Marketing/ September 14, 2021/ News

When importing from China, for example, through Chinese B2B sites, such as Alibaba or Made-in-China, we find some abbreviations used by suppliers. Familiarizing yourself with them is essential to fully understand an offering and the services provided by a chosen vendor. One of them is MOQ. What is MOQ and how does it influence Chinese virtual shopping? Why do sellers set MOQ?

What is MOQ?
MOQ (Minimum Order Quantity) is the minimum quantity of items one must purchase for a manufacturer to agree to process an order. It means that if there are 1500 pieces for the product and we are interested in ordering only 200, we will not be able to buy it in this quantity when making virtual Chinese purchases. The MOQ is often given in offers on online shopping sites, for example, Alibaba, Made in China, or other such platforms.

Below you can see the MOQ for one of the phone case suppliers in Made-in-China. It is provided in the “Basic Information” table, which contains the most important information about the product.

However, it may happen that MOQ is nowhere in the offer of the chosen product. In this case, you should contact the provider and consult it directly.

MOQ in the case of a factory and a trading company for Chinese virtual purchases
When searching for a provider of Chinese virtual purchases, for example, on e-commerce portals, you can find manufacturers of a product and trading companies. What is the difference between a factory and a trading company? A factory is a direct manufacturer of an item, which means that it creates it from scratch to order and sells it. On the other hand, a trading company is not a manufacturer of a product in its offering. That’s why manufacturers’ offerings are typically smaller and limited to one or a few products, most often from one category. However, trading companies deal with various products and their stocks can be very large and diverse.

The MOQ will be lower for a trading company and higher for products ordered from manufacturers. Assuming that while examining a supplier’s offer we notice that the MOQ is only several dozen pieces (for example, 50 pieces), they are likely to be a trading company. Manufacturing and selling such a small number of products is not beneficial for manufacturers.

It is worth keeping in mind that the MOQ is higher for OEM and ODM orders. In both situations, a factory manufactures products following the requirements of an importer, for example by placing their company logo or applying a certain pattern to the item.

What influence MOQ?
Why do sellers set a minimum order quantity? It has a lot to do with logistics, the economy, and other factors. For manufacturers, creating more products and selling them will be much more profitable.

First of all, the minimum order quantity can affect the unit price. The more products you buy, the less you pay for them because making more products is cheaper. Some vendors provide details about the dependence of order size price on information about a product. In the picture below, you can see how the cost of a phone case changes with increasing order.

MOQ in negotiations
As you prepare for import, one of the most important things is determining and following your budget. When checking the MOQ of a chosen product, one must consider its financial capacity. If the MOQ exceeds it, it is better to give yourself more time and look for other more beneficial offers. In this way, you will avoid being financially overloaded.

Some sellers will be prone to negotiate MOQ, but we recommend avoiding it. There are some situations where a supplier agrees to reduce the MOQ. However, later it turns out that the quality of the products is worse than expected. Dishonest suppliers execute smaller orders, but at the same time, save on the quality of the materials used for the production of the goods.

Deciding to buy goods when your MOQ exceeds your financial capacity or initial arrangements may not be worth it. It may happen that despite the lower unit price, ordering the most products turns out not to be profitable for you. Therefore, such a transaction presents a risk of too much financial burden and losses.

Summary

MOQ (Minimum Order Quantity) represents the minimum quantity of goods that must be purchased from a chosen supplier.
Mainly, it influences the unit price of a product. The more we order, the lower the cost of a unit.
However, keep in mind that MOQ should not be treated as a tool in negotiations.
On the one hand, you need to consider your financial capacity and the profitability of placing a large order.
On the other hand, if your goal is to lower the MOQ, be aware that dishonest manufacturers will send you lower quality products. In this way, they want to guarantee a similar benefit.
Remember to always ask the supplier about MOQ and place orders according to the previously established budget.

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