When you order something online, or from a wholesale market, or directly from a manufacturer, they allow the purchase of items up to a minimum order quantity. This is called MOQ meaning. Sometimes we notice it didn’t get placed until we didn’t order the minimum product quantity from manufacturers and wholesalers. Manufacturers and wholesalers decide a certain minimum order quantity according to their business and what could be more beneficial for their business. So, sometimes, the minimum order quantity is important for doing business and also for its growth.
Now, let us discuss everything MOQ meaning in good detail.
MOQ definition:
As we know, MOQ stands for minimum order quantity, and the name of MOQ itself tells us that this is the smallest unit for a business that wants to sell its products to its customers at one time.
The minimum quantity could be anything more than 100, or more than 1000 because for manufacturers and wholesalers, selling 1 unit is not profitable, so they decide on the minimum quantity to sell their products to retail stores. It depends on business and products and also on the needs of the customer. Customers can purchase single items from retail stores, or some other quantity according to their choice.
Why MOQ?
Now, the question is, why do wholesalers and manufacturers want a minimum order quantity for their products?
Whatever business we do, we need some profit to keep running that business for a long time. MOQ makes it easy by providing the facility of the smallest unit to be sold of the products, and manufacturers and wholesalers can earn some benefits by supplying products in a good quantity to the retailers.
There are different factors on which industries decide what should be the lowest unit of selling products, such as the type of product they manufacture, the need for the product in the market, and some other factors that help industries decide the minimum order quantity of the product. MOQ is helping different industries with the growth of their businesses.
MOQ’s Impact on Industries:
The minimum order quantity is beneficial for both the wholesaler and the purchaser because when the wholesaler supplies a good quantity to the purchaser, then they earn a benefit according to the quantity they are supplying. The wholesaler decides the cost according to the number of products. If he sells a single product, then the calculation may change for the product. The product’s manufacturing cost, labor cost, and machinery cost will determine the cost of the product according to these factors. Then they decide the quantity and cost. The decided quantity includes the profit of the industry.
MOQ Varieties:
The first one is a high MOQ meaning, and the second one is a low MOQ. These two MOQs are determined by different methods and factors. Let us discuss them in detail.
High MOQ:
When suppliers want a high minimum order quantity, then they need an amount according to the product quantity, which depends on how many products they are going to purchase from the industry. Buyers are required to pay some money when they are giving an order for the product to the company. Then they can also decide on the payment on the delivery time of the product or pay the seller in installments. Sometimes, both buyers and sellers become partners, and they perform the entire process of manufacturing and selling products within it. So they make a good profit in partnership.
Low Minimum Order Quantity:
When compared to the high minimum order quantity, low minimum order quantity is a little more complicated because both buyer and supplier are required to work hard.
When a buyer orders for a low minimum order quantity, they order fewer products and repeat the order several times. This increases the charges and decreases the profit of the seller. Sellers are also worried when they place a low minimum order because they might go out of stock, and this can disrupt the supply chain between buyer and seller.
MOQ Advantages:
The following are the advantages of using MOQ for the seller:
MOQ is beneficial for both buyers and sellers as it makes a strong bond between them for supplying goods and selling them to retailers. When sellers manage to meet the minimum order quantity, then the cash flow of the industry becomes good. Sellers can gain profits by using minimum order quantity as they get orders in bulk and they can manage the cost of manufacturing, machinery, transportation, and some other costs. According to these costs, they can determine the cost of the product with their profit.
Buyers’ Benefits from Using MOQ:
Buyers know that when they use the minimum order quantity of a product, they get the best price of the product from the seller as they are directly purchasing the product from the manufacturer. Buyers can know the exact price of a product from different manufacturers, and then they can determine the cost of the product for retail buyers, including their profits.
Factors dependent on MOQ:
Elements of Making Products: MOQ depends on whether the materials for making products are easily available for industry or not and the cost of the raw material in the product. Order by Buyer:-this determines the number of products demanded by the buyer and if they can make that product or not, the total expenditure for making products, and some other factors that are dependent on MOQ.
Conclusion
If we are running any business, then we look for a maximum profit from that so that we can keep running that for a long time. This is where we need a minimum order quantity (MOQ). MOQ is advantageous to both buyers and sellers because it benefits the person who purchases products at wholesale prices.
Wholesalers and manufacturers both earn benefits when they get orders through a minimum order value. Low risk of loss for industries when they get an order through MOQ as they can make the product according to that order and calculate its cost according to that and while they will sell that they can earn profit as well from that product.
