian Golzari, The product sourcing plan.
“Maybe the minimum order for the actual product is 800 units, but you asked for some sort of color-matched box for packaging, which brought it to 5,000 units.”
The most common elements that affect MOQ include:
- Production costs: Higher production costs may result in a larger MOQ to ensure that it is a profitable venture for the supplier.
- Short or long term partnerships: If you have already established a relationship with the supplier or they are confident that it is a long-term partnership, you may be offered better MOQ terms.
- Storage and logistics: MOQ may also be affected by the supplier’s storage capacity and logistical constraints. Larger orders may be able to be processed and transported at once more efficiently. Storage also affects the quantity at the end of your order. Remember to factor in the space available for storing product boxes for weeks or months.
- Customization or specialization: Custom or special products may require larger orders to justify setup costs and any additional requirements.
Why you should choose a low minimum order quantity
When a supplier comes to you and says, “Yes, you could go for the minimum order quantity, but look at all those shiny extra things you get if you buy that quantity,” it’s only natural to be serious about their offer to be considered.
After all, if the minimum order is $5 per bottle and a larger purchase causes the cost per bottle to drop to $4, surely that’s a given?
Well, when placing the first order of a new product, it’s important to focus more on the total cost rather than the cost per bottle. Here is a quick example.
If 1,000 bottles cost $5 per bottle, that’s a total cost of $5,000. If 2,000 bottles cost $4 per bottle, that’s a total cost of $8,000.
Now imagine you sell 800 units in both examples. With the minimum order quantity you only have 200 units left to sell, but with option two you still have a massive 1,200 left lying around somewhere, taking up space and possibly even selling out!
Keep learning: How to set the price of a product – the final answer
Get your MOQ in order and use our AI-powered system to find the perfect new products
Building a strong relationship with a reliable supplier can also significantly improve your MOQ, among many other benefits. To learn more about how you can use our AI-powered system to find the perfect next product for your business, check out this free masterclass.
