Trade Resources Blog What is minimum order quantity? How to negotiate MOQ for both parties

What is minimum order quantity? How to negotiate MOQ for both parties

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By Celinelee on Nov 22, 2021
Tags: What is minimum order quantity

One of the most common questions asked when people are buying products in bulk is ‘What is minimum order quantity? This important topic plays a key role in any decision making process, making it vital to understand everything about the MOQ, as well as knowing how to approach the topic and open conversation with suppliers. In this article, we will begin by looking at the definition of minimum order quantity, explaining what it means before outlining the importance of being able to negotiate the MOQ to meet your requirements. After this, the article lists the benefits of knowing how to negotiate, as well as the various stages of negotiation. Finally, it then explains how to negotiate for both buyers and sellers, going through different techniques that can assist communication and help to build a great working relationship at the same time as achieving your objectives. By the time you have finished reading this article, you will be equipped with all of the knowledge you need to begin communicating and preparing to order your desired quantity of products. It really can be that simple to decide MOQ, so let’s get started.

What is minimum order quantity?

It’s time to answer the important question… what is minimum order quantity? Minimum order quantity, or MOQ as it is sometimes named, is the smallest number of items that you are able to purchase from a supplier or manufacturer. This phrase is used all over the world and is an essential piece of information for anybody looking to buy or sell.

Minimum order quantities can range in size by significant amounts. Some suppliers will be happy to sell smaller quantities of items, while others will demand larger quantities to be purchased. It all comes down to the way that they prefer to work and often depends on logistics, as well as the regularity of orders.

For smaller products, as they are typically lighter and can fit into smaller packaging, you may find that the answer to ‘What is minimum order quantity’ is actually higher, however this may also mean that they are more cost-effective and lower priced. It can really vary from supplier to supplier and it is impossible to know what is minimum order quantity without speaking to the suppliers. 

What is minimum order quantity

Why is it important to negotiate the right minimum order quantity?

The first point to note is that a minimum order quantity must work for the person placing the order. There are different things that they should consider, making sure the minimum order quantity is suitable and is what they need it to be.

Negotiations are a key part of coming to a decision on the amount of products that will be purchased. Without this, it becomes very difficult to get a quantity that is beneficial for both parties.

Here are three reasons that it is important to negotiate successfully.

Space requirements

The amount of products that you purchase should be carefully considered, as these products will then need to be stored somewhere. This can be a very big challenge for products that are larger in size or that come in large storage boxes or protective packaging. You must make sure you have the available storage space to comfortably store the items, whether this is in your own storage facilities or a third party space like a warehouse. If you do not have enough space to store a certain MOQ, you can discuss reducing it, or having it shipped in more than one separate shipment.

Cost

The number of items that you order will directly influence the cost. Every person or business will have a maximum budget that they can set aside for the purchase. Simply put, it is impossible to invest if the cost is higher than the amount of money available. Because of this, cost must be factored in when working out the minimum order quantity you can afford. Often, the larger the order, the lower the price per unit.

Demand

If there is not enough demand for a large volume of products, it is important not to  invest in more than you need. This is particularly important if you are new to the market, or are unsure how well a certain product will sell. The quantity you order should always be based on demand, with research playing a large part in this decision. The buyer will understand how quickly they expect to sell or get rid of the products, so this needs to determine negotiation requirements.

The benefits of knowing how to negotiate

When you know how to negotiate, there are countless benefits that can be gained. These include:

Rapport

Great negotiation skills are key to build rapport with potential suppliers and manufactures. By understanding how to speak with them in a way that shows respect, this helps you to work together more successfully. It also helps the other party to respect you, giving you a better reputation and increasing the likelihood of them wanting to work with you now and in the future.

Persuasion

Successful negotiation helps you to persuade the other person and help them to understand why you want your chosen MOQ. By being able to do this, you are able to talk the other person around to meet your requirements and needs.

Results

Finally, knowing how to negotiate properly brings results. This means you are able to find solutions that work to meet your own requirements by listening, making recommendations and being persuasive.

minimum order quantity

Stages of negotiation

There are various stages of negotiation, which we will now list. By following these in order, you can strategically approach negotiations in a way that is most likely to be successful.

1. Understand your ideal order quantity

The first stage when thinking ‘what is minimum order quantity’ is to understand what your perfect quantity would be. To understand this, begin by looking at demand, budget, storage space and any other information that will help you to know how many you should buy. Speaking to your target market can also be a great way to work out how many to order.

2. Do research to understand typical minimum order quantities

Next, your research should look at what the usual minimum order quantities are. If you want the answer to ‘What is minimum order quantity’ typically, it’s a good idea to look through different suppliers and see what they say their MOQ is. This is a great starting point as it will help you to understand what is normal, as well as giving you a rough starting point to base your calculations on. It will also allow you to compare different manufacturers and suppliers and minimum order quantities for each of them. This research is vital to make sure you do not go into negotiations with unrealistic expectations.

3. Speak with suppliers and manufacturers

After this, it is time to begin communication. Get in contact with the suppliers and manufacturers that sell the products that you are looking to purchase. The first thing to remember is that any answer to ‘What is minimum order quantity’ is typically a guideline and can be adjusted if it works for both parties. It’s all about finding a happy medium.

When speaking with them, make sure you respect boundaries, sho that you are listening and ask plenty of questions so you can understand all of the relevant information. Explaining the reasoning behind your questions and preferences is also a great way to build rapport and help to negotiate successfully.

4. Negotiate

Once you have all of the information that you need to begin negotiations, it is time to prepare. The next section looks at different negotiation techniques to make sure you are able to get what you need and work successfully together, as well as building long-term business relationships.

moq wholesale

How to negotiate MOQ for both parties

We will now look at how to negotiate minimum order quantities for both buyers and sellers, showing different ideas and strategies that can aid negotiations.

For buyers

First, you should go in with relevant knowledge of the market, being aware of usual MOQs as well as knowing the number that you would ideally like to purchase in each order.

One of the first questions a buyer needs to ask is ‘What is minimum order quantity’. By doing this, you can understand the starting point. After this, you then need to work towards a number that meets your preferences.

Here are 7 negotiation techniques that can help to reach an agreement.

1. Be passionate about the products

Suppliers are proud of what they sell and they want to sell to people that are equally as interested. Make sure you show interest, ask questions and be friendly when communicating.

2. Explain if you are a first time buyer

If this is the first time that you are purchasing a specific type of product, make this clear to the manufacturer or supplier when you are speaking with them. It is completely understandable to want to purchase a smaller quantity when you are wanting to start testing a product. It is worth asking politely if you are able to place a smaller initial order to make sure the products are what you need, before committing to a larger purchase.

3. Explain the potential

Suppliers and manufacturers will be interested to hear what the potential is for long term business. Explain your objectives and the likelihood of you placing repeat orders, as well as the chances of you placing larger orders in the future. This helps a supplier to see value in gaining your custom, as they will want to build long term relationships with buyers.

4. Speak about price

Sometimes, a supplier will increase the cost slightly for each item when a lower MOQ is being bought. It is worth discussing this option if they are hesitant to let the quantity be reduced to the number that you need.

5. Consider purchasing various items

If you do not want to commit to a large order of one specific product, to reduce risk, you can ask to order different products from the same supplier, mixing and matching them to meet their typical minimum order quantity. This can be a great way to have a wider ranging product line and test different potential products without it being as risky. It can also help the manufacturer or supplier to be happy with the total size of the order.

6. Look for products that don’t need manufacturing

You are more likely to negotiate a smaller MOQ with products that do not need manufacturing. The reason for this is that they are more likely to be ready to ship and they may have excess stock that is pre-packaged due to cancelled orders or over purchasing.

moq order quantity

For sellers

These tips will help sellers to master negotiations on the topic of ‘what is minimum order quantity’.

1. Listen to buyers’ requirements

Knowing what a buyer needs is key to having a great starting point for negotiations as it will help you to determine their priorities. 

2. Speak about long term objectives

Understand how likely it is that a buyer will place repeat orders in the future, as it can be worth reducing minimum order quantities to build trust with them and encourage them to return.

3. Be honest and realistic

When asking minimum order quantity details, some buyers will try to ask for numbers that are far too low, but being open about the lowest that you can go is a great way to open conversation and help them to understand why you cannot meet these requirements, if that is the case.

price moq

Time to get started

Now you have all of the information that you need, it is time to begin putting it all into action. So the next time someone brings up the topic of ‘What is minimum order quantity’ of any particular product, you know exactly how to approach the subject and find a solution that is mutually beneficial. Most importantly, have fun negotiating!

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