On this informative and free blog, you will find all the information you need to know about Dropshipping’s Minimum Order Quantity (MOQ) regulations, what MOQ you should use, and how to establish one for your business.
Dropshipping is a retail fulfillment model where store owners do not store inventory. Instead, they ship items directly to customers from suppliers or third-party logistics warehouses. Because the item stock never physically passes through their hands, dropship stores can operate substantially lower overhead.
You can make a great living through dropshipping because it frees you from the responsibility of manufacturing, storing, and shipping products to your customers. It also enables you to launch an online store with little money upfront. Let’s begin by covering some of the most important things you should know about minimum order quantities (MOQs), let’s go over some basics.
Dropshipping vs. Wholesale
Wholesale and dropshipping may seem the same on the surface, but they’re quite different. In a wholesaler relationship, you purchase items from a supplier in bulk at a lower price with the expectation of reselling them for a profit. In other words, you buy items in bulk from a wholesale supplier and sell them individually. Thus, wholesale retailers are known as bulk buyers. The bulk price is usually reduced to offset any associated risks to protect yourself from incurring heavy losses.
As a wholesaler, you are required to take possession of the items that your customers have ordered. You’ll then take responsibility for getting these products to your customers, and you’ll also be responsible for any quality control issues that may arise.
On the other hand, dropshipping is a retail model where online store owners never take possession of the items they sell. Instead, drop-ship store owners list products for sale and sell them directly to their customers. A store owner receives an order and sends the order to the supplier for shipping directly to the customer.
What is a MOQ, and why do I need it for my business?
A MOQ is the number of units you must buy from a supplier for them to connect you with their product catalog and sell items to your customers on your behalf. This isn’t an issue if you are ordering from wholesalers or manufacturers, as they have their MOQs that you will need to meet before ordering from them. In some cases, a supplier may not even honor orders below the minimum order quantity.
Your MOQ is rather simple to determine, and it’s normally expressed as a number of units per product model. For example, if your suppliers require an MOQ of 6 for one of your products, you will need to purchase at least six units of this product before they are willing to sell it.
Why do I need MOQ for my business?
The most common reason suppliers have MOQs is that they do not want their stock sitting in storage too long. If you are shipping your orders directly from China, it can take weeks or even months for the product to reach its destination. This essentially delays the arrival of your customers’ products, which can lead to customer dissatisfaction. Customers expect to receive their orders quickly and on time, so the longer they have to wait for something, the less likely it is that they’ll order again or recommend you to their friends.
How to Choose best suppliers on the basis of MOQs
When choosing a supplier, you want to select one whose MOQs suit your business’ needs or who has a favorable minimum order quantity. For example, if you sell high-priced products, you have a wide range of customers, and you don’t need to worry about returns; MOQs will not be as important. On the other hand, if your items are inexpensive and small in size, the shipping costs may eat into your margins quite a bit, making it especially critical that you do everything possible to cut down on those costs.
Also, you might want to consider suppliers with lower MOQs if you’re just starting and can’t afford to order large quantities of your products.
Another reason suppliers may have MOQs is to limit their exposure if a product is defective or does not sell well. If your supplier agrees to fulfill your orders, even if you only purchase one unit of a product, they will be taking on the burden and responsibility of shipping items that may not sell well. The costs and raw materials involved in this process could prove to be very costly and difficult for them, so they may not be willing to do this if your total order size is too small.
It makes sense to select a vendor who will work with you if your business model changes if you are starting. In addition, they should have MOQs that will allow you to change direction without being forced to buy large quantities of products that you may never use.
Dropshipping’s Minimum Order Quantity
From the different types of dropshipping business models, some stores work on both B2B (Business to Business) and B2C (Business to Consumer) models, which can be achieved by either letting product suppliers know about the placement of the products or not. Both methods are popular nowadays, with some businesses preferring to inform vendors about their plans for selling their items while others decide to keep it a secret.
If you choose to use the B2C dropshipping business model, then you should let your suppliers know that you’ll be selling their products yourself. This way, they can sell the items as if they were your own and know how to handle any customer feedback or other issues regarding the product. Using this model requires a track record and experience first since vendors would not just give business contracts to newbies.
If you choose to use B2B dropshipping model, then the scenario will be different. You won’t tell your suppliers that another store is selling their products. So if there is a complaint about the product, it may come back to you since you’re the one who sold it. This can put your business at risk since you never know how good your supplier’s product quality is.
Whichever model you use, choosing a supplier with a minimum order quantity (MOQ) that suits your needs is crucial. If MOQs is too low, then that would mean that suppliers will be stuck with huge stocks of unsellable items if they choose to work on the B2C model. On the other hand, if their MOQs are too high, then that could mean that you’ll be placed on a long waiting period before you can start selling products.
How to Select Suppliers with Low MOQs?
There are many suppliers out there, but how do you select the best supplier for your business? You just need to clear a few basic concepts to find the best dropshipping partner.
Web Stores and Wholesalers:
You should begin by narrowing your search. Start by looking at web stores and wholesalers, as they have a wide range of products available, and their Minimum Order Quantity is usually lower. In most cases, these suppliers will work on the B2B model and the B2C model as long as you let them know that you’ll be selling the items yourself.
Suppliers from China:
You can also search for suppliers from China or Taiwan. The MOQs are usually lower than those of suppliers from Western countries, but you need to know that communication may be an issue. If you use the B2B dropshipping model, you must let your supplier know about your plans for selling their items.
Furthermore, you should keep in mind that it will take longer to deliver products from China compared to other countries, even if your supplier offers free shipping. This is mainly due to the different systems used in each country, so you may need to allow more time for delivery.
The benefits of having a low MOQ
- You have to spend less money before you start selling products.
- It is being able to test out your business model before making any large investments.
- It allows more time and flexibility in setting up new products or services before needing the manufacturing of those items begins;
- You will not have as much inventory risk.
- You can avoid being stuck with a huge stock of unsellable items since you will only order what is needed for selling.
Tips for lowering your MOQ if possible or necessary:
- Ask if the supplier has promotions for new customers.
- Look for suppliers with low MOQs with high product ratings, so they are more likely to have lower MOQs on their newer items.
- Get suppliers who are willing to offer you trial orders. You can tell them that you will be doing a review of their item(s) and then give them the results of your review. If they like what they hear, then order larger amounts (which means lower MOQ).
- A reliable supplier should allow trial orders first before asking you to place a larger order. So make sure to ask how many items you can get for free beforehand.
Having a lower MOQ means that you will only need to make a small investment and start selling products faster. However, if no demand exists for your products or they don’t sell as well as anticipated, you’ll be stuck with unsellable items. Another problem would be the time it takes to deliver goods from suppliers in China and learn to use a new system of communication.
Therefore, you must spend time researching your supplier and their MOQs before making any final decisions for your eCommerce business.
How a low MOQ can increase your profit margins
A low enough MOQ means that your company can sell products with greater frequency, lower per-unit prices, and less overhead. This will inevitably lead to higher profits because you’re not committing as much capital per unit of time or money invested in obtaining the product.
When the price also becomes attractive for customers looking to buy in bulk, it’s a win-win scenario for both parties involved!
Orders are more likely to be fulfilled on time at the best price point. The company gains more revenue than if they had set a high MOQ with pricing above what customers are willing to pay at checkout. And most importantly of all, everybody gets their desired product sooner than expected.
How to set up a low-MOQ dropshipping business
The key to achieving a low MOQ is finding the right suppliers. Make sure you are doing your research by making connections before actually placing an order or even buying product samples. Make sure that you have a better understanding of your supplier’s minimum quantity and supply chain management.
Fire-sale suppliers usually have limited capital, are low-quality suppliers, offer their storage facilities, or try to quickly remove surplus goods.
Consider working with a supplier who has a drop shipping option since they can give you more up-to-date information on their MOQs for each product. This way, you can find out how many units are up-front instead of directly buying products.
In general, you should start with a higher minimum order quantity; you can always go back and request lower MOQs later. A higher upfront investment may pay off in the long run if it’s something new or unique that has received a lot of attention from customers.
The downside is that you’ll have to wait longer before any money comes in, which means it may be difficult to get more inventory on stock quickly enough.
What to consider before committing to a supplier
Before committing yourself to a supplier and their products, you should always check the quality of the products first. If you can’t afford product samples because of MOQs that are too high, then ask the supplier if it’s possible to lower your order quantities for samples instead.
If requests fall on deaf ears, you should look for other suppliers for your dropship business.
How finding a supplier with lower MOQ can benefit your store.
A lot of suppliers have certain minimum order quantities (MOQ). This is the minimum number of items that you have to buy to get a certain product.
When suppliers have MOQs, your business can start running with very little upfront investment needed. This allows you to decrease your average cost-per-order while selling larger quantities without any significant increase in overhead costs.
If you need to order a large number of products in bulk, having MOQs at such low levels will ensure your business can keep up with the demand. You won’t be left with unsold goods or overflowing inventory waiting to find someone willing to buy them from you.
Conclusion
Look out for the MOQs and how they affect your business.
When there are no minimum order quantities, you can order lesser amounts of products without having to worry whether or not they’ll sell. This allows you to start up quickly with fewer upfront capital investments.
However, if there are too many MOQs, you may end up ordering more of the product before it even starts selling. This may quickly lead to overwhelming costs, especially if you are dealing with new or unique products.
When placing an order, make sure there are no MOQs involved or ask for a lower one if needed. Always check first the quality of the products to avoid wasting.
FAQ about minimum order quantity
How do I set my MOQ?
Your minimum order quantity should reflect the number of items a customer would reasonably buy in a single transaction. You can simply split the total amount of money for a certain product by the unit price and then follow that with a plus sign. So that would look something like this:
$100 / $25 = 4 +
In this example, you know from your supplier’s MOQ requirement of 6 units per model that you have to purchase four product models to place an order.
It’s important to remember that your supplier still holds the ultimate responsibility for fulfilling customer orders as a drop shipper. This means if you can’t meet a MOQ requirement or it has been met, there is no obligation on the supplier’s part to fulfill your order.
Your MOQ should never be set higher than what’s required to meet projected sales. If you set your MOQ too high, there is a possibility that customers will see the product as unavailable and choose to buy from your competitors instead.
When you’re just getting started, it may be wise to start with an MOQ of 6 to ensure enough demand for one of your products. If, however, your customers are also purchasing other products, consider increasing your MOQ to 10 or more.
Are there any exceptions?
Some suppliers may offer special pricing where the supplier agrees to sell below their standard MOQ requirements. In the event that you wish to use one of these exceptions, make sure not to set your MOQ too high. Therefore, you may have difficulty finding future products to sell from that supplier.
What if I can’t meet my MOQ requirement?
If the items you would like to sell are listed as available with a minimum order quantity of 50 units, you will need to increase your monthly sales volume or find a different supplier.
You may even want to consider starting with a lower price product until you’ve built up some better understanding of customer purchasing behavior. Remember that just because your supplier’s MOQ is 50 doesn’t mean that you need to buy 50 units – they’ll fulfill any quantity of your order, even if it’s only 1 unit.
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