{"id":1706,"date":"2024-09-03T16:20:15","date_gmt":"2024-09-03T16:20:15","guid":{"rendered":"https:\/\/www.shipbob.com\/au\/blog\/minimum-order-quantity\/"},"modified":"2025-12-26T06:40:46","modified_gmt":"2025-12-26T06:40:46","slug":"minimum-order-quantity","status":"publish","type":"blog","link":"https:\/\/www.shipbob.com\/au\/blog\/minimum-order-quantity\/","title":{"rendered":"Minimum Order Quantity: How it Works & Calculation Guide (+ 6 MOQ Tips)"},"content":{"rendered":"\n

Table of Contents<\/p>

** Minutes<\/p><\/div><\/div>\n

What is minimum order quantity (MOQ)?<\/a><\/p>\n\n\n\n

Why do suppliers use minimum order quantities?<\/a><\/p>\n\n\n\n

How do MOQs affect ecommerce brands?<\/a><\/p>\n\n\n\n

How to calculate minimum order quantity in 4 steps<\/a><\/p>\n\n\n\n

6 tips to make the most of minimum order quantities<\/a><\/p>\n\n\n\n

Easily implement minimum order quantity with ShipBob<\/a><\/p>\n\n\n\n

Minimum order quantity FAQs<\/a><\/p>\n<\/div>\n\n\n\n

Many ecommerce businesses purchase raw materials<\/a> or finished goods from manufacturers<\/a>. Ideally, these brands want to purchase just enough inventory to meet demand. <\/p>\n\n\n\n

The bad news? Many suppliers institute a minimum order quantity (MOQ). This means that brands must commit to buying a certain amount of stock, because it\u2019s more cost-effective for manufacturers to mass-produce items. <\/p>\n\n\n\n

Your brand\u2019s ideal unit count or reorder quantity<\/a> may not match your manufacturer\u2019s MOQ. However, there are benefits to MOQs \u2013 and ways to make them work for you. <\/p>\n\n\n\n

In this article, we\u2019ll give you an overview of minimum order quantity, take a look at some vital factors to consider when calculating MOQ requirements, and provide tips on how to make the most of MOQs.<\/p>\n\n\n\n

What is minimum order quantity (MOQ)?<\/h2>\n\n\n\n

A minimum order quantity is the minimum number of units that a business will sell in a single order.  <\/p>\n\n\n\n

For example, if a customer wants to place an order with a business that has an MOQ of 10 units, the customer must purchase at least 10 units in that order for the business to accept and fulfil it.  <\/p>\n\n\n\n

MOQs are instituted so that the business producing or selling the units can cover their costs and make a profit from the production or sale.<\/p>\n\n\n\n

Types of MOQ<\/h3>\n\n\n\n

In general, there are two types of MOQs: supplier-set MOQs and brand-set MOQs. <\/p>\n\n\n\n

Supplier MOQs are MOQs that suppliers set, and then present to the brands that are considering purchasing from them. Suppliers set these MOQs to make sure that they don\u2019t lose money on a production run. <\/p>\n\n\n\n

For example, say a supplier makes candles, and a nearby boutique orders 10 candles from them. The supplier must buy the raw materials and pay for the labour to make just the 10 candles, which altogether costs $500. If the supplier sells each candle for $8, they only make $80, which is not nearly enough to offset the $500 production cost or see any profit.  <\/p>\n\n\n\n

However, if the boutique orders a larger amount of candles \u2013 say, 50 candles \u2013 the supplier can purchase raw materials in bulk at a much cheaper price. This lowers their production costs to just $200. By selling 50 candles at just $6 apiece, the supplier still nets $300, which is enough to cover production costs and secure some profit for their effort. <\/p>\n\n\n\n

Brands can also institute MOQs for end customers, though this is far less common. For instance, a brand may have an MOQ requirement for wholesale or retail<\/a> partnerships, where they require a minimum of 50 units or $500 worth of product to be purchased together.<\/p>\n\n\n\n

Why do suppliers use minimum order quantities?<\/h2>\n\n\n\n

If MOQs tend to annoy ecommerce brands, why do suppliers have them? The reasons have less to do with brand satisfaction, and much more to do with the supplier\u2019s bottom line.  <\/p>\n\n\n\n

Cost reduction<\/h3>\n\n\n\n

As mentioned above, instituting MOQs enables suppliers to purchase raw materials in bulk, which is usually more cost-effective. If a supplier\u2019s process is already designed for mass-production, they may not even incur much more in the way of labour costs for larger orders than smaller orders. <\/p>\n\n\n\n

Some suppliers don\u2019t even purchase raw materials until a customer has made their purchase. This lets suppliers avoid spending money to produce inventory that doesn\u2019t get sold \u2013 and since materials and finished goods<\/a> aren\u2019t sitting on shelves until they\u2019re sold, the supplier will have lower holding costs. <\/p>\n\n\n\n

Higher profits<\/h3>\n\n\n\n

MOQs help ensure a profit for suppliers on every production run. Suppliers may adjust the prices of goods and MOQs over time to widen or shrink profit margins. <\/p>\n\n\n\n

Inventory management and control <\/h3>\n\n\n\n

Suppliers don\u2019t want to be stuck with goods they can\u2019t sell, either. To keep their own inventory moving through their supply chain (as opposed to sitting on shelves), suppliers may require brands to commit to purchasing a certain amount of stock. This allows the suppliers to manage their inventory more effectively, and keep inventory levels in check.  <\/p>\n\n\n\n

How do MOQs affect ecommerce brands? <\/h2>\n\n\n\n

MOQs can make inventory management more complicated for ecommerce brands, but they sometimes offer benefits as well. Here are some of the most common upsides and downsides of MOQs.  <\/p>\n\n\n\n

Pro: Cost-savings for large purchases<\/h3>\n\n\n\n

Many suppliers with MOQs choose to pass some of the cost-savings they see onto their customers. Purchasing goods at the supplier\u2019s bulk MOQ may give a merchant the best price per unit \u2013 so depending on the product\u2019s shelf life and the amount of demand for the product, buying at the MOQ amount may be the most economical option.<\/p>\n\n\n\n

Pro: Stronger business relationships<\/h3>\n\n\n\n

Discussing MOQs with suppliers and negotiating potential solutions or compromises can be difficult, but it is usually worth it. These conversations can strengthen the supplier-customer relationship<\/a>, which is key to a brand\u2019s long-term success.<\/p>\n\n\n\n

Con: Inventory management challenges<\/h3>\n\n\n\n

While MOQs typically benefit suppliers, they can make it difficult for the brands to balance their inventories. <\/p>\n\n\n\n

For instance, a supplier may require an ecommerce brand to purchase 100 units of a particular inventory item \u2013 but if the brand is still growing, it may not be able to sell through all 100 units. This could leave them with deadstock<\/a>, and increase their holding costs<\/a>. <\/p>\n\n\n\n

For this reason, merchants working with suppliers that have MOQs will need to take extra care when forecasting demand, find storage solutions that accommodate larger quantities of inventory, or simply find a different supplier. <\/p>\n\n\n\n

Con: Cash flow considerations <\/h3>\n\n\n\n

Having too much of your brand\u2019s capital tied up in inventory can create cash flow problems. As a result, having to purchase inventory in bulk because of a supplier\u2019s MOQ can leave you short on cash. It may also be longer before you see ROI on your inventory purchase, as the more units you have, the longer it may take you to sell them all.  <\/p>\n\n\n\n

How to calculate minimum order quantity in 4 steps<\/h2>\n\n\n\n

There is no one right MOQ amount, as many businesses have different requirements. Of course, ecommerce brands and suppliers usually face a tradeoff: they can either set a higher MOQ at a lower price, or pay a higher price per unit for a lower MOQ. While there isn\u2019t a go-to formula for calculating minimum order quantity, you can use the steps below as a starting point.<\/p>\n\n\n\n

1. Determine demand<\/h3>\n\n\n\n

Before a supplier makes any stock, and before a merchant buys any stock, both parties need to know how much stock they plan on selling. Good demand forecasting<\/a> takes product type, competition, seasonality, and other factors into account to produce an estimate for how many units a merchant or supplier will sell. This data can help inform your next purchase order.<\/p>\n\n\n\n

As an ecommerce merchant, you may find that the supplier\u2019s minimum order quantity isn\u2019t too far off from what you plan to sell through. <\/p>\n\n\n\n

For example, say your brand\u2019s demand forecast for the upcoming quarter predicts that you\u2019ll sell 900 stock units. If your supplier has an MOQ of 1,000 units, this difference is manageable. If the product is small (like a bracelet), 100 units may not take much more room to store \u2013 and it never hurts to have some safety stock<\/a> in case demand spikes.<\/p>\n\n\n\n

On the other hand, you may find that your supplier\u2019s MOQ is much higher than your expected sales. If your supplier\u2019s MOQ is 1,000 units, but your brand only expects to sell 400 units, you will need to negotiate with your supplier to find a solution.<\/p>\n\n\n\n

2. Calculate your break-even point<\/h3>\n\n\n\n

Both suppliers and merchants seeking to establish their own MOQs will need to know their break-even point. <\/p>\n\n\n\n

The break-even point is the per-unit price that results in no profit or loss for the business. Usually, suppliers and brands determine this price, and then set their MOQs above it to ensure they make a profit.<\/p>\n\n\n\n

For instance, if it costs a supplier $0.40 to make a single unit of product, the break-even point would be $0.40. If an ecommerce brand spends $100 to purchase 50 units of inventory from a supplier, the breakeven point would be $2.<\/p>\n\n\n\n

3. Understand your holding costs<\/h3>\n\n\n\n

Some products are more expensive to store than others (due to size, duration of storage, and special warehousing requirements). It\u2019s financially beneficial to ensure such items are not kept in your inventory for too long.<\/p>\n\n\n\n

Your inventory holding cost<\/a> is the true cost of storing all of your products and something you must consider before investing too heavily in inventory. This means that suppliers may want to wait until a purchase is made before purchasing and storing raw materials or finished goods, and merchants may want to think twice before complying with high MOQs.<\/p>\n\n\n\n

4. Come up with your MOQ<\/h3>\n\n\n\n

Having gathered all this information, suppliers and merchants are ready to set an MOQ. <\/p>\n\n\n\n

Say that your brand:<\/p>\n\n\n\n