Minimum order quantity (MOQ)

Sustainable business models can be maintained with MOQ. However, the seller may be flexible with these restrictions in instances where the buyer and seller have substantial professional history.

The lowest number of units allowed by a wholesale supplier for buyers to purchase at one time is Minimum order quantity (MOQ). This restriction is placed by the suppliers in order not to waste time and resources on orders that would deliver very little profit. The concept of MOQ is very simple and straightforward and is used by wholesalers around the world.

The main goal for most business owners is to maximize ROI and profit. A lot of profit maximization is determined by the production and stock of the number of units of any given product. You must be strategic with your MOQs in order to keep a positive cashflow and grow your wholesale business.

Minimum order policies is set by wholesale suppliers and producers in order to make sure they are making a profit on every single order that they produce. The cost of items will be less if it the production is more. However, this may depend on production components, like costs of labor, raw materials and physical capital.

There is no set formula for determining the MOQ for suppliers, but generally, the breakeven point is used by the suppliers on the specific product as a starting point. Although MOQ is set by suppliers, they will have a little flexibility to offer lower quantity orders in special situations as long as they can maintain a positive cash flow. Suppliers have the power to set your minimum order policy at whatever point they see it fit the profit and what makes sense for their company.

You may be thinking of purchasing a large quantity of items for your store when you are introducing to your store for the first time. But, it may be difficult to place an order with your intended quantity with minimum order policies in place, if it is lower than what is set by the sellers. However, there are some ways to go get around MOQs that are higher than what works for you. You can negotiate with the seller to try to make the order work for you.

You can negotiate MOQs with the seller in some instances. The approach must be respectful and professional if you want to negotiate MOQs. For example, it is really not appropriate to ask for an ultra-low order quantity of 200 units at wholesale price if the MOQ is set at 5000. But you can ask for between 3000 and 4000 thousand units if that is a number you are comfortable with since that is much closer to the MOQ of seller. You can explain your situation and ask politely. Many wholesale distributors will agree with you if it makes financial sense for them.

Consider asking if you can purchase a few at the retail price if you want a couple of units to test out. It is a reasonable ask as this option is generally available on the listings of many suppliers. Thank the seller and move along with grace if he does not agreed to your request as per your desire. Do not spoil the relationship as you may have to work with that supplier in the future.

Dropshipping is a business model when a retailer sells a good without having any inventory. Generally, the digital storefront is provided by the retailer and the order is fulfilled by a third-party distributor.

The dynamic of buyer and seller changes a bit when it comes to dropshipping. Flexibility on either end is ideal as it benefits both parties to develop a long-term relationship. Small quantity orders are required in Dropshipping. The initial investment on the seller's side can be justified by the potential of a successful, long-term arrangement. However, you need to be highly selective with who you work with on dropshipping projects. Ensure to focus on high-quality buyers with a solid strategy and operation.