If you run or are starting an e-commerce business, you might have heard the term “minimum order quantity,” or MOQ, floating around. If you have heard of it, chances are you feel conflicted.
There’s advice for and against this method. This makes it difficult to decide whether it’s the right choice for you, especially if you don’t understand how it works and how it can make you money.
In this post, you’ll learn what an MOQ is, how to set one that won’t make your customers run for the hills, and how to use the strategy to increase your profits and reduce your expenses.
What Is Minimum Order Quantity?
Before we jump into the good stuff (like how to make money with an MOQ), let’s dive into the minimum order quantity definition.
An MOQ refers to the minimum amount someone can order from a business.
For example, imagine you’re a wholesaler on Alibaba. You create an MOQ of 100 units, which means your customers need to purchase 100 units or more to do business with you.
You can also make your MOQ a dollar amount. For example, your customers need to spend a minimum of $500.
Why would you want to use an MOQ? Simply put, it protects your business and profit margins. If someone wants to order only five items from you, it’s sometimes uneconomical to start the production process. If you do, you’ll end up losing money.
With an MOQ in place, it ensures you’re covering production costs and making a profit.
Do MOQs only work for manufacturers or wholesalers? No….