You might have come across the term MOQ while setting up your Amazon product listing via Amazon Seller Central. As you can guess, it is an important figure as far as Amazon sellers are concerned. However, if you are a beginner, you might not understand what MOQ stands for. But if you want to sell your products to get as many sales as possible, you should utilize MOQ to the full extent.
This guide has discussed Minimum Order Quantity in detail, including MOQ meaning, its pros, cons, and regulations regarding its use. We will start with a quick introduction to MOQ. Please keep in mind that MOQ has two meaning terrains for Amazon sellers: one while selling an Amazon product online and the other one while getting products from suppliers/vendors. We will explore both, anyway.
MOQ Meaning: What Does MOQ Mean While Selling Products on Amazon?
MOQ stands for Minimum Order Quantity. The concept refers to the minimum number of units that a buyer must have in their cart to buy a specific product from Amazon. MOQs are commonly available for low-priced products, and each Amazon local site may have unique regulations. For instance, the product must be priced less than £10 to be eligible for the Minimum Order Quantity. Let us take a look at an example scenario.
Suppose that you are selling an indoor disinfectant available in bottles of 1L. Now, imagine that you set the Minimum Order Quantity at 3. As a result, the customer cannot buy one or two units of the item. Instead, their Amazon shopping cart must have three units of your product to place the order. The seller can set up the MOQ as high as 6. In that case, the customer should have six units of the products in the cart to place a successful order.
We hope you understand the meaning of MOQ on Amazon. It is one of those terms that both Amazon buyers and sellers pay attention to. Are you wondering why? We will explain that in a bit.
Why Is Minimum Order Quantity Important for Amazon Sellers?
As we said in the MOQ meaning section, Amazon sellers should pay attention to MOQ while setting up a product listing on the eCommerce website. For some sellers, setting up the Minimum Order Quantity is an optional process. Those sellers may have a good number of profitable sales anyhow. However, you cannot expect the same performance from all the products this way.
You already know that Amazon wants you to follow strict packaging/labeling rules. However, taking care of these rules can be expensive if you are not doing it in bulk. Therefore, if we go back to the case of the disinfectant, it will be more cost-effective to pack and ship your products when multiple units are involved. In other words, the process of sending an individual unit would not be as profitable as you think.
Therefore, Minimum Order Quantity provides a cost-effective way for many businesses out there. Provided that we are always trying to cut down the expenses, MOQ is quite helpful.
What Products Should Be Under MOQ?
It may seem that Minimum Order Quality is a sure-shot way to increase sales. However, it is not precisely the case at all times. Instead, MOQ only works best with only a few product categories. Of course, you can set an MOQ for other products, but it will do more harm than good. According to Amazon and experts, you should put the following products under MOQ.
- Items that people quickly replenish are the best products to be put under MOQ. We are talking about food items, detergents, cleaners, shampoos, etc. You can expect a customer to purchase these things multiple times a month, correct? Therefore, it makes sense to think that a customer would buy more units instead of one.
- There are a few other products that people purchase in bulk. For instance, we come across various office supplies, such as paper, pens, erasers, etc. These products are often low priced, even when they are available in packs. Therefore, by setting up a high Minimum Order Quantity, you can boost your sales and make things easier for the customer.
- The third instance to set up MOQ is when you think you cannot stay profitable if you sell a single unit with all the benefits. For example, when you have a low-priced item, the packaging/shipping costs may sometimes go beyond your profit margin. In these instances, you can set up a MOQ for 3 or 4 units. It can be a better alternative to packaging. It would also mean a minimum amount would be credited to your account.
By the way, you should not put some products under MOQ. Some of the examples are:
- It would help if you did not put an MOQ for products you already sell as a bundle. For instance, suppose you sell a bundle of beauty soaps. It does not make sense to set an MOQ for this deal since people are already getting multiple units. In these instances, setting up the MOQ will decrease sales since customers do not want to overspend.
- As an Amazon seller, you should stay away from MOQ and make a good profit by selling your products via FBA. You may already know that selling low-priced products via FBA is an easy task. It will help you earn a competitive profit as well. If you can keep this ball rolling, you do not have to ever step into the MOQ game.
- There are some products that customers do not buy again. We are talking about printed books, software products, video games, DVDs, and large appliances. It would not be brilliant to put products like these under MOQ. Doing so will only decrease the sales. By the way, Amazon does not allow you to add products from these categories under MOQ in the first place.
Pros and Cons of MOQ
- MOQs can help you increase the revenue from products that are not profitable when sold in one or two units.
- When properly marketed, a product eligible for MOQ will be a stable source of income, especially if we are dealing with food/everyday/office products.
- Amazon offers built-in options to set up and manage Minimum Order Requirements. Then, you have to decide how many units a customer has to purchase.
- Amazon FBA does not require any additional preparation for MOQ products. You can send the FBA inventory as you usually do.
- You cannot put products from specific categories under the MOQ system. It happens even when the product price is low.
- Amazon allows you to set MOQ between 2 and 6 only. So, if you want the product to be sold for seven units, you should skip MOQ and go for custom bundling options.
- Amazon does not recommend using MOQ for products that have already come bundled. Typically, it is okay, but there could be some low-cost bundles that could use MOQ.
We should keep in mind some other instructions as well. For instance, MOQ conditions are enabled only at an Amazon-site level. It means you will have to set up different instructions for other stores. Similarly, the MOQ system cannot be combined with other offers in the market. It happens at the SKU level itself. Amazon might not show the MOQ details if you do not follow the restrictions.
MOQ Meaning: What MOQ Stands for While Buying Supplies?
Even in this scenario, MOQ refers to Minimum Order Quantity. However, since it applies to suppliers and manufacturers, MOQ refers to the number of products/units a manufacturer should spend to profit from the transaction. As you know, factories and manufacturing centers are pretty advanced these days. Even so, it would help if you produced more than a specific number of units to make the functioning worth it.
There are a couple of reasons why manufacturers set up an MOQ for their system. First, there is the aspect of production costs. Every system has an ideal point where the energy requirements and product results are met. However, it cannot be achieved when manufacturing a single unit or two. Therefore, to keep it under control, each manufacturer comes up with a perfect blend of production cost and margin.
As a seller, you have to consider the production cost and the MOQ before ordering something from vendors or suppliers. You can find all this information on the vendor’s page. Of course, multiple vendors will have multiple minimum order quantities. You would have to compare these options before you make the final selection.
How to Manage Minimum Order Quantities While Getting Supplies?
Before you seek options to optimize the minimum order quantity, you should explore the available options in the B2B market. Of course, you can use platforms like Alibaba to make this possible. However, regardless of the niche you are working with, you must find many suppliers suitable for your work. Only after a head-on-head comparison can you work with optimization. Here are some insights that would help you.
It would help if you understood that the Minimum Order Quantity is not a fixed amount. The company may have set a general number, but it is subject to change. For example, suppose you have chosen a supplier for your long-term bond. You might need thousands or hundreds of units in the first place, but seasonal demand may either shoot up or bring down the numbers.
In these instances, you can negotiate with the supplier. For example, they may be able to do something with the production flow to give you fewer units without charging exasperated prices. Alternatively, they might combine your order with another set to not have to pay a lot. Whichever method that the manufacturer chooses, you will have some benefits.
Minimum Order Quantity – MOQ – could be a problem while placing minimal orders, though. If your supplier cannot offer products according to this price, you should start with negotiation. If it does not work at all, you may have to find a supplier that deals with a smaller MOQ business model. As we said, the MOQ requirements would vary depending on the product. Some products may have some liberal MOQ requirements, while others are strict.
Now that you know how MOQ price and profit margins work, shall we explore the pros and cons?
Pros and Cons of MOQ
- The biggest benefit of an MOQ is that you can get the best prices from a supply chain. You and the supplier will have a figure that can find you in sync. It is great when we consider the long-term plans for small businesses that target increased profit margin.
- Large companies will also find MOQs useful when they have to stock up their inventory in smaller quantities and larger quantities. By choosing the best choice from the thousands of supplier directories, any company can make the right choices.
- It is also great that you can find MOQ on most supplier listings. As we said, MOQ varies per niche, and there are ways to calculate MOQ if you are new to the scene. In the end, these calculations are better than losing money.
- The limitation with MOQ is the upfront costs, which can be a little tiresome for small businesses. However, if you have a good selling strategy, you would not miss this amount. In fact, you can consider this a part of the primary investment.
- It would help if you were careful while choosing the supplier. Some Chinese suppliers may have hidden fees in addition to the MOQ. You should pay attention to this. It is one of the reasons why most customers go for only trusted suppliers, even if it means choosing a high MOQ.
We hope you understand the meaning of MOQ in both instances. As an Amazon seller, it makes sense to understand what MOQ is. You would also have to use the insight while selling your products and getting the raw products from a supplier. In fact, you may have to consider the procurement costs and the supplier’s MOQ before you set an MOQ for the Amazon product listing.