What is Minimum Order Quantity (MOQ)?

Minimum Order Quantity, or MOQ, is often used by businesses in order to help better control and predict their revenue and manage their bottom line. In some cases, MOQ makes perfect sense. But, in others, MOQs can actually be preventing sales. Knowing when having a MOQ is a good decision, and when it isn’t, is essential to excelling in online retailing, especially if you are a wholesaler or manufacturer.

In a lot of cases, having a Minimum Order Quantity has numerous benefits to the retailer, which is why many businesses use them. For buyers, however, MOQs can be frustrating, especially if you’re just trying to get a business off the ground. Either way, better understanding the reasoning behind seemingly arbitrary MOQs can help make Minimum Order Quantities make more sense.


Understanding Minimum Order Quantity (MOQ)

Minimum Order Quantity, or MOQ, is exactly what it sounds like — the minimum amount of an item you can order when making a purchase. If you don’t meet the MOQ, most retailers, including wholesalers and manufacturers, won’t sell to you. Depending on the type of product and the size of the retailer you’re wanting to work with, the MOQ will vary tremendously. In general, the more an item costs, the lower the MOQ will be. If, on the other hand, each item costs very little, then the Minimum Order Quantity will tend to be higher.

While MOQs can be annoying to consumers and startups, they serve an important purpose. As a business, having MOQs can help prevent you from losing money and ensure, in the case of manufacturing and wholesaling, that you’re working with serious buyers.


The Benefits of Setting Minimum Order Quantities for Businesses

Wholesalers in particular benefit greatly from having MOQs in place because they allow them to better control their profit margins. When selling larger quantities of items for less, as most wholesalers do, MOQs protect their bottom line, ensuring that they can stay in business even with their low prices. MOQs also require consumers to purchase a certain amount of products, which guarantees that more money is made with every order that is placed.

Of course, like anything in business, setting up the right Minimum Order Quantity is essential for success. Below are a few tips for getting the number right so that you make the most money without losing sales.

  1. Whatever number you choose for your MOQ, it absolutely must be at least high enough to cover all of your costs, including the product itself, your team, and other overhead costs.
  2. The higher your overhead costs are and the more expensive your products are, the higher your MOQ needs to be in order to keep your expenses in check.
  3. Higher MOQs, however, don’t always equal more money. If your product costs less to produce or if your overhead costs are lower, having a lower MOQ will drive sales. If you set this number too high, you’ll actually hurt your business more than you help it.

And you don’t have to be a wholesaler or manufacturer to utilize the benefits of Minimum Order Quantities. For some businesses, having low MOQs, like on an ecommerce website for example, can help encourage customers to fill their carts. Finding the right balance, not too much and not too little, will take some testing though.

Learn more from other feature courses

Learn more about eCommerce