If you're in the business of hawking products online (A.K.A, an e-commerce entrepreneur), one of the core concepts to learn is Minimum Order Quantity (MOQ).

To keep costs low, most top manufacturers won't let you purchase tiny portions at a time. Large orders let them slash administration, packaging, and shipping expenses—bulk buying power pays big dividends in the e-commerce game.

Before you let MOQ scare you off a certain supplier, learn all about it so you can negotiate a deal that's actually worth your while.

What Does MOQ Stand For?

Minimum Order Quantity: the minimum amount of goods a supplier is willing to sell in a single order.

Sellers set minimum orders based on the costs involved in manufacturing or selling goods. In other words, they want to ensure that they profit from each batch.

For example, a factory that specialises in custom-printed mugs would set their MOQ at, say, 250 mugs. Since setting up the printing process for a batch of mugs takes a lot of effort, selling just a handful of mugs won't be worth their time. But processing 250+ mugs per batch? Now the factory can recoup its expenses.

Low MOQ vs High MOQ

Some factories have stricter MOQs than others. If a company sets a high MOQ, this means you need to buy in bulk to hit their minimum.

Is low or high MOQ better? It all depends on your situation:

• A buyer looking to buy in bulk at a rock bottom price. A uni student shopping for graduation gowns, on the other hand, doesn't want more than a single gown.

As you can see, "better" is entirely relative to the buyer's needs.

What Is an MOQ Supplier?

An MOQ supplier is a manufacturer or distributor who has set a minimum order for their products.

MOQ suppliers are common in manufacturing, especially those who make products to order. Whether a factory makes furniture, apparel, or plastics, they usually set MOQs to ensure profitability.

How Do You Calculate MOQ?

The MOQ is determined by the supplier, not the buyer. So, the supplier will tell you their MOQ rather than you calculating it yourself.

However, as a buyer, you can calculate the minimum number of products you need to buy to make a profit. After all, stocking your warehouse with a big order won't do you any favours if you can't sell the goods!

To calculate the minimum quantity to buy, you need to consider your goals. If you want to minimise costs, consider the carrying costs and demand for the product, among other things. You can then decide if a supplier's MOQ is worth it for you.

What Is MOQ in Dropshipping?

Dropshipping is a business model where the seller does not have to maintain a physical inventory of products. Instead, the seller partners with a third-party supplier to handle the inventory and shipping of products.

With dropshipping, sellers can avoid the cost and hassle of managing a physical inventory of products. This gives them the flexibility to offer a wide variety of products to their customers without having to buy and store them in advance.

The MOQ in dropshipping typically refers to the minimum quantity of a product that must be ordered from a third-party supplier.

How Do You Negotiate MOQ?

What should you do if a supplier sets an MOQ too large for your budget? Negotiating a MOQ is common practice. If you play your cards right, you can work out a deal that benefits both you and the supplier.

Before you start negotiating a MOQ, here are four things to keep in mind:

• Build a rapport. Business is about relationships. If you want a supplier to lower their MOQ for you, you need to be on good terms with them first. Get to know the supplier, show them that you're reliable, and treat them well. The supplier will be more likely to budge if they know and trust you.
• Offer a higher cost per unit. You can offer to pay a higher price for each unit in exchange for a lower MOQ. This offers a fair trade: the supplier gets higher margins on each unit, and you get to buy in smaller quantities. It's a win-win!
• Explore creative compromise. Say that the supplier's MOQ is 1000 units, but you can only afford 750. A creative compromise could be to ask to pay a deposit now, and then pay for the rest of the order at a later time.
• Accept standardised products. Custom products require more effort to make, which can lead to high MOQs. If you're okay with standardised products, then the manufacturer may be willing to lower their MOQ.

What Is a Good MOQ?

An MOQ varies greatly by supplier and product type, so there is no one-size-fits-all answer to what a "good" MOQ is. Rather, what's most important is finding an MOQ that's in line with your budget and business goals.

If you want to keep your financial risk low, a lower MOQ is a good idea. A high MOQ means you're spending more upfront, so you'll need to sell more goods to recoup your investment. But the advantages are typically lower prices per unit and lower shipping costs, which can lead to higher profits.

Final Thoughts

As a buyer, you have the power to influence MOQ negotiations. Finding the sweet spot between your financial needs and your supplier's requirements is key to making your business a success. Do your research, be creative, and build strong supplier relationships to get the best deals.

Need help navigating MOQ or finding reliable suppliers? Epic Sourcing Australia can help! Book a free consultation with our team today.