If you’re entirely new to eCommerce, learning a few basic concepts can help you go 5 steps ahead of the competition. One of them is the Minimum Order Quantity (MOQ). MOQ is particularly essential when you don’t manufacture your own products - i.e. when you’re a dropshipper. And as it stands, most online store owners either use dropshipping or buy stock from manufacturers wholesale.
The trouble is, wholesale manufacturers will usually require you to purchase a minimum amount of a certain item (also known as “minimum order quantity”). In this guide, we explore MOQ and what you need to know about it so that your store can be successful.
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What Exactly Is Minimum Order Quantity?
Suppliers need to make their manufacturing process viable. So, they’re only willing to sell a volume of products that ensure they make a profit in their operations.
Therefore, a minimum order quantity is the smallest amount of product that the manufacturer can produce and sell to you at once. This amount varies among the different suppliers. For instance, a particular supplier might only do business with you if you’re ordering 50 units or more.
On the other hand, some suppliers only deal with large orders, say, 10,000 units and above. If you only want a specific amount to stock your Shopify store, you might find the concept of minimum order quantity a bit of a nuisance. Let’s take a look.
What’s The Use Of A Minimum Order Quantity?
You might order a certain amount of goods and the supplier might deny your order simply because it is less than what they have specified. From your perspective, it looks like the supplier is leaving money on the table by sticking to their guns. That’s a loss for both of you, right? Well, not necessarily.
If the supplier goes ahead and fulfills that small order, they might very well not turn a profit on that transaction. It’ll be good for you but bad for your supplier in the long run.
Before you know it, they’ll be out of business, and you’ll be searching for a new supplier. After all, they buy their raw materials in large quantities and spend a significant amount of money running the production machinery. So, to make a profit, they need to produce a specific amount.
Therefore, the minimum order quantity is good for both parties. The supplier makes a profit, stays in business and you retain a trusted source of goods.
In another scenario, your supplier requires you to order a specific amount because that’s the maximum they can get their hands on in one go. For example, their facilities might be small, requiring them to produce small batches of products. The MOQ can also be good for your business alone.
When you buy in bulk, you’re usually spending less on each unit item. By meeting or exceeding the minimum order quantity, you’re using less capital to acquire stock.
However, it’s not all roses with MOQ. It can be a hurdle to setting up your Shopify store. This is especially more pronounced if you’re a rookie in the eCommerce realm. If you have a limited amount of starting capital, you want to buy a small volume of items. Then, you’ll gradually increase the orders as your business grows.
But suppliers won’t be able to sell to you if they can’t make a profit on the small order you want. Dropshipping is usually the way to go if you’re faced with such a problem.
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How To Negotiate A Favorable Minimum Order Quantity
We neglected to mention something earlier. MOQ doesn’t necessarily deal with several products. Instead, manufacturers or suppliers might want a minimum value for an order. That means your order has to exceed a certain amount to give you the products you want.
So, if you’re starting out, you need to negotiate an order quantity or cost that doesn’t set your fledgling Shopify store back. Therefore, you need to know how to negotiate an MOQ that fits in with your business plan.
Lucky for you, we have a few pointers that could go a long way in securing your stock and at the same time satisfy your supplier. Here are a few ways to negotiate a favorable MOQ.
Ask If They’re Willing To Reduce The Order Requirement
Before you do anything else, ask your potential supplier if they’re willing to lower the minimum amount of units. You’ll be surprised to find that they can be amenable and lower the MOQ for you. Before you get into any further negotiation, you need to feel out the supplier.
Asking them shows if there’s wiggle room that you can work with. Also, it doesn’t hurt to ask. You don’t need to pull out your negotiation tactics straight away. A simple question could do it. However, if it doesn’t, you can always employ a few more tactics.
Pay The MOQ Value But For Your Desired Amount Of Goods
Sometimes, you’re really set on getting a specific amount of goods. This is usually because you don’t have the storage to keep any more than that.
On the other hand, meeting the minimum order might Ask the supplier if you can pay the full value of the minimum order but still get the specific number of items even if they’re below their required amount. It might cost you more for each unit, but at least you get the number of items that you needed.
Cover The Set-Up Costs
Like we’ve stated earlier, many suppliers specify a minimum order quantity so that they can break even. That value of that amount of goods offsets the cost of producing them. Therefore, coming in with a smaller order doesn’t benefit them. To remedy this, you can offer to cover the cost and fees for setting up the production run for your smaller batch.
Yes, you’ll pay more per unit. However, what you pay now is definitely less than what it would have cost to meet the MOQ.
Lower Your Product Quality
You can stay within your budget and meet the minimum order amount if you lower your product quality. This is because it will cost the supplier less and, consequently, reduce the MOQ as well.
This is advisable only if the lower quality product is still acceptable to your target market.
Group Your Order With Another Customer
It might rarely come to this, but if you really want to meet the minimum order without paying for all of it, partner with another entrepreneur. Granted, they might be your direct competitor. However, you need to work together to get the exact number of items you want without breaking the bank.
The drawback to this, especially in eCommerce, is to find a Shopify store owner willing to partner with you. Many of them will already have their own suppliers. Alternatively, they might be flush enough to meet the supplier’s MOQ.
Set Up A System For Pre-Orders
If you don’t have the funds to cover the minimum order, you can always source it from your customers. Set up a pre-order system. Clients order products before you get them. When you have enough pre-orders, you can use this money to cover the minimum order quantity. With this in place, you can then fulfill your clients’ orders.
The drawback of this method is that it might be nearly impossible if you don’t have an established customer base.
Manufacturers and suppliers need to make a profit when providing items for your Shopify store. A minimum order quantity ensures that they do. However, you might not always be able to meet this quantity.
We’ve explored some of the ways you can negotiate with your preferred supplier. Negotiations won’t always be successful. Therefore, you’ll need to move on and try doing business with other suppliers. Alternatively, you can run your store on a dropshipping basis.
Minimum order quantity (MOQ) is something every dropshipping entrepreneur should pay attention to, just like having an excellent Shopify theme. Download Debutify - the free top-converting theme for Shopify stores.