For new retailers, navigating minimum order quantities, or MOQs, can feel like a delicate dance. Order too much inventory, and you may find yourself with a surplus you can’t sell. Order too little, and you aren’t able to meet the demand for a certain product. But find just the right MOQ, and both you and your customers are happy. Both sellers and buyers have preferences when it comes to MOQs, and they should be a factor you consider before making a wholesale purchase.
Though MOQs may seem like a limitation you have to work around, there are ways that retailers can leverage MOQs successfully. Read on to learn more about MOQs, their benefits, and best practices for you to keep in mind.
What is minimum order quantity (MOQ)?
Minimum order quantity, or MOQ, is the lowest number of products a buyer can purchase from a wholesaler at one time. Sometimes this is also referred to as case size. When you see a minimum case size on a product page, that means you must buy multiples of that number in order to purchase from that wholesaler.
Imagine you’re buying leather journals that cost $6 each, and the wholesaler you’re considering has an MOQ for 200 journals. That minimum order quantity means you’ll need to spend $1,200 to meet the MOQ for that product.
Why are MOQs important?
For retailers, purchasing products in bulk can help ensure they’re paying the best price possible per unit—also known as the economies of scale. For wholesalers, having an MOQ for their products can prevent waste on shipping and fulfilling small orders that generate little to no profit. A retailer can sell a single jacket and price it appropriately to still make a profit, but for wholesalers, selling a single item at a time can be a loss-maker. That’s why wholesalers will sell items in bulk via MOQs to retailers who can then sell single units to individuals.
What are examples of MOQs?
When a buyer logs into a marketplace like Faire, for example, and searches through any category, whether it’s beauty and wellness or food and drink, they’ll encounter MOQs on the detail page for each product. On Faire, buyers must meet an order minimum to purchase from any given brand. While an MOQ is expressed by a number of units, order minimums are expressed by the amount of money a retailer must spend on a single order.
Some brands have a $0 order minimum and no minimum order quantity, like Coco Select’s Black Onyx Soap, meaning you could buy a single unit as a retailer—while other MOQs can go up to $1,000 worth of goods, such as that of Valley Rose, a luxury jewelry brand. Marketplaces like Faire allow you to sort by order minimums with a “low minimum” filter at the top of the search results page.
What MOQ best practices should retailers follow?
If you’re a retailer who’s new to the space, you can use MOQs to manage costs effectively and build relationships with wholesalers. Understanding MOQs can prevent you from business missteps like sitting on hundreds of units that you can’t sell. Here are a few tips to keep in mind when dealing with MOQs.
Forecast consumer demand from your sales data
Retailers must understand and anticipate their customers’ needs. While you may not have a crystal ball to know the exact number of velvet earmuffs your shoppers may want, you can look at buying trends from previous weeks, months, quarters, or years to make a realistic prediction about how many earmuffs they might want now. Examine your historical sales data. Pay attention to what’s selling and when it sells. You might notice sales go down in the summer and spring, so maybe you look for suppliers with lower MOQs during that time.
Offer incentives for shoppers to order more
A banner you might see at the top of any e-commerce site usually offers perks like free shipping or a free gift if a shopper orders a certain amount of goods. These are called shipping thresholds, and incentives like this can increase your average order value (the average dollar amount a customer spends on your site) and also help to move inventory faster. By bumping up sales, you’ll be able to more easily meet the MOQs of your wholesalers.
Search for lower MOQs to mitigate risk
If you’re a newcomer to retail or an experienced retailer who’s just testing out a new product, you’ll want to prioritize wholesalers with lower MOQs. Lower order minimums allow retailers to test out new brands without having to worry as much about excess inventory. Meanwhile, smaller case sizes allow retailers to have more variety in their store, which is valuable for smaller brick-and-mortar spaces or retailers who are still getting to know what their customers love. A lower MOQ reduces your upfront investment and grants more flexibility if your needs, or your shoppers’ tastes, change over time.
Understand your inventory and storage expenses
Keeping inventory isn’t free and can be an underestimated expense in retail. Products that sit in storage can easily eat into your overhead cost. If you’re a small retailer who stores excess inventory in your shed or garage, then storage costs you nothing. But if you keep inventory in a warehouse, then you likely have monthly costs associated with that storage. If the MOQs for one of your wholesale suppliers are too high, you won’t be able to sell those units quickly enough to justify what it costs to store them.
Make sure you have a high turnover of inventory before investing in the storage of bulk products. This especially goes for anything in the food and drink category where retailers have expiration dates to consider.
Nurture strong relationships with your wholesalers
Similar to how it’s important to know your customer, you should also know your supplier. Forming strong connections with the wholesalers you depend on can go a long way when it comes to getting you the best price per unit. A brand might not be able to lower its MOQ to accommodate your specific business needs, but maybe it’ll allow you to customize your order.
MOQs can be an opportunity to take a critical look at your customer demands, your business overhead, and how you incentivize shoppers. By paying attention to MOQs, retailers can form positive relationships with brands, keep their shops well-stocked at the right price, and mitigate the risks that come with shopping wholesale.