If you are a manufacturer of your own brand or a private label seller, you would have surely come across “Minimum Order Quantity” or just MOQ. The term MOQ can be defined as the minimum amount of a product that the manufacturer plans to produce or make for the per run of production.
The idea of MOQ came into the picture when manufacturers realized that no matter how much they produce in the production runs, as long as they do not make a decent profit, it won’t matter. That’s why the nature of manufacturing has a minimum number of units per run that they can satisfactorily make profits from. There are a lot of simpler ways of explaining the MOQ and how it is important to the online sellers.
This article will tell you everything you need to know about MOQ and how it can help you earn secure better profit margins via Amazon FBA.
What is MOQ?
Although, we have explained it earlier, let us try it with simpler terms so that even the beginners can understand it – Minimum order quantity or MOQ is the minimum or lowest amount of units that a seller needs to buy from a manufacturer or supplier. Be it buying from a supplier in China or any other country, this still MOQ applies.
Here’s an example: Suppose you want to buy 500 units of packaged toys from a trusted manufacturer. If the manufacturer has an MOQ of 1000 units, he or she won’t be able to sell you 500 units, which means you have to purchase a minimum of 1000 units from the manufacturer.
Here’s another instance: Suppose you have a product that you want to sell online on Amazon. You contact manufacturers, and the manufacturer will give you their MOQ, and you have to order the manufacturing of the product based on their MOQ. The manufacturers decide an MOQ to ensure a profit and going below that won’t get them any profit.
What if you want a product of a quantity that is lower than almost every manufacturer’s MOQ? Does that mean that you have to increase your order quantity? What if you cannot afford to be on parwith the manufacturers? Does that mean you have to wait or discard your idea of selling on Amazon?
The answer is NO! There are ways to lower MOQ, and that’s what we will explain next.
Read on.
How Can You Lower MOQ?
Mold expense
One of the common reasons that determine a manufacturer’s high MOQ is the mold cost. A manufacturer takes into consideration the cost of mold while deciding the MOQ. This is especially true for highly customized or highly differentiated products that doesn’t exist on the market yet.
Mold is the most crucial factor in the process of production, and it is a constant cost. To recoup it, the manufacturer sets the minimum order quantity. You can lower the MOQ by paying the cost of the mold if you are placing a lower order quantity. By paying for the mold expense, you will take away the manufacturer’s risk, and in return, you can ask for a lower MOQ.
When you pay for the mold cost, you are reducing the manufacturer’s cost of production as well, and he or she doesn’t have to set a high MOQ to recoup it.
Of course, be prepared to shell out hundreds to thousands for the mold and this usually is not the option for FBA sellers who just started. If this is not an option for you, then read on.
Material Supplier
The idea is to find out the actual reasons behind the manufacturer’s MOQ. Generally, just like the cost of the mold, the cost of materials will also play a major role in deciding the MOQ.
If you can arrange or help the manufacturer with the material, he or she would most likely reduce the minimum order quantity.
Furthermore, this can also help in building a healthy relationship between you and the manufacturer, ensuring a special MOQ for you every time!
Internal Requirement
In addition to the mold and material expense, there could be other requirements as well that you can help the manufacturer with in return for a lower MOQ.
You can help the manufacturer with resources that you possess or can manage that can boost his production; for example – manpower or equipment.
Say You Are Looking for a Long Term Partner
This is the most common tactic in the books, and many use it as well. Whenever you interact with a manufacturer, emphasize that you are interested to find a long term partner. This will create a positive impression of you in the mind of the manufacturer.
Further, it can also work as an assurance to the manufacturer that you would order a pretty big order in the near future. As a result, the manufacturer may consider lowering his MOQ as it would seem a promise of a prolonged business deal.
In addition to that, when the manufacturer treats you like a big business owner, there will also be minimum chances of malpractices. The manufacturer would never think of jeopardizing a potential long-term customer for petty profits.
Packaging
Out of many factors that determine the minimum order quantity, one is the cost of packaging. If you can take that task from the hands of the manufacturer, you can lower the MOQ effectively.
You can ensure a decent packaging if you have a facility where you can manage the packaging or get the packaging done via economic third-parties. The cost and process of packaging require quality check and manpower; therefore, taking responsibility for it can convince the manufacturer to lower the MOQ.
Tip: MOQ of packaging are usually at least 1,000, but that does not mean your product should also follow the 1,000 MOQ. You can make 1000 packaging and store the excess at the supplier for future production runs.
Never Stop Looking
It is true that this is the most tiring idea that would require you to keep contacting manufacturers one after another, but it is an honest approach. Just like we thought of the idea of tricking a manufacturer into believing that you own a big business, a manufacturer can also think of ways of tricking the buyer.
Therefore, to make sure that you don’t end up in the receiving end, you should keep looking for the ideal manufacturer who can see the potential in your partnership and decide to lower the MOQ.
Further, if you can find a manufacturer who wants his products to get the desired exposure, there are chances that he or she may consider compromising with the MOQ.
You can get our contact manufacturer’s template right here to help you in your search.
Conclusion
There are more ways to lower the minimum order quantity, but you have to make sure that you do not compromise with the quality of the product while trying to save some money.
With Amazon FBA you can get your products to a large customer base, and you can earn profits in no time.
Lastly, remember it’s the product that will sell and compromising its quality can only affect your sale and profit in the long run. So, in your search for a good MOQ, do not sacrifice its quality.