When looking for suppliers for their e-commerce businesses, some online merchants hear the term “MOQ” for the first time. And it is not uncommon for them to type something like, “MOQ meaning” into Google.
But what is MOQ, actually? Well, in this comprehensive guide, we will explain what the term means and the relationship between MOQ and the dropshipping business model.
MOQ meaning: What is MOQ?
MOQ is an abbreviation for “Minimum Order Quantity”. It is the minimum amount of products that you, as a buyer, can order from a seller at a time.
This refers to a minimum order requirement that a seller sets. And you must meet that requirement if you want to do business with the seller.
MOQ is specified in a few different ways, including units, pairs, boxes, etc. Sometimes, you can also find suppliers/sellers that would ask you to spend a minimum amount, let’s say $300, for an order to be processed. This means that you need to place an order of above $300 for a purchase to happen.
Let us give another example to put things in context. Take for instance the following scenario: You are a new retailer looking for a manufacturer to buy products for your business.
But when contacting the manufacturer, you realize that they have a MOQ of 500 units. You are a bit confused when finding out that. And you try to understand the MOQ meaning.
But let’s make it clear from the start. If the manufacturer has a MOQ of 500 units, it means that you must buy at least 500 items at a time.
It is also important to understand that most industries vary widely in terms of MOQs. But some categories and industries in e-commerce have reasonably high MOQs.
Why do certain companies have so high MOQs?
Again, in some industries, MOQs can get as high as thousands of units. This is commonplace on sites like Alibaba. But you can start dropshipping with Alibaba without having to deal with minimum order requirements.
Let’s get back to the point. Suppliers and retailers tend to have lower MOQs compared to factories and manufacturers.
But why do certain companies have so high MOQs? There are no strict rules or criteria that manufacturers, wholesalers, or other companies have to follow when coming up with their MOQs.
Different companies calculate their MOQs differently. But as a rule of thumb, they consider a few factors when calculating their MOQs.
Some of these factors include the total amount of all production expenses, production cost per unit, product demand, their minimum desired profit per unit, etc.
Without MOQs, some companies, particularly manufacturers, would not be able to make a healthy profit.
MOQ meaning: Benefits for sellers
MOQ has a few advantages and benefits that are attracting sellers – mainly manufacturers and wholesalers. Here are three benefits a seller could get by having a MOQ set in place.
• Improved cash flow
If e-commerce sales are growing at a very slow pace, those sellers may not be headed in the right direction.
Remember that even growing, profitable companies sometimes deal with cash flow problems when their finance and operations fail to run efficiently.
But when sellers have MOQs set in place, they can more easily manage their product prices and order sizes. As a result, they are more likely to have a healthier, more predictable cash flow.
• Smooth production process
One of the main reasons why sellers have minimum order requirements is that a MOQ is associated with a sound production plan.
With MOQs, sellers can ensure that their manufacturing process runs as smoothly and efficiently as possible. This contributes to a smooth manufacturing process and flow.
• Lower inventory management costs
Frequent dips in sales may result in increased inventory levels. Such fluctuations in demand may be a nightmare for sellers.
But, with MOQs, sellers do not guess the number of products their customers want. Moreover, they have a clear idea of how much stock they can really move.
Due to that, they can better organize and manage their inventory. And this may result in lower inventory management costs.
MOQ meaning: Benefits for buyers
Besides sellers, buyers can also benefit from MOQs. So, let’s see why a buyer would like to work with a seller that has a MOQ.
• Better price per unit
Buyers, who source their products from sellers with MOQs, often get the best price per unit. That is to say when they buy a large number of products at a time (buy in bulk), the price of individual units is often lower.
The more they buy, the less each unit costs them.
Long story short, working with sellers with MOQs allows buyers to purchase a large number of products at a fraction of the “normal” cost.
This means better prices for buyers. And for them, it is a great way to reduce the overall costs for their businesses.
• Lower shipping costs
It is also totally understandable that buying in bulk means lower shipping costs. For instance, when a buyer buys from a seller with a MOQ, the seller sends the products in one shipment.
This also decreases the need to source from other suppliers, which can save the buyer a lot of money when it comes to shipping and delivery.
• Lower possibility of running out of stock
In today’s world, customers want to get exactly what they want and when they want it. And it comes as no surprise that stockouts are some of the most frustrating experiences for customers.
Stockouts may also contribute to missed opportunities to engage customers, lost sales & revenue, and potential damage to a business’s reputation.
Some products can be out of stock sometimes.
However, by working with sellers that have MOQs and buying in bulk, businesses are at a lower risk of running out of stock.
MOQ for dropshipping: What is MOQ and what you need to know about it when running a dropshipping business?
If you know how to start a dropshipping business and how this business model works, then you are probably aware that dropshipping is an order fulfillment method and that you (as a dropshipping store owner) are not responsible for keeping any inventory.
But still not understanding the MOQ meaning? You couldn’t become a dropshipper and work in the industry if all suppliers had high minimum order requirements.
It is impossible to buy in bulk, i.e., meet a minimum order requirement set by a supplier, because you do not even own a warehouse. Y
ou are a dropshipper (operating your business online), right? Where are you going to keep those products?
All this can be a bit confusing, especially if you are a first-time dropshipping entrepreneur. But worry not because most reliable dropshipping suppliers have no MOQ.
This means that to start and run a dropshipping business, you can order one product at a time from your dropshipping supplier.
Fortunately, reliable, certified dropshipping suppliers are familiar with the dropshipping business model.
They understand the importance of no MOQ for you. And they are willing to ship one item at a time directly to your customer.
However, there are wholesalers and manufacturers out there that claim to offer dropshipping services.
When you come across a wholesaler, manufacturer, or supplier with a MOQ, the first thing you need to do is ensure that they have a dropshipping program.
Keep in mind that some of them may require you to purchase their MOQ upfront. If this is the case, here is what you need to do. Sure, it is up to you to decide if you want to take such a risk.
Unable to meet the MOQ set by your potential supplier? Here is how to come up with a solution
In some cases, MOQ can be a little intimidating and pose a significant challenge when you are on the purchasing side, particularly if you are a dropshipper.
For dropshippers, working with dropshipping suppliers with no MOQ is a better and safer option.
Still, if you want to reap the benefits of working with a supplier with MOQ but you are not able to meet their minimum order requirement, here is what you need to do:
1. Ask for a lower minimum
Although this is the most obvious step, it is not the easiest one. Plus, many dropshippers tend to overlook it. Remember that manufacturers/suppliers/wholesalers/sellers do not have to “meet you halfway”. Sometimes, you can bargain for a reduction in MOQ by as much as 20%.
So, you need to try to negotiate a lower minimum. Just give it a try! You have nothing to lose.
For example, let the supplier know that this is the first time you are sourcing from them. Also, tell them that you would like to test how everything goes with a smaller quantity.
As long as the supplier you are negotiating with does not budge and still requires a high MOQ, do not get discouraged. You have more options to try.
Just read on.
2. Implement a pre-order system
If your resources are limited, i.e., you do not have enough money to cover the minimum order requirement set by your potential supplier, you can get the appropriate financing to meet your specific needs from your customers.
But how can you do that? Well, you can do that by setting up a pre-order system.
Simply put, your customers will place orders before you get them. This way, you can cover the MOQ.
Yeah, this is typical of the dropshipping business model. But when you set up a pre-order system, you only place an order (a bigger one) with your supplier when you have enough orders on your end.
Because of that, you can use this option only if you have an established customer base.
3. Mix and match your order
You may want to consider using this option, provided that your potential supplier offers dropshipping services. Yes, we know that you now understand the MOQ meaning.
But by using this option, you can order many different items from your potential supplier. However, you can do that without meeting the MOQ for each item individually.
Though you still need to meet the MOQ, there is no need to order a large quantity of one particular product at a time.
Again, choose this option only if the supplier has a dropshipping program and is able to send one product at a time to your customer.
4. Choose another dropshipping supplier
If none of these options works for you, you can always find and partner with a supplier with low or no MOQ.
There are many supplier directories out there where you can find a wholesale & dropshipping supplier with low or no MOQ, depending on your needs. For example, our supplier directory can help you with this.
Interested in sourcing products from trusted Chinese suppliers with low or no MOQ? Hiring a dropshipping agent is an excellent way to do so.
Your dropshipping agent might even own their own warehouse to store your products in. Sounds impressive, right?
And if you are still not sure how to find the right supplier or manufacturer for your product, do not hesitate to read our previous article.
The bottom line
Now that you have understood the MOQ meaning, you should be able to answer the question “What is MOQ?”.
We wish we could tell you that if you (as a dropshipper) worked with a supplier with a high MOQ, it would be an easy journey. But the truth is, it won’t.
Sure, retailers that have warehouses can benefit from working with suppliers that have MOQs. But this may be a bit harder for dropshippers.
So, as a dropshipper, you should either partner with a dropshipping supplier with low or no MOQ or choose one of the above-mentioned solutions.