What is minimum order quantity when you’re ordering from suppliers?
This is a question we are often asked by retailers and ecommerce vendors who approach Epic Sourcing for help.
Here’s an explanation of the answer plus some other bits and pieces that are worth keeping in mind when you’re dealing with suppliers in China and other parts of the world.
Minimum order quantity, or MOQ, refers to the smallest number of items you can purchase at once.
It can apply to almost any form of goods, from toys and clothing to air conditioners and building materials.
When you’re researching suppliers as a retail or wholesaler, taking minimum order quantity into account is important. You don’t want to land on the exact product you want, only to realise you need to buy at least 5,000 of them at one time.
What is minimum order quantity? The term applies to the customers of manufacturers and wholesalers. A manufacturer will sell goods with minimum order quantities to wholesalers, who apply different MOQs to their retail clients. Then retailers go on to sell far smaller quantities to consumers. It’s not common for retailers to sell minimum order quantities unless things are packaged, e.g. a six-pack of picnic plates.
If you desperately want to purchase something but don’t need the MOQ, you don’t necessarily have to order that many. However, the price you pay will reflect the minimum order limit. So it’s possible to pay for 600 of an item but only order 500, for example.
Scan through a website like Alibaba.com and you’ll see plenty of listings with minimum order quantities ranging from 10 pieces into the several thousand.
It costs money to design a new item and create a way to manufacture it. If you’re only interested in purchasing a handful of items, it’s not worth the effort for the manufacturer. They need to know the lowest number they can sell in order to start making a profit. Once they have identified this, they will make their buyers aware of it.
The larger the order number, the more money the supplier stands to make because they minimise end to end production costs. Having a clear minimum also makes it easier to control cash flow.
A minimum order quantity means there is less need for manufacturers to have items on standby as well. They can calculate their profit points and then only make to order based on a request that makes sense from a production perspective.
In a manufacturing hub like China, having strict MOQs is an important strategy for remaining competitive and staying on top of costs. It reduces the need to constantly be interacting with large numbers of buyers who only want to purchase a handful of items, meaning manufacturers can operate in a more efficient way and pass savings onto their clients.
The industry standard of setting an MOQ also saves manufacturers from dealing with ‘tyre kickers’. If you’re in business, you’ll know all too well that dealing with people who aren’t really serious about making a purchase is a waste of time. By being clear on buying limits upfront, manufacturers are saying ‘Goodbye’ to the customers they don’t want, often without even speaking to them.
MOQ benefits you as the wholesaler or retailer as well. You’re getting a better price by buying in bulk because you only have to go through the ordering process once and you will only have to wait for one delivery. If you have the storage space to accommodate your orders, it’s worth taking advantage of.
A simple MOQ takes standard profit calculations into account. For example, a manufacturer may know how many swimming pool toys they need to produce at a time in order to make a profit.
Orders pertaining to size based items or things with a number of different parts may require more complex MOQ formulas because the process involves more than one calculation.
If you’re confused about the reasoning behind an MOQ, speak to your sourcing company. Your point of contact will probably be able to decipher it for you.
Right now, with shipping at a premium and many manufacturers in China feeling the pressure due to COVID lockdowns, you may find MOQs are higher than they have been in previous years.
This is especially the case with Australia, which is seeing ‘jams’ at many international ports for a number of reasons.
There are always workarounds and risk mitigation strategies when it comes to shipping. Reach out to your sourcing company partner to discuss your goals.
You may find a product you think will work for your business but be a little nervous about the minimum order quantity.
The good news is you can usually request a sample. This will be sent to you via airmail and should arrive relatively quickly. Ordering a sample gives you the opportunity to test the quality and see if the item matches the description as well as your expectations. Once you’re confident you’ll be getting what you want, you can go ahead and make a larger order.
At Epic Sourcing, we walk our clients through the product sourcing process and always recommend ordering a sample before making a larger purchase.
The meaning of minimum order quantity is just that - minimum. You can always exceed it (and manufacturers will usually be happy if you do).
Sometimes, you’ll see an MOQ next to a couple of different prices, for example MOQ 10,000, Price $10 - $15.
Generally, the higher price will match the MOQ. So order 10,000 units and pay $15 for each. Increase the number of items you purchase and the price will edge closer to $10 per unit.
Here is a list of tips from the sourcing agents at Epic Sourcing when it comes to minimum order quantities:
You can then up your next order based on your customers’ response.
Many manufacturers set an MOQ but won’t respond to emails from you, even if you’re definitely interested. This is why you need the help of a sourcing company, even if you know the meaning of minimum order quantity and other common terms.
Going back to the point about efficiency; busy manufacturers don’t want to lose time. They need to work with people who speak their language (literally and figuratively) and understand the process, from product development to MOQs, shipping and beyond.
If you’re not getting the response you were hoping for when you make enquiries and attempt to negotiate, reach out for help. At Epic Sourcing, we have relationships across a number of Chinese manufacturers, and people on the ground who make the communication process much smoother for everyone.
Want help to understand what is minimum order quantity and answer the question “do suppliers have minimum order quantities?” Contact Epic Sourcing today.