Do you want to know the examples of minimum order quantity and learn about it?
If yes, then you’ve landed at the right place!
In an eCommerce business, managing inventory is very critical. Your inventory management will determine your business’s success rate.
To manage the inventory, wholesalers have set a minimum order quantity for their online stores, which helps them to increase the average order value and sales and boost revenue. It has proven to be a very successful technique for growing your business.
So In today’s article, I’ll cover a few examples and tips for setting the minimum order quantity. In the end, I’ll also explain how to set up minimum order quantities in WooCommerce.
First, let’s learn about the minimum order quantities.
On This Page
- 1 What is Meant By the Minimum Order Quantity?
- 2 Minimum Order Quantity Examples
- 3 Benefits of Minimum Order Quantity
- 4 How to Implement a Minimum Order Quantity?
- 5 How to Set a Minimum Order Quantity in WooCommerce?
- 6 Tips to Optimize the Minimum Order Quantity (MOQ)
- 7 Wrapping Up
What is Meant By the Minimum Order Quantity?
Minimum Order Quantity or MOQ is the lowest number of products that your customers have to purchase in an order. You can set it up based on the number of units or total order value.
In short, it is the minimum number of products a buyer can purchase in a single order from your store. It can give some significant benefits.
In an eCommerce business, the minimum order quantity (MOQ) is set to avoid taking the orders that give you no or little profit and takes the same time to fulfill as the minimum order quantity. Different product categories and products will have different minimum order quantities.
For example, an expensive item will likely have a lower minimum order quantity than the simple and inexpensive one.
Types of Minimum Order Quantities (MOQs)
Depending upon the products you sell, MOQs can be divided into two types. Following are the details about them.
1. Simple Minimum Order Quantity (MOQ)
Simple MOQs are simple to understand, as the name implies. Before placing an order, your customers must agree on a minimum spend or minimum quantity.
An excellent illustration of this may be a retailer of customized goods. If the buyer only wants to buy a few products, adding a logo or color scheme to a cup or pen wouldn’t be cost-effective.
2. Complex Minimum Order Quantity (MOQ)
When you want to set a complex minimum order quantity, there will be two or more criteria. It might be even more complicated than that, requiring your customers to meet a minimum order amount and minimum unit quantity.
For example, let’s say you’re sourcing fabric for your clothing line. You can have a minimum order quantity (MOQ) in yards or meters of fabric per color.
You will create a MOQ that takes into account the minimum spend, minimum quantity, and minimum fabric measurements. To be able to place an order, customers must meet all requirements.
Now let’s dive in and see a few detailed examples of minimum order quantities.
Minimum Order Quantity Examples
MOQ is very simple to straightforward to understand. The following examples will help you learn more about it.
Alanic Clothing is a top-notch store for fashion and sports clothes. They have set the minimum order quantity (MOQ) as 500 units and offer 40% off on wholesales.
A buyer must buy at least 500 units for a 40% discount. This way, they can cover the extra costs like shipping and packing a large number of products and still be in profit.
Ultimately, the kind of products you sell and their price point significantly impact your MOQ. We’ll discuss it in later steps.
Let’s say you deal in wholesale computer gear. If your wholesale customers purchase from you, they will receive a 40% discount on the retail costs.
However, that price differential doesn’t just disappear magically; instead, you’re giving up about 20% of what could have been a 60% profit margin.
If you take a $2,000 order and a retail competitor takes the same amount, your share of the pie will be substantially lower. Additionally, consumers who buy in bulk receive more goods for their money.
You can calculate the minimum order quantity you can fulfill while still turning a profit after all associated charges to safeguard yourself against financial loss. That could be a sum of $1,000, $2,000, or even more.
Now let’s see some benefits and formulas of setting MOQ.
Benefits of Minimum Order Quantity
Minimum order quantities can provide many advantages. When properly implemented, the MOQ can be an effective inventory control technique that helps customers reduce costs and suppliers maintain positive profit margins.
Following are the benefits of minimum order quantities.
1. Better Cash Flow
An MOQ can assist suppliers in having a healthier, more reliable cash flow when product prices and order volumes are adequately regulated.
2. Eliminate Overstock Issues
Keeping a lot of inventory in storage costs money. In addition to paying for storage space, you must keep track, maintain, and secure inventory levels. Minimum order quantities can help you utilize less warehouse space and spend less on inventory.
3. Improved Profit
Suppliers can better regulate their profit margins by carefully managing MOQs, ensuring that goods are only manufactured when significant profits support the order.
Minimum Order Quantities (MOQ) not only give benefits to manufacturers but also gives a lot of benefits to the buyers like savings on large orders etc.
How to Implement a Minimum Order Quantity?
There isn’t a strict formula for minimum order quantity, but a few things will help you estimate the minimum order quantity.
1. Determine Demand
Product type, competition, and seasonality are just a few elements that will affect and change demand. Suppliers use historical data to estimate demand and determine the inventory levels required to handle market fluctuations.
The demand for a product will help you determine the minimum order quantity.
2. Calculate Break-Even Point
You must know your break-even point to set your minimum order quantity.
Regarding MOQs, suppliers consider the quantity of products they must sell to break even and eventually turn a profit. Their expenses typically include the cost of the goods or supplies, labor, storage, customer acquisition, and any other costs directly related to a sale.
3. Calculate the Holding Costs
The price of storing things will vary depending on what is offered and how much space is needed. For instance, refrigeration will cost money, and goods with irregular shapes can require more space.
As a wholesaler or manufacturer, you won’t want to have goods on hand for an extended period because a speedier turnaround will improve your financial situation.
Before investing in inventory, you should consider your inventory holding cost, which is the cost of keeping all your products in storage.
4. Set Your Minimum Order Quantity (MOQ)
Suppliers set their minimum order quantities (MOQs) for each product type after they analyze demand, decide on a break-even point, and compute holding costs.
This prevents orders that would otherwise be unprofitable from being placed by customers who want to buy smaller quantities.
Suppliers could provide incentives like bulk-buying discounts to entice clients to make larger purchases. This benefits both your bottom line and inventory management.
How to Set a Minimum Order Quantity in WooCommerce?
If your store uses WooCommerce, you can set a minimum order quantity in a few straightforward steps so that you, as a wholesaler or manufacturer, will get a good piece of the pie.
You can use the WooCommerce Min-Max Quantities plugin to set a minimum order quantity so that the buyers will have to fulfill the minimum order quantity to complete the purchase.
This plugin can also help you set the minimum purchase quantity for a specific product.
You can follow the How to Set Minimum and Maximum Order Quantity tutorial to set a minimum order quantity (MOQ) in your store.
Tips to Optimize the Minimum Order Quantity (MOQ)
After calculating your optimal MOQ, there are a few more factors that you, as a wholesaler or manufacturer, must keep in mind to ensure that your effort is successful and you wind up receiving bulk orders and profits.
- Offer free shipping in your region.
- Keep buyers updated about the discounts on minimum order quantities.
- Eliminate the products that aren’t selling well.
- Use WooCommerce Wholesale Suite to keep track of orders and inventory.
That’s it for today’s tutorial.
Now that you know how to set/calculate the minimum order quantities, you can easily set MOQs for your store.
I hope this tutorial helped you understand the minimum order quantity (MOQ). I have tried to clear everything related to the minimum order quantity, but if you have any questions or confusion, please post them in the comments section. I would love to answer all your questions.
Download the WooCommerce Min-Max Quantities plugin and set a minimum order quantity on your store now!