The term minimum order quantity (MOQ) is one you’ll familiarize yourself with quickly, if you decide to partner up with Chinese product suppliers.

 

A strict MOQ requirement is also a main challenge you’ll have to overcome if you’re just testing out a small business idea.

 

When you have a small amount of money to invest in the acquisition of products, MOQ can make it really difficult to pinpoint the right opportunity. It will also limit the number of factories you can potentially partner up with.

 

So, what exactly does MOQ stand for and are there ways to negotiate a more favorable threshold? While the answer will vary from one supplier to another, there are ways to protect your interests and still ensure mutually-beneficial, long-term partnerships with Chinese factories.

 

What Exactly Is MOQ?

MOQ requirements is a standard for product manufacturing and the smallest possible number of items that the factory is willing to make as per your specifications.

 

Obviously, this threshold is needed to ensure that the manufacturing process results in profit for the factory itself. Whenever a very small number of items is to be made, the factory will potentially be operating at a loss. This is where the MOQ requirement comes in.

 

The number is not universal across all Chinese factories and typically, there’s some room for negotiation.

 

MOQ requirements will depend on the factory’s size, the types of equipment it operates and the specifics of the product you’d like to have manufactured.

 

It also depends on whether you’re working directly with a factory or a Chinese trading company (these are Chinese wholesale suppliers). Factories tend to have higher MOQs. Trading companies don’t manufacture items but rather source them from different factories. As a result, the minimum order quantity can be reduced significantly when working with a distributor rather than a manufacturer.

 

Average MOQ Numbers to Anticipate

In comparison to some other manufacturing countries, China has relatively low MOQ requirements. This is one of the main reasons why many small businesses choose to partner up with Chinese wholesale suppliers and manufacturers.

 

Many Chinese factories will quote a MOQ in the 500 to 1,000 range. Obviously, that’s not an exuberant amount if you want to start a business.

 

Other Southeast Asian countries and manufacturing hubs around the world tend to have much higher requirements. In fact, they will not even give you a quote if you cannot order 5,000 products or even more.

 

So, if you’ve chosen a Chinese factory, you’re already off to a good start.

 

Apart from having a relatively low minimum order quantity requirement, some Chinese suppliers will also be open to negotiating that condition. If you want to reduce the MOQ, here’s what you’ll need to do.

 

Strategies for Negotiating Lower MOQs with Chinese Manufacturing Companies

Discussing the conditions of the partnership with an overseas factory will certainly involve talks about the MOQ requirement.

 

Bringing down the MOQ number is possible in several ways. Keep in mind, however, that some manufacturers and suppliers will be more flexible than others. First and foremost, you will have to identify these entities in order to discuss the aspects of the partnership and get some concession.

 

Testing the Waters

One of the ways to bring down the MOQ is to get manufacturer involved with you.

 

Begin the negotiations process and if you’re happy with the terms and conditions, order a sample.

 

Most Chinese factories will fulfill that requirement quickly.

 

Check out the sample that has arrived and communicate back with the factory. If you’re happy with the quality, let them know that you’re interested in a partnership but for the start, you’d like to order a small batch of products. In a sense, you want to test the waters and gauge the market before ordering a larger amount.

 

Some factories will agree to such an arrangement and this is one of the easiest opportunities for bringing down the MOQ number.

 

It’s also possible for the supplier to agree to your requirements but increase the price per unit of the items being manufactured. Do the math to see if the new price enables you to meet your bottom line. If you’re happy with what you’re being forward, move forward with product sourcing.

 

Increase the Overall Order Size

This strategy will work if you’re ordering different kinds of products from the same manufacturer or supplier.

 

To bring down the MOQ, you can offer to increase the overall order size by adding more products.

 

Keep in mind, however, that each product variety will carry its own individual MOQ. Hence, you may face some tough negotiations if you opt for this strategy.

 

Reduce Product Customization Requirements

The more specific and customized your product is, the costlier the manufacturing process would become.

 

Thus, you may receive a MOQ quote that doesn’t really make you happy.

 

Bringing down the range of customizations is one possibility to reduce the quantity you’ll have to order from Chinese manufacturing partners.

 

Show Some Flexibility in Terms of Materials

MOQ requirements are heavily affected by the cost of materials and supplies that will be used in the manufacturing process.

 

Thus, the relationships a factory has with suppliers and sub-contractors will play a role in giving you favorable product manufacturing conditions.

 

If you show some flexibility in terms of the supplies being used, you could enjoy a lower minimum order requirement. The rarer and costlier a material is, the higher the number of items you will need to buy from the manufacturer.

 

Show some flexibility during the negotiations and chances are that your willingness to work together will be rewarded.

 

Inquire about Paying in Instalments

Sometimes, bringing down the minimum order quantity will be impossible.

 

Let’s say you really like the supplier or factory you’re communicating with. The sample you received is excellent and all of your requirements are being met. You want to work with them but you’re bummed out about the MOQ number.

 

One of the things you can do in such situations is ask if paying in instalments is a viable option.

 

When you agree to pay in instalments, you’ll have the entire quantity of products manufactured and they will be shipped to you in instalments. You’ll make a payment for each instalment that you receive until the entire quantity gets sold.

 

In such instances, you will need to discuss the size of each individual instalment and the length of time that the supplier will be willing to store the remainder for you.

 

Such arrangements are more likely when you and the factory or supplier get to know each other well. This is one of the reasons why working on relationship establishment can really pay off in the long run. Not only will the cost of manufacturing become manageable, you’ll also get to enjoy some additional flexibilities and facilitations.

 

The Lowest MOQ Isn’t Always the Best Choice

Going with the Chinese manufacturing partner that gives you the lowest MOQ isn’t always the best way to start your business.

 

In some instances, a significant reduction in the minimum order quantity will bring on a huge quality compromise. This isn’t what you want when you’re attempting to establish a loyal clientele.

 

If you do a bit of research on Alibaba, you will come across entities that have MOQ requirements as low as 20 or 50 items.

 

These entities are usually wholesalers rather than manufacturers. They also distribute off-the-shelf items that have been created for the local market.  Many of these products will not meet requirements for distribution in the US, the EU and other parts of the world.

 

The best approach would be to seek an optimal price to quality ratio. Maximizing your purchasing power is another strategy to consider if you want to partner up with some of the top overseas factories. Thus, you may want to wait some time and initiate the process when you have the funds to carry out talks with some of the “big” players.