MOQ stands for “Minimum Order Quantity”. It is the amount that an online shop has to commit to selling a product. Often it is a case of “I have some products, I want to sell them. How do I go about doing so?”
In order to do some business, you need to have set numbers in your head. You need them in order to know how much product you need to produce, to order them and also in order to know how much to charge your customers for them.
In reference to the above, the answer to the question is:
“ How much should I sell?”
Now, this may seem obvious, however, sometimes we just need to find the middle point between all extremes. This middle point is often represented by the MOQ.
What is MOQ good for?
MOQ is good for a number of things.
- It allows the shop to set minimum and maximum limits. For example, if you are selling a product which costs $100 to make, you cannot sell it for less than $100 and for more than $100.
- It allows the shop to know how much inventory they have. This is very important as too much inventory can end up leading to a shop which has a lot of unsold products.
- It allows the shop to time the products release appropriately. For example, if you are releasing a new product, there is no point in producing a large amount of it and then letting it sit there for months. There is no point in having inventory which is sitting around and unused.
- It allows the shop to know how much product they can produce. This is an important point. If the shop has a set MOQ, then they can plan to produce a certain amount of product at any given time.
- It allows the shop to know how much product they can sell. Again, this can be very important. If the shop has a large amount of product sitting around and they cannot sell it, then they will have wasteful inventory and lose money.
- It allows the shop to know how much production they can handle. If you live in a small town and your products are seasonal, then setting an MOQ allows you to know how much product you can produce in the time span of a year.
- It is a case of setting the right numbers so that you can manage your inventory and your business effectively.
What are the downsides of MOQ?
There are a few downsides to setting an MOQ.
- MOQs restrict business. If you have a product that you love, but no one else is buying then you may have to sometimes sacrifice your profits in order to move the business forward.
- MOQs can lead to stock which accumulates. If you have a large amount of inventory, then it may be hard to keep track of everything. For example, if you are selling products which have a shelf life of one month, but you are buying in products which have a shelf life of two years, then you are going to have difficulty keeping track of everything.
- MOQs can lead to a lot of unused inventory. If you have a large amount of inventory, then you may be unable to sell anything.
- If you are hoping to sell your products in overseas markets, then an MOQ can be a barrier. This is because in some markets, such as China, a lot of products are made specifically to be sold overseas. The manufacturers will make huge quantities of a product and then sell them to retailers at massively reduced prices. As a result, retailers may not have any use for the products.
How do you set an MOQ?
If you are planning on selling a product which does not have a fixed price, then it can be hard to set an MOQ. For example, if you are selling a product which costs $100 to make, then you may want to set an MOQ of 5-10 items.
These days, digital products are becoming more and more popular. Products which can be bought, downloaded and used later. Examples of this would be music and movies.
If this is the case, then a part of your MOQ should be allocated to your products being digital products. For example, if you are selling a song for $1, then you may want to set an MOQ of 5-10 songs.
If this sounds like something which is relevant to you, then I would recommend that you check out the product. It is a very easy to use product and great to have if you are looking to sell products online.
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