If you own a retail business, you’re going to spend a lot of your time looking for wholesalers and browsing through inventories because you have to get your products somewhere. That’s how the retail sector works – manufacturers ship their products to distributors and wholesalers, and wholesalers ship those products to retailers like you. As you look for inventory, Minimum Order Quantity or “MOQ” is a term that you’re going to see often.
When you source products from a wholesaler, the MOQ can refer to two different things.
- It can refer to the minimum number of units that you need to order, either to obtain free shipping or to place the order at all.
- It can refer to the minimum total value that your order must have, either to obtain free shipping or to place the order at all.
So, what does the MOQ mean for you when you’re sourcing inventory for your business, and what’s the correct way to plan for it? In this guide, we’ll explain everything that you need to know.
Why Do Minimum Order Quantities Exist?
The reason why you see MOQs when shopping for wholesale products is because it can be difficult for a wholesaler to earn an acceptable profit from smaller orders in many cases. That’s partially because wholesalers operate on very thin margins anyway and partially because unless orders are sufficiently large, wholesalers may lose money on shipping expenses.
Profit margins can be incredibly thin for wholesalers because most sales take place online, whereas in the past, retailers would often order products through physical catalogs and only had a few distributors from which to choose. Today, retailers aren’t just choosing from a handful of catalogs. Any business owner can search for products online and potentially find dozens of wholesalers around the world. There are an estimated 679,000 wholesale operations in the United States alone, covering every industry you can possibly imagine. Wholesalers need to keep their prices as low as possible, or they risk not making any sales at all – so they need to ensure that orders are large enough for them to earn money.
You’re Less Likely to See a MOQ When Buying from Domestic Wholesalers
One thing to keep in mind when you source inventory for your business is that there can be significant differences between ordering products from a domestic wholesaler and ordering from one that’s based overseas. When you order from a wholesaler based in a nation such as China, you’re probably more likely to deal with MOQs because many Chinese manufacturers ship products by sea. Ocean freight is only a viable option financially when higher product quantities are involved.
When you order from a domestic wholesaler, it’s possible that you won’t have to worry about MOQs because ground shipping may be a viable option depending on what you’re ordering. On the other hand, ordering domestically may mean that you’ll pay a little more per unit. A very large portion of the world’s consumer products are made in China. If you order products from China, you’re probably dealing directly with the manufacturers. When you order products from a domestic wholesaler, you’re buying products that the wholesaler purchased from the manufacturers. You will likely pay more as a result. It’s important to do your own research and decide what makes the most sense for your business.
Don’t forget that some products are either only produced domestically or are very difficult to source from overseas wholesalers. Most of the brands that make nicotine pouches, for instance, don’t manufacture their products in China. Ordering nicotine pouches wholesale will likely mean that you’ll be dealing with a distributor in the United States.
MOQ Is Only One Factor to Consider when Choosing a Wholesaler
In the previous section of this guide, we discussed MOQs and how they can relate to the price you pay for unit when sourcing inventory for your business. In general, ordering from a wholesaler with an MOQ means that the total cost of your order may be higher, but it can also mean that you’ll pay less per unit. That, however, is only one important factor to consider when you evaluate different wholesalers.
Another important thing to consider when choosing a wholesaler is how long it’ll take for you to receive your order. A package sent via sea freight from an overseas manufacturer will take much longer to arrive – potentially several weeks – than one shipped by ground from a domestic wholesaler. In addition, you also need to consider the possibility of customs delays when ordering products from overseas. Products ordered from domestic distributors have already cleared customs and won’t experience additional delays.
Product quality is the final key thing that you need to consider when choosing a wholesaler. Even if many wholesalers all appear to be using the same product pictures and descriptions on their websites, it doesn’t mean that the products actually are identical. It’s common for wholesalers – especially those based overseas – to use computer renderings or AI-generated pictures rather than actual photography. It’s also not especially rare for overseas companies to steal pictures from one another. Sometimes, there’s no substitute for having the actual product in your hand – and that’s what we’re going to discuss next.
Don’t Be Afraid to Ask for Product Samples
After you’ve spent some time researching, you’ll probably narrow your selection down to a few different wholesalers – perhaps one or two domestic ones and a couple based overseas. If the wholesalers are close on price, it’s possible that product quality will end up being your main deciding factor.
Here’s the thing that you might not know about buying products from wholesalers: Many of them will give you free samples if you ask. Some wholesalers just don’t advertise that fact because samples cost money, and they don’t want to be flooded with requests for free products. If you’re serious about potentially buying from a particular wholesaler and can prove that you represent a legitimate business with the ability to meet the wholesaler’s MOQ, don’t be afraid to ask for samples before placing an order.
Interesting Related Article: “Revolutionizing Quality Control in Manufacturing with AI and Computer Vision“
