Whether you decide to go into a retail or a wholesale business model with your brand, you need to understand MOQ.
To start MOQ stands for: Minimum Order Quantity and refers to the least amount of products or units that a supplier or wholesaler is willing to produce/sell at one time.
MOQs are sometimes negotiable, within reason, but it’s up to a business to be able to meet a supplier’s MOQs or negotiate a reasonable MOQ in order to do business with them.
MOQ's vary quite dramatically depending on the supplier or wholesaler. It's calculated by each business and depends on how much it costs them to produce the product, it ensures they make a profit on your orders.
Before you start discussing business with any supplier or wholesaler you need to workout what you can afford to purchase and workout some sale projections. This way when you open discussions with suppliers or wholesalers you can negotiate what suits you. You won't be wasting their time either.
MOQ's are extremely important for businesses as it determines what kinds of brands they are willing and able to work with. By setting MOQs, suppliers can easily communicate with businesses how many units it takes for them to be able to work together.
If you're starting out, you usually want to start on a small level to see how the market responds. For this, you need to find suppliers who will produce small orders. Like wise, if you are wanting to produce larger quantities (hundreds and thousands of pieces) you'll need to find a supplier that can meet your demand and have the materials, machinery and personnel available to produce the amount of units you need.
Suppliers don't just set their MOQ's based on their profit margins. Some suppliers have to produce large orders based on their machinery and the effort it takes to set up to produce garments. It may not be time or cost effective for them to set up their materials and run their machinery unless they’re guaranteed to be compensated for a certain amount of units their production run produces. Because of this, they set their MOQ to match what it’s worth for them to set up a production.
The advantages of MOQ's are that it gives you the best price for the number of units you desire. Often the price will drop the more you purchase. That way you can maximize the profit you earn when you sell the product.
The biggest disadvantage of MOQs is the upfront cost required to be able to get your units produced. For example, 1000 units at $10 per unit means that the production run will cost $10,000 upfront, which, if you’re a new business may be intimidating or impossible to meet.
If you’re just starting out as a new business, meeting MOQs can be frustrating. There are plenty of suppliers who offer low, or no, MOQs, it’s just a matter of finding those suppliers. Do lots of research and talk to as many suppliers as possible and be honest - they might be able to work something out for you. There are also a bunch of directories that can help you find a supplier you are looking for. Send me a note and I'll be able to help you.
Overall, MOQ's are put in place for a reason, although they can be quite frustrating at times, or straight out impossible. If you can't meet the suppliers MOQ's you need to find a different supplier or alternative method like print on demand so you can cut back on your initial investment.