If you’ve thought about going wholesale with your business, then you’ll need to consider and establish an MOQ. This MOQ is also an important concept for established wholesale businesses that want to ensure reasonable profit.
In this article, we’ll cover the basics. We’ll discuss both the seller and buyer perspectives of MOQ and how a 3PL can help you to manage yours as a seller.
What is Minimum Order Quantity? MOQ Demystified
Let’s first answer the question, “what is MOQ?” which stands for minimum order quantity. Your minimum order quantity is the minimum amount of items that can be ordered from a wholesale company.
Without the minimum order quantity, eCommerce businesses might not be able to survive. With packaging, handling, and shipping costs that must be covered, this concept ensures that sales can be profitable.
Having a minimum order quantity is a good way to ensure that you have a healthy profit margin and are able to maintain a stable income.
High Minimum Order Quantity
There are some considerations to keep in mind if you’re thinking about establishing a high minimum order quantity. Firstly, you’ll need to invest a large amount into inventory and warehousing. You may need to buy 20-30 weeks of inventory to keep up with a high minimum order quantity.
Additionally, the risk of obsolescence increases with a high minimum order quantity. There’s a risk that demand may go down over time, leaving you with lots of inventory that you can’t sell.
However, there is an upside to having a high MOQ, too: Decreased ordering and administration costs. When you’re able to buy or create a large number of products all at once, you will tend to get better prices from your suppliers.
Low Minimum Order Quantity
Some businesses choose to adopt a low minimum order quantity. With a lower minimum order quantity, you won’t have to keep as much inventory on hand. You’ll also be more prepared to be flexible when demand changes.
However, a low MOQ means that you have to review (and order) your stock more frequently. When you buy less inventory more frequently, you are likely to run out of supplies if a large order comes in.
Summary: High MOQ vs. Low MOQ
There are pros and cons to a high and a low MOQ. The best choice is ultimately dependent on what type of business you have and how much stock you want to buy, as well as how frequently you want to place orders with your manufacturers.
How to Use MOQ as a Wholesale Supplier
What does minimum order quantity mean for a wholesale supplier? MOQ is a concept that can benefit wholesale suppliers when it’s used correctly.
Benefits of Using a MOQ for Wholesale Suppliers
There are several benefits to establishing an minimum order quantity if you’re a wholesale supplier. These include:
- Low Inventory on Hand: Implementing a lower MOQ means that you can produce and sell goods quickly, all while and keep inventory low.
- Increased Profit: Even a lower MOQ can increase your profits. It all depends on your production and demand cycle.
- Guaranteed Profit: With an MOQ, you can set the price per item, and guarantee that you’ll make a certain profit off of that item every time it is purchased in bulk.
How to Earn Big with MOQ Terms
When you don’t sell in bulk, you have no control over how many items are ordered at a time. This can affect your bottom line. With an MOQ, you can guarantee that you’ll get a certain profit every time products are purchased.
For example, if you set the price of your product at $15 per unit without an MOQ, you cannot control how many items will be sold per order. If a customer buys a single item, you may end up paying quite a bit for shipping.
Now, let’s add an MOQ. Let’s say you choose an MOQ of 15 units and set your price to $14 per unit. While this is lower than your original price per unit, it’s guaranteed that your buyer will have to purchase a minimum of 15 units each time. You may be able to get bulk discounts on shipping, which can recoup the amount of the discount that you give to a wholesale purchaser.
Setting Up MOQ Terms Like a Pro
Consider how much money you need to continue operating in a stress-free environment.
- If you spend more money on your materials and supplies, then a higher MOQ is a good choice
- If your product is cheap and easy to make, you can settle for an MOQ on the lower end
The MOQ you set must ensure that you can pay for supplies, materials, salaries, utilities, and other essential costs.
Should You Always Have MOQ Terms in Place?
While you are not required to have an MOQ in place to create a profitable business, establishing an MOQ can make it easy to guarantee a profit, while streamlining the order process.
Dealing with MOQs as a Buyer
What is MOQ from a buyer’s perspective? How can you work around it?
1. Negotiate on Price
In some cases, you may be able to negotiate prices. The wholesaler may not be able to lower their cost, but it doesn’t hurt to ask. If you work with the same people year after year, they may be willing to give you discounted prices, since they know that you’ll bring repeat business.
2. Consider Purchasing Online
Tools like Wholesale Central or other B2B marketplaces can help you to compare prices between wholesalers so that you can find the one that will meet your needs for price and MOQ.
3. Use a Trader
A trading company can place an order for multiple companies. This allows you to get the same amount of product for a lowered price. You still meet the MOQ requirements by working together with other buyers who need the same product, but may not be able to meet the minimums for their individual orders.
4. Be a “First-Time Buyer”
When you buy from a wholesaler for the first time, they may be more inclined to remove the MOQ requirement.
Working with a 3PL to Help Manage MOQ
A 3PL (third-party logistics) provider is a great way to manage your MOQ process stress-free. These companies handle inventory management, warehousing, and order fulfillment.
A 3PL like Print Bind Ship can handle all of your inventory management needs. With a 3PL, you can easily keep track of your inventory in real-time with digital tools. This can be helpful, whether you need book printing and binding services or you want to offer items in bulk.
Warehousing is the best way to keep your products organized and secure before they are shipped. A 3PL can combine warehousing with their other services for your products.
Using a 3PL like Print Bind Ship for order fulfillment ensures that your packages can get to their destination on time.
Partnering with a 3PL like Print Bind Ship
Using an MOQ can be beneficial for your business if it is employed correctly. Now that you know the basics, it’s time to look for a 3PL to handle your fulfillment needs.
Print Bind Ship has a team of experts that can handle all of your fulfillment, inventory, and warehousing needs; all you have to do is contact us for a 15-minute consultation!