How to figure out your Min Order Quantity
The lower your min order, the more attractive it is to retailers. Here’s a guide to determine what’s right without breaking the bank or your brand.
You’re a maker not a mathematician. But once you get past this step you will be able to sell more and make your business more cost effective to run. So pull out that calculator.
But first let’s add a distinction between Min Order Quantity and Total Min Order.
The Min Order Quantity (MOQ) is the smallest quantity a retailer has to order per SKU. This is a unit.
The Total Min Order is the total order amount of all SKUs added to the cart. This is Dollars. Let’s not worry about this for a minute.
Back to MOQs. If you ever checked out Alibaba you might’ve seen insanely huge MOQ of 5000 or 10,000 units. But we’re not into mass manufacturing. Handmade is about small batch production.
The rules are different here.
Most MOQs for makers on SKUE vary between 1 and 10.
For example, If you make soaps, it could one bar of soap or 10 bars of soap.
You might sell it in a case of 6. If you are ok selling one case of six soap bars per order then your MOQ is 1 Case.
If you’re ok with just one soap, then your MOQ is 1.
But since you are doing wholesale, it’s a balance between bulk quantity and how much the retailer is comfortable ordering.
There are two parts to this
How much can you afford?
What would make a good collection?
How much can you afford?
To calculate this, think about the cost of production. Add up the materials, packaging, labor and you’ll get to a good number. Wholesale is about bulk, so what if you are going to sell at half your retail price, how many soaps need to be ordered to put you at a profit.
Let’s say the retail price of a bar of soap is $8.
Then the wholesale price should be $4
Your cost of manufacturing should be $2.
Typically it’s hard to make much profit if you are selling it at $4 wholesale. You may get some returns or need to make some concessions for reorders.
So you may decide to sell it in a case of 6 soaps.
Now your MOQ is 1 case which is 6 x$4 = $24 maybe give some concession and make it $22.50 which is the case of Whispering Willow featured here.
That sounds more reasonable.
Then you get to the next part:
What would make a good collection?
Imagine if a retailer stocked only lavender soaps from your collection. Would that really make a great display?
Probably not.
When customers shop they need to see your range. Decide your MOQ so the retailer has the license to showcase your collection in the best possible way.
You may require retailers to add at least 1 case of each soap variant.
1 Case Yuzu
1 Case Lemongrass
1 Case Peppermint
And so on….
Which gets them to the Min Order Total of say $150
So let’s bring it all together.
Every category has it’s own MOQ. Based on the category, the MOQ varies.
For handmade furniture like a stool it’s 1
For large bags it’s also 1
For small purses it could be 3
For stationary 1 case of 10 cards and so on…
By deciding the minimum quantity and the min order total, you can help the retailer and guide them towards stocking your product to shine at their store.
Vinit is co-founder of SKUE, a marketplace for makers to get retail ready and sell to stores. If you are a maker selling handmade product and think you are ready for wholesale, apply here.
