If you are a new e-cigarette businessman or a small business, MOQ is very important to you. Before choosing a product for operation, you may need multiple products for market testing. Or the products you want to operate have many SKUs, such as brands, styles, Puffs, etc. (except products that are exclusively represented), but the supplier will set MOQ for each SKU. Due to insufficient funds, the initial investment is large and the capital pressure is high.
A healthy cash flow is vital for your business. It is important for you to achieve a suitable MOQ from suppliers, otherwise, your business will be seriously influenced by a large inventory in the early stages of entrepreneurship. Many small businessmen usually have this idea: they want to get low MOQ at the lowest price. This is totally wrong！
In my today’s blog, you will learn about，
Without further ado, let’s jump into the article, I bet you’ll benefit a lot!
1. What is MOQ meaning? Why do wholesale suppliers/ factories set MOQ？What is MOQ definition?
What is the MOQ definition?
MOQ is short for “Minimum Order Quantity”, which means the least amounts of products that a manufacturer is willing to produce or the minimum quantity that a wholesale supplier is willing to sell.
For example, you need to OEM an e-cigarette. Usually, different manufacturers will formulate MOQ according to their scale. The MOQ for a factory of 2000-5000 square meters is about 1000-3000pcs/flavor/color, and the minimum order is at least 10 flavors. If it is a factory with a size of 10,000 square meters or more, it is about 5000pcs/flavor/color, and the minimum order is at least 10 flavors.
Why do wholesale suppliers/ factories set MOQ?
Unlike retailers and drop shippers, as wholesale suppliers or manufacturers, they make money by selling products in bulk. That is because the profit per unit is very low. As manufacturers, the most important reason for setting MOQ is to cover their cost of production. If quantities are too small, it is difficult for them to operate the production line and purchase certain quantities of raw material or packaging material.
If you just want to wholesale some branded products first, and the quantity is only a few hundred or a few thousand, t is the best choice for you to purchase existing products from wholesale suppliers instead of manufacturers.
Suppliers such as trading companies or wholesalers, they’re acting like a middleman, the 2nd middleman, or distributor. Their MOQ depends on the condition that they buy products from factories.
For example, as a small-scale wholesaler, they can get goods from factories in small quantities or the factory they cooperate with is small-scale. MOQ of such suppliers might be lower. On the contrary, capable trading companies, can purchase large quantities of products from factories at a lower price. Hence.
In a word: all types of suppliers set a MOQ to meet their threshold.
2. Whether MOQ is good or not, if not, how to overcome it?
It is difficult to identify whether MOQ is good or not absolutely, which is subjective views from supplier or buyer.
For suppliers, they hope you can buy products as much as possible. But on the contrary, purchasers will hold a different view on MOQ. It is unfriendly to those small businesses or some startups.
To comply with suppliers’ MOQ, buyers will have a large inventory that perhaps can’t be digested in a short term.
Therefore, my suggestion is to purchase from an authorized trading company or wholesaler. For example, if the brand’s MOQ is 2000pcs/color/flavor, it may be MOQ400pcs/color/flavor in an authorized company with certain strength. If you add 10 flavors, you only need 4000pcs. This is a very good choice for new e-cigarette merchants or stores that want to test the market response. It allows you to maximize the benefits.
Hence, as a new enterprise, when you choose the best you want to operate by comparing different products, there will be fewer choices within your budget range because of MOQ in the early stage of your business.
After you operate business smoothly, or you can identify which kind of products can be profitable steadily, You can get goods at a large MOQ with a lower price from manufacturers or Brands, which is usually lower than buying products from wholesalers. Then your products can be more competitive in the market.
Or you can choose to operate customized products. Usually, for some customized products, manufacturers need to invest more funds in making molds. Accordingly, fewer importers will choose to customize their own products because of high investment. The direct benefit to you is you will be more competitive in such kind of product market.
3. How to negotiate lower MOQ with suppliers? What if you fail?
In this most important section, I will teach you how to get lower MOQ from suppliers, and how to deal with it if you can’t get lower MOQ. Some startups will be discouraged by the suppliers’ MOQ. Actually, MOQ usually can be negotiable, but the premise is that it should meet the suppliers’ profit margin.
4 practical tactics to negotiate MOQ with suppliers:
The following 4 tactics are precious experiences I seldom share with others, and you should bear them in your mind. Why do I call it “tactic”? MOQ negotiation is a soft skill to get a win-win solution, just like a business game between you and your suppliers.
1)Communicating with suppliers frankly and sincerely
Many courses will teach you a solution, that is, you can pretend to be experienced or a veteran. For example, if you negotiate with suppliers about the unit price at the quantity of 30,000 pieces, but actually in the end, you just want to buy3,000 pieces. I think such a method is useless. As suppliers contacts many different purchasers, and it is easy for them to identify whether you are a veteran or a newbie.
And on the other hand, many Chinese suppliers are willing to decrease MOQ to a certain extent in the first cooperation with you. Of course, MOQ also should be within their cost controllable range. But if you adopt such a method, they will think you are not a reliable cooperation partner.
Hence, you can tell suppliers it is your first order for this kind of product. You want to place a small order to test the market, and the order quantity is about 30-45% MOQ. But the suppliers’ quotation may be 10%-30% higher than the previous unit price in the end. Of course, if you think it’s OK, you can place an order.
If suppliers are reluctant to lower MOQ to a certain extent, you can try the next tactic
2)Consider and communicate with suppliers from their perspectives
Many people won’t consider problems from the opposite party’s standpoint, remembering it, business is always built based on win-win cooperation. You shouldn’t let suppliers compromise unilaterally. You can say some words to let suppliers think you can understand his difficulties. Besides, you can tell them that they won’t lose money from the business with you. And you want to build a long-term business relationship with them.
At the same time, you can communicate with suppliers about your business mode and situation. For example, if you are a Chain store you can tell them why you will choose this kind of product, your marketing plan so on. It is enough for you to be sincere rather than show how professional you are.
3）Exert a certain pressure on suppliers
After the above two steps, you can tell them one thing: despite they are the best suitable supplier for you, but you also have other suppliers to choose from. If they couldn’t meet MOQ you propose, you will give up them and find another supplier to cooperate with.
4）Negotiation on other expenses
If suppliers still think it is not worthwhile for them, you can communicate with them to know what difficulties they have.
- Costs on starting the machine
For many OEM orders, the cost of opening the machine and the cost of packaging are very expensive. Unless the number of products reaches 20,000+, it is not worth it for them to start the project. Therefore, if the supplier tells you that the project cost is very high, you can tell them that you are willing to bear a certain percentage of the cost. Or you can provide the packaging.
- ODM products
If you want to customize the product, the possible reason they set a high MOQ is that they need to make a new mold. In this case, you can offer to pay part of or bear the cost of mold manufacturing.
Increase your prepayment ratio or even pay in full immediately
The common payment method is to pay 30%-50% in advance when placing the order and pay the balance after inspection for shipment. And you can propose that you are willing to arrange 60%-70% payment or even pay in full immediately, which will make the supplier think that you want to cooperate sincerely with them.
What if you fail?
The key to negotiating is the price you can accept or a balance point between you and suppliers. If you cannot make a deal, you can try another way. For example, if you are a newbie and need products to operate the market test in advance, you can cooperate with relatively small-scale suppliers at first. And after your business develops steadily, you can find another medium or large-scale supplier to cooperate with. After all, it is a truth: Rome is not built in a day.
Caution: when you negotiate with suppliers, you had better not let the negotiation end unpleasantly. That is because you may negotiate with them again in the future.
You may ask me such questions:
Why do customized products have higher MOQ than existing styles?
Product customization involves many aspects, such as adding a logo, changing color, material, or design, and so on. Accordingly, manufacturers will invest extra labor and money in preparing material, making mold. Hence, MOQ is undoubtedly higher.
If you just want to make a simple change to the existing styles, such as printing your logo or just replacing a color, it is not a time-consuming or very complicated operation for manufacturers. Hence, under such circumstances, manufacturers will not increase their MOQ sharply.
But if you want to buy brand new products your design or production involves a time-consuming and complex process or making a new mold. MOQ will be higher for such products.
I want to hear from you
When it comes to MOQ, it may be not easy to find a vendor that meets your pricing and quantity requirements. But rest assured. There is always a supplier that satisfies your needs.
Don’t regard the lowest MOQ as the only aim, the key is that the price and MOQ of the supplier you choose to cooperate with are within your budget range.
We have helped many New businessmen, And we are willing to try our best to support them as we can understand their hardships along the way. If you have any questions about MOQ let me know by leaving comments below, or feel free to contact us.
