MOQ is an unavoidable topic for buyers who want to import from China.
Many new businessmen may not quite understand the MOQ meaning. In this post, I will introduce you to the meaning of MOQ and offer some practical tips and effective strategies to help you get a lower MOQ.
What Does MOQ (Minimum Order Quantity) Mean in Wholesale?
MOQ is short for Minimum Order Quantity. It represents the minimum number of products a manufacturer or supplier is willing to sell.
MOQ sometimes referred to as minimum order size, can be measured in either units or dollars. Whichever best helps the business achieve its target gross profit margin.
Why is MOQ Important in Wholesale Business
When you buy products in stock, the MOQ is lower, or even no MOQ requirement, but it will be a low-margin business.
Imagine that all competitors can easily sell the same product, which can lead to high product homogeneity and fierce competition.
So you need to create differentiation through customization. And customization is usually accompanied by MOQ.
MOQ on Alibaba, Made-in-China, and Global Sources
When you have a purchasing plan and need to know the MOQ of a product in general, you can visit these Chinese wholesale websites.
On these wholesale sites, you can find out the prices of the products, and the MOQ requirements of the suppliers.
MOQ on Alibaba
On Alibaba, the price of a product is usually related to the quantity purchased. The minimum quantity requirement is the MOQ of the supplier.
For example, the MOQ of this standard bottle is 100pcs.
If you have a target price for the product, the minimum value of the volume range corresponding to the target price is your MOQ.
For example, if you want to buy a water bottle with a target price of $3.7-$4.1, then your MOQ will start from 5,000 or 10,000.
But the final price and MOQ are usually obtained after communicating with the supplier. The data here can only be used as a reference.
At the same time, the supplier will indicate the MOQ of the customized logo and the MOQ of the customized packaging in this position below.
MOQ on Made-in-china
On Made-in-china, the MOQ is given directly, like the picture below. At the same time, there is also a price range on the side of the MOQ.
The price and MOQ here are also reference values, and the actual situation can only be determined after communicating with the supplier.
But it doesn’t mean the MOQ here is useless. Take the example above, where the supplier states that the MOQ is 1,000. Through negotiation, you may be able to get MOQ starting from 800, but it is difficult for you to get MOQ up to 500 because the supplier needs to consider their cost.
MOQ on Global Sources
The MOQ displayed on Global sources is more like a combination of Alibaba and Made-in-china.
They clearly marked the MOQ and provided the product price range corresponding to the quantity.
What Kind of Products Require Higher MOQs and Why?
Generally speaking, customized products tend to require higher MOQ. Aspects of customization include but are not limited to logos, colors, materials, designs, accessories, packaging, etc. Some custom projects have to open a new mold.
These will incur additional charges. To cover these costs, suppliers often specify higher MOQs.
Usually, when customizing some mass-produced products, the MOQ will be relatively high, such as:
- Glass Bottle
- Plastic Water Bottle
- Thermos Cup
- Iron Box
However, when customizing some handmade products, the MOQ will be lower than those above, such as:
- Backpack
- Clothing
- Hat
- Sock
MOQ for these handmade products depends on their fabrics.
For example, a roll of cloth can make 200 pcs of T-shirts, so the MOQ of the T-shirt is 200 pcs. Because the MOQ of a fabric factory is a roll of fabric, the T-shirt manufacturer purchases at least one roll of this fabric.
If you only need 100 pcs of T-shirts (using half a roll of cloth), the manufacturer won’t be able to fulfill the order for you. Because they can not buy fabric from the fabric factory to make the T-shirts.
8 Practical Tips when Negotiating with Suppliers for Lower MOQ
MOQ is critical to your business goals. Although the MOQ is calculated by the manufacturer or supplier, it does not mean that you do not have any say in the MOQ.
We can still strive for lower MOQ with effective strategies. Here I summarize 8 common strategies to guide you on how to negotiate with suppliers for a lower MOQ.
Strategy #1: Fully Describe Your Plans with Suppliers
Whether you are a novice or a veteran, describing your procurement plan in detail with the supplier can gain the goodwill of the supplier.
Suppliers can learn more about you through your purchasing plan. If you are their target customer, the MOQ they give you will be quite reasonable.
Because he makes sure that you really want to do business, instead of asking about business information at random.
As you describe your plan for your suppliers, keep the following in mind:
First, you need to clearly describe what you want and the potential quantity. This kind of information will show the supplier that you are sincere, and this information will help the supplier calculate the most reasonable MOQ.
Second, for customized products, you need to know the direction of your customization. Say, you want to use acrylic instead of glass, iron instead of copper, etc.
For example, if you tell the supplier that you want to customize a product, but when the supplier asks you for customization details, you don’t know anything.
This will make the supplier consider that you are not a real customer to customize the product, at least you don’t have any idea. In their minds, this kind of business is very difficult to succeed. It’s also hard for them to give you a reasonable MOQ because they have less information from you. So their MOQ tends to be 50-80% higher on a no-loss basis.
Finally, you can describe your sales plan to the supplier.
For example, if you are a customer in the UK, your first target market must be the local market in the UK. But the UK local market is not your only market. You can tell the supplier that the first trial order will be to sell in the UK and also to test the feedback of the target customer on the product. If the product works, then your plan is to expand the sales channel through the Internet to the whole of Europe, or even other continents.
Describe your grandiose sales plan to suppliers as much as you can, but don’t exaggerate. This plan is based on your product research.
If you exaggerate your sales plan, you will make suppliers think you are just a corporate spy asking for information. The supplier might tell you MOQ starts from 5,000 instead of 500.
Strategy #2: Put Pressure on Suppliers
Although in the business negotiation, you should fully express your sincerity and determination to cooperate, the business negotiation is still a game between you and the supplier. So you have to put a little bit of pressure on suppliers to get the goddess of victory to come to you.
The best way to put pressure on suppliers is to shop around. Compare the quantity, quality, and price of products given by different suppliers, and use this information as a bargaining chip to negotiate with your target suppliers.
You can tell your suppliers, for example, that you’d love to work with them, but that you have alternative suppliers. Although the quality of the candidate supplier is lower than yours, it is still within your acceptable range. They offer a lower MOQ, if the supplier can’t accept your lower MOQ, then you will consider working with another supplier.
Such negotiations will increase competitive pressure among suppliers. If your target supplier wants to win the competition and win the order, he will have to rethink and calculate his profits. If they can still make money at the expense of some profits, they will try to get you to work with them by lowering their MOQ.
Because they know that if they don’t lower their MOQ, then their competitors will seize the opportunity. The end of the matter is that they lose the contract and there is no profit to be made.
Suppliers’ compromise on MOQ resulted in lower profits than expected, but they successfully secured orders.
For both of these outcomes, a smart businessman must know how to make the right choice.
Strategy #3: The Perspective-taking
The successful operation of an enterprise needs to consider many aspects of cost, such as raw materials, labor costs, transportation costs, energy consumption, machinery procurement, and so on.
The same goes for your suppliers, especially if you’re dealing with a real manufacturer, who can spend more.
During the negotiation process, you also need to see things from the supplier’s point of view. You need to understand the nature of the MOQ set by the supplier to cover costs and make a profit.
Once the MOQ you proposed will cause the supplier to lose money, the result of this negotiation can only be a failure.
Strategy #4: Please Hold on for a While
Please wait a moment before you make your final decision.
During this waiting time, suppliers don’t know what you’re doing or whether you’re negotiating with their competitors.
In this unknown situation, they worry about losing the order to a competitor. So if their MOQ is too high, they will take the initiative to contact you for information about your order. This is a good signal that they are eager to win the order.
This is a psychological tactic that is widely used in business negotiations.
Strategy #5: Cut Back on Custom Items or Go Straight to Stocks
Sometimes high MOQ is due to a lot of customization items.
Let’s say you need to buy a batch of sports water bottles. You need to customize your own color scheme, print your logo and customize the box.
In this case, each custom item has a separate MOQ, because the bottle manufacturer is mainly responsible for making the bottle, but he does not make the box.
Boxes are mainly purchased from box factories, so this MOQ is determined by the box factories. The same MOQ for logo printing is also determined by the printing house.
Even if the MOQ for customized colors starts from 200-300pcs, the MOQ for the printing logo may be 500 pcs, and the MOQ for the packaging starts from 1,000 pcs.
This will increase the MOQ of your sports water bottle from 200 pcs to 1,000pcs.
So in this case, to get a lower MOQ, you can either reduce custom items or buy products in stock directly.
Strategy #6: Change Your Payment Term
Common payment methods are 30% deposit in advance, 70% balance before shipping or 50% deposit in advance, and 50% balance before shipping.
But in order to get a lower MOQ, you can choose to increase the deposit ratio or even 100% in advance. In this way, the supplier has more deposit to deal with this order, and they also think that you have enough sincerity for cooperation, so they will consider reducing MOQ to a certain extent to achieve cooperation.
That is, of course, if you have a good working relationship with the supplier. If it is a new vendor, this strategy can be risky.
Strategy #7: Store Packing Materials
In the case of the bottle mentioned in Strategy #6, if the MOQ of 1,000 is really out of your reach, then you can reduce the MOQ by storing packaging materials.
In the above case, the MOQ started from 1,000 mainly because the MOQ of the packaging factory was too high. But you still want to make your own packaging, so you can order 200 pcs of bottles and order 1,000 pcs of boxes.
All you have to do is ask the supplier to send you 200 pcs of the bottle. What about the other 800 boxes? Storing them in the supplier’s warehouse, of course.
In this way, the MOQ can be effectively solved because of custom packaging. At the same time, the procurement cost can also be effectively controlled.
Strategy #8: Show Sales Data of Your Best Sellers
In general, the supplier’s standard MOQ is for the general customer. For example, we are general customers and need to buy a batch of sports water bottles. So we might get MOQ starting from 500.
However, when I communicate with the supplier, I reveal to him that I am a seven-digit Amazon seller and show him my Amazon sales data.
Then in the eyes of the supplier, I am not on the same level as you. They think I have more potential because I have proven myself to them. So during the testing phase of the new product, they were more willing to lower the MOQ to support my business.
In this case, my MOQ might start at 200. While the MOQ for you still is 500.
So if you have success stories, don’t skimp on your sales data. You can show it to your suppliers.
Another thing to remind you of is privacy. You can blur key pieces of information. Because it’s your business secret, you don’t want to show it to anyone. All you have to do is let the supplier know that you are a good seller and that you have achieved your goal of lowering the MOQ.
4 Final Solutions in Case You Can Not Meet MOQ when Importing from China
The above 8 practical tips can be applied to the negotiation process with suppliers.
But we can’t guarantee that every strategy will work, so you can try them all.
If you are really cornered, you can use the following ultimate solution in case you can’t reach MOQ.
Deal with Other Distributors Instead of Manufacturers
Distributors, acting as brokers between buyers and factories, can place joint orders on behalf of several buyers at once.
This allows a particular manufacturer’s MOQ to be split among multiple buyers, lowering it for everybody.
Or a distributor may purchase large quantities of the product from the factory as inventory. For example, if they buy 100, 000 pcs of products at a time from a factory, they may get 30-40% off of the normal wholesale price.
They then sell it back to you at the standard wholesale price, pocketing the difference.
For you, the prices are standard wholesale prices, but you can start with a smaller MOQ, say 200, rather than the 100,000 you trade directly with the manufacturer.
Try Aliexpress or Dhgate for Lower MOQ
You can also try some of China’s Business-to-Customer platforms, such as Aliexpres and Dhgate.
The main function of these online platforms is to retail Chinese products to the rest of the world. Since the merchants on these platforms are located in China, close to the source, it is profitable even if you retail from them and resell the products in your country.
Because these platforms are retail-focused, you can get the product you want at a lower MOQ. Note, however, that these platforms generally don’t support customization. This is also the limitation of this solution.
Slightly Higher Unit Price in Exchange for Lower MOQ
While this option may not be feasible for many buyers, paying a higher upfront cost for a smaller order can allow buyers to save on transport, storage, and other costs in the future.
Work with a Sourcing Agent to Negotiate on Your Behalf
Sourcing agents in China can negotiate with suppliers on your behalf and integrate some production resources to support the lower MOQ.
There is no surefire method of lowering a supplier’s minimum order quantity. But by hiring an experienced China sourcing company, locally based and professional team, you can rest assured that you’re getting the best quality service for a fair price.
How to Determine MOQ? The Right Calculation Formula You Need
Since MOQ is so important in the business of importing from China, you might want to find a one-size-fits-all formula to easily calculate the manufacturer’s MOQ, as if the total price of the product purchased is equal to the unit price of the product multiplied by the quantity.
But actually, the calculation of MOQ is not an easy task.
Each manufacturer and supplier will get their wholesale MOQ through reasonable calculation according to their own actual situation.
Although there is no one-size-fits-all formula that can be applied, the MOQ calculation formula for manufacturers and suppliers usually takes into account the following aspects:
- Raw Material Price
- Labor Cost
- Machine Cost
- Material Loss
- Tax
- Energy Consumption
- Packaging Scheme
- Other Expenses
For the factors mentioned above, it is difficult for buyers to know the actual production situation accurately, so it is difficult to calculate a reasonable MOQ. Often they can only passively accept the MOQ requirements of the manufacturer or supplier.
Conclusion of MOQ Meaning Tutorial
For MOQ, it is not easy to find a balance point satisfactory to both the manufacturer and the purchaser in the negotiation process.
You need to communicate strategically with suppliers from multiple perspectives and ensure that your MOQ is met as much as possible within acceptable purchasing costs.
At the same time, it is also from the perspective of suppliers to understand the rationality of their MOQ formulation.
Chinasourcify is a team of expert China sourcing agents that has helped small business owners, including but not limited to startups, Amazon sellers, retailers in Google, and so on, manufacture and source products with lower cost since 2018.
If you have any questions about MOQ, or you want to import products from China, we‘re willing to help you, please submit a free sourcing RFQ or leave comments without hesitation!