MOQ Meaning: What is MOQ ? & 7 ways to reduce MOQ

When we are sourcing products, we often encounter “MOQ” issues when communicating with factories or suppliers. If the overall purchase volume is relatively large, there is no worry, but for some entrepreneurs or buyers who develop new products, we often encounter when it comes to the negotiation and communication of MOQ, what methods do we have to solve such a problem? First we need to understand the origin of MOQ.

MOQ Meaning

Table of Contents：

Ⅰ. MOQ Meaning / What does MOQ mean?

Ⅱ. Why do factories or suppliers have MOQ requirements?

Ⅲ. Packaging customization and MOQ relationship

Ⅳ. How to meet the MOQ?

Ⅴ. 7 ways to get low MOQ from manufacturers?

Ⅵ. MOQ Meaning: Conclusion

MOQ Meaning

MOQ is the abbreviation of “Minimum Order Quantity”, which refers to the minimum production quantity or shipment quantity that the supplier is willing to undertake when placing a single order with the supplier. The MOQ is usually formulated by the manufacturer or distributor of the product, in order to ensure that they can guarantee their own profit every time they produce or sell it. Regarding the negotiation activities of MOQ, the ultimate goal is only one, try to find a minimum quantity that we can undertake and the supplier can also accept.

Due to the different materials used by different manufacturers and their different regions, their material costs, labor and even water and electricity costs will be vary. Therefore, when formulating MOQ, the quantity they accept is also varied, up to 100,000. down to 100 is possible. In some special cases, some suppliers could provide customized services for customers, the MOQ can even reach just 1 at this time.

Why do factories have MOQ requirements?

MOQ meaning is the minimum order quantity. If you know or set up a factory before, you will know that opening a production line every day has a fixed cost (basic labor fee/electricity fee/machine loss fee/material consumable fee), if the order quantity is not enough for a day or half a day’s production capacity is equivalent to a loss, only exceed a certain amount of production can be profitable. Manufacturers are faced with staff shortages on the one hand and restrictive conditions on the other. The standard scale problem is difficult for employees to grasp, so MOQ requirements come.

• Profit balancing requirements after product line start up

When formulating MOQ, it is usually determined by the supplier according to its own single production cost. The production process of large quantity order entered the assembly line. Once the assembly line is opened, only one product is produced, which is completely inconsistent with the manufacturers’profit. Therefore, how many products can be produced in a single production process, then this production quantity is likely to be directly used as the factory’s MOQ. MOQ can also be formulated according to the amount, but the MOQ is specified according to the amount, and its essence is only the specified quantity.

• Low profits require more sales

Most China manufacturers tend to operate on thin profit margins, usually as low as 3% to 10%(Different industries are different), and low profit margins require suppliers to produce large quantities of products to break even.

• Supplier’s MOQ requirements reflect the MOQ set by their material suppliers

Chinese suppliers tend to keep raw material and component inventories to a minimum. As a result, they have to purchase materials and components from suppliers according to the order, which in turn requires factories to be able to meet their suppliers’ MOQ.

• Most Chinese manufacturers are reluctant to stock products

Most Chinese factories are reluctant to keep stock products, because the stock will occupy the factory cash flow, unless the factory has its own brand and has a separate sales channel, so they will prepare some of the stock for their own online and offline channels, they generally require “custom-made” without inventory.

• Define MOQ to filter clients

The importance of MOQ is mainly reflected in the aspects of factories and suppliers. By setting up MOQ, suppliers can protect their own profits, and at the same time automatically filter out target clients which are not their service intentions. For e-commerce groups, the importance of MOQ is mainly reflected in finding suppliers that meet their needs. Some e-commerce groups are relatively small in scale, and the amount of each order is not high. Such groups need to find suppliers who can provide them with low MOQ to avoid higher costs. And large companies are not without such troubles, they also have to find producers who can provide them on time and in quantity. If you choose to purchase goods from multiple manufactures, there may be differences in the materials and quality of goods supplied by different channels, increasing unnecessary risks to the final satisfaction of consumers.

Packaging customization and MOQ’s relationship

Gerneral packaging are prefabricated general purpose packs with little customization in size, color, shape or finish. Gerneral packaging can be mass-produced at low cost, but is limited to standardized box sizes, colors and styles that do not reflect the brand’s unique message or identity

The gerneral packaging is ready-made for easy immediate use. It is usually the default choice for shipping warehouses. As the name suggests, the gerneral packaging is provided with little customization. Since it’s not designed for your needs, it will have a basic and generic look and feel.

Custom packaging is packaging that is uniquely tailored from the ground up around a company’s specific needs. The custom packaging process includes modifying the shape, size, style, color, material, varnish and other specifications of the packaging.

When use stock packaging vs custom packaging?

You should use general packaging when:

• You want to test different marketing options and don’t want to undertake the expense and time of custom printing until you’re ready.
• You are a startup company on a tight budget looking for an economical way to conduct market tests or run other promotions.
• You are facing a production shortage and need to bring available products to the market as soon as possible.
• You are preparing to distribute exhibition samples to attendees.

General packaging

You should use a custom packaging when:

• You have a hign-end product and you want to create a sophisticated look.
• You want to take advantage of the product’s custom box design or shape options.
• You want customers to unbox your product and share their reactions on social media
• You need or want unique and out-of-the-ordinary packaging, and you’re prepared to pay more for virtually limitless customization options.
• You need a lot of printed packaging, and you want every aspect of packaging production to be tailored to your specific needs.
• You have a subscription box service or an e-commerce type of service and want to highlight your product in a unique way.

Custom packaging

So what does packaging have to do with MOQ?

Packaging and printing is a very competitive and thin-profit industry. If the custom packaging customer’s design file is complete, the quantity meets the MOQ requirements, and the production requirements are clearly explained, the price is negotiated between the two parties, and the factory can start work immediately after taking the information. In fact, although the profit is small, but can be obtained, the factory is still willing to do it.

If MOQ is a small order, the manufacturer generally does not like to take orders. why?

The reasons are as follows:

• The business is too good and the production capacity is limited. Which customer’s order makes money, which customer will be picked up first. Customers who are sensitive to price / have many requirements / have poor future expectations during communication will be directly sifted out by the manufacturer.
• The cost of communication between the two parties is high. The two sides chatted for a long time, then the profit was gone.
• The production resources, service resources and production cycle of small orders and large orders are similar. The rate of return on time is different!

For the factory, small orders cannot support the factory at all; for salesmen, small orders cannot complete the performance. Doing a small order depends on salemen’s mood.

Therefore, whether the factory has customized requirements for your packaging will also affect the negotiation of MOQ.

How to meet the MOQ?

You know what does MOQ stand for, and it’s a lot easier to define MOQ more than what you just learned when you started your business online. Many manufacturers have high minimum order quantities. If you are just starting your business now, you have to solve the problem with smaller quantities and find the right suppliers. If you start going through a lot of negotiations related to MOQ issues, it’s best to keep looking for other supplier. The process is about finding the product and supply chain that suit you and your business best, not trying to meet the needs of large supplier’s requirement and MOQ. Still, many manufacturers are offering low MOQ requirements. You can read a list of some of the most trusted and dedicated e-commerce vendors, do your research on Google, and ask people who are already in the industry, and it will save you a lot of nervousness and further misunderstandings. Remember, each vendor’s MOQ is different, so do your research and choose wisely. Your business depends on this. Of course, there are also options like AliExpress or Alibaba MOQ that allow smaller quantities. It’s great for startups to purchase a minimum amount of products, because you can sell those items faster and easier later on. Paying a lot of money in advance is not a smart decision.

7 Ways to Get Low MOQ

As a buyer, often encountered that the MOQ cannot be reached. What are the ways to reduce the buyer’s MOQ requirements in the negotiation with the factory?

1. Manufacturer’s inventory inspection method

Consult the factory for ready-made products. If you have an off-the-shelf product, check your inventory to see if there is enough stock for your order. If the product is in sufficient stock, there is no MOQ issue.

2. Increase unit price

If you really can’t find inventory, you can only solve the MOQ issue head-on. You can increase the product unit price or increase the MOQ volume, such as from 30% MOQ to 50% MOQ. Attached wiht a purchase order to the manufacturer, and if they still refuse and offer no other terms, then you can be sure they really can’t lower the MOQ.

3. Patchwork order

If the previous methods fail, buyers can see if there are other orders that can be handed over to the factory. If there are orders for B products, then the loss of the A product order that cannot meet the MOQ can be transferred to B order. If the factory’s products and strength are good, the buyer can parch these two orders and send it to the manufacturer for delivery.

4. Order deduction

If you are a long-term cooperative client of a manufacturer as a buyer or a major customer in the future, then the factory is willing to make this order even if loses money. You can maintain a long-term cooperative relationship with the factory by catching big fish with long lines. Help them make up for this loss in later orders.

5. Increase negotiation skills

• Place sample order

Be sure to ask the supplier for a sample before placing an official order. After confirming the quality of the products produced by each supplier, the MOQ is calculated. Note that the quotation and MOQ of each supplier’s products may be different.

Note that when you purchase a sample order from a manufacturer, tell them that you intend to continue working together. Tell him that you are asking for samples to inspect the goods first, and the size of the final order will depend on the quality of the samples.

• Say you are a first-time seller

As a seller, I believe you can consider it from the perspective of a supplier doing business. So don’t tell the supplier that you’re not sure if the product will sell, or that you don’t have enough money to buy more quantities. In this way, the supplier will ignore you, let alone cooperate with you.

You have to say that this is the first time you buy from him, and at first you want to buy small orders for testing, the quantity is about 20–25% MOQ. Usually suppliers will accept this request immediately, they will think you are really buying and not just asking for price.

However, be mentally prepared, the final price of a single product may be higher than the MOQ price. If you think it doesn’t matter, you can place an order.

If your product needs to be customized, the supplier will generally not accept small orders, because they may have to design and purchase special parts if they want to produce customized products. But you can still try to negotiate with the supplier to reduce the MOQ by 30% or more.

Let the supplier know that you Pay attention to the smooth completion of your first order. First provide your requirements for product production, and then negotiate with the manufacture to reduce the MOQ. Tell him that you want to gather feedback from the market to improve the product before placing a large order.

During negotiation, the reduction range is best controlled within 30%. If the MOQ you quoted is too low, the supplier will not be able to collect the cost, and the negotiation will not be successful. If the supplier is unwilling to compromise, then try the next strategy.

• Understand suppliers and express the idea of long-term cooperation

If the previous negotiation failed, then go on to show that you understand his position. Tell the supplier that you will never let him lose money and that you have a long-term partnership in mind.

Negotiate in the vendor’s shoes, and if they understand, they may accept your MOQ.

• Sincere communication

You don’t have to be very professional, as long as your overall tone is genuine when talking, you can proactively explain your ability to sell products and assure them that you are a excellent buyer. If their MOQ seems more difficult than others.

Reiterate that you will spend money on promoting this new product. Provide detailed information such as the percentage of freebies and how much you will spend on advertising. Straight to the point.

When negotiating, you shouldlet them know clearly : although you think this supplier is the most suitable, you currently have other suppliers to consider. If they cannot agree with the MOQ you propose, you can only look for other suppliers.

The best response time to the manufacturer is 48 hours. If the other party is only an employee, there is time to ask the boss and give you a specific answer.

6. Split cost

Maybe some manufacturers are still unwilling to provide you with products according to your MOQ. However, they’re not necessarily reluctant to work with you, they just can’t accept the MOQ. At this time, you can also continue the negotiation with slight changes in other conditions. Specifically, it depends on which of the following aspects the manufacturer has difficulties:

• Machine start-up costs

If the supplier says the problem is machine startup costs, you can tell them you’re willing to share partial cost. This shows that you are flexible and take working with them seriously.

• Special parts

Maybe the supplier can’t accept your MOQ because they have to buy the special part to customize it. In this case, you can ask them if you are willing to pay for the parts cost of this order, so that they can accept your MOQ. After all, your first order must also ensure that the part is suitable.

7. Find a sourcing agent or trader for purchasing

Why finding a sourcing agent and trader can solve the problem of low MOQ? Because these purchasing agent have a fixed supply chains, they belong to long-term cooperation. Even if an order is less than the MOQ requirement of the manufacture, the manufacture is still willing to produce it because the factory does not want to lost the big client. But if you contact with the factory directly, and they have never cooperated with you before, they will only think that you are just a small customer, and will not lose its profits in this order. Therefore, you can communicate with the manufacturer and also with the sourcing agent, and you will know who has the advantage by comparison.

MOQ Meaning: Conclusion

We hope this blog has given you a better idea of the overall MOQ meaning and best way to reduce MOQ.

As we’ve said time and again throughout this blog, MOQs are set for a reason. So, although negotiation is expected you need to ensure what you’re asking for is reasonable.

Remember, MOQs are set in place to cover the costs of doing business. So, if the supplier’s demands are entirely out of your reach, then its best to contact a different supplier.

Alternatively, if you’re at a stage in your business where you can’t afford to buy products from any supplier, consider using wholesalers or drop shippers instead. Entrepreneurs love these business models because they can buy products one by one rather than shelling out for a massive number of products in one go.

Have you got any experience using a supplier? or Have you encounter MOQ issues, you can contact with us by email (info@rz-sourcing.com),we can help you to slove this issue.