A minimum order quantity (MOQ) is an important consideration in a business negotiation. Assume you discover a new business opportunity and decide to import a promotional item from China for trial sales. However, because the suppliers’ MOQ is generally high for you as a starter or a small business, you will give up this business opportunity, feeling frustrated and stressed. You may be disappointed and even irritated by this: “Damn it, why do they set the MOQ so high?”
Actually, it is not the suppliers or manufacturers who intentionally set up barriers. In fact, a MOQ is required for them to operate within a production plan. If the MOQ is too low, they won’t be able to cover the labor and material costs required in the manufacturing process, let alone make a profit. And a low MOQ will not only make the production difficult to run, but also impact other factory-related activities. For example, the MOQ of a plastic cup is as low as 500 pieces, suppose the manufacturers can produce it on a single purchase order, however, the MOQ of the color boxes required for the cup is 1,000pcs. Obviously, the two MOQs can’t be incompatible, which will cause the factory considerable difficulty in resolving the issue, which they will most unlikely do during their busy business seasons.
#1. Some tips on how to negotiate MOQ with China’s promotional goods suppliers
1-1. Order from the export traders rather than manufacturers
Some people prefer to order products directly from the factories, believing that the price will be lower than those charged by traders. However, in most cases, it is not a wise choice because a factory’s MOQ is always higher than that of a trader. There are two major reasons for this:
First, the most direct reason for a factory’s higher MOQ is that, when producing a product, a factory considers not only the material cost during production, but also labor cost, and the energy cost, such as water fees and electricity fees, etc., which has been steadily risen in recent years. It is also necessary to take into consideration the defective rate, as well as the overhead expenses such as storage costs, and production site rental costs. With so many cost items, it is inevitable that the MOQ of the factory is a little higher.
Trading companies, on the other hand, are unique. Their operating expenses are lower. And, as middle-man, most trading companies aim to establish long-term business relationships and provide quality service to their customers. To accomplish this, they may purchase one item from a factory with an MOQ of 2,000 pieces, sell 1,000pcs as a trial order to the customer as he desires, and keep the remaining 1,000 pieces as inventory and wait for the opportunity to one from his many customers, or put it on retails on Amazon if it is a non-patent product, which will only cost time and small warehouse expenses to solve this problem.
Second, trading companies have a large number of factories as steady suppliers, and they are well aware of which factories have lower MOQ to meet the needs of their customers. For example, he may be aware of a factory that could reduce his MOQ from 2,000 to 1,500 pieces during their slack season or due to insufficient production orders, or he may be aware of a factory that could take up the market portion as soon as possible.
1-2. Use neutral packaging for the first trial order
There is no doubt that customization, whether in shape, function, LOGO, or packaging, adds to the product value, resulting in a higher price. However, it also inevitably increases the MOQ quantity. Only when you are certain that this product will sell well, or when you need to bring it into the market in large quantities with a risky move, can you use customized packing to create product differentiation? Otherwise, I would advise you to keep everything simple and not print any logos on a custom box, a neutral color box or even white box would be an ideal solution for trial orders or small orders.
1-3. Compromise your trading terms
As we all know, all trading terms are equal for both parties. In other words, if a supplier is expected to make MOQ concessions, then the purchaser may be willing to make some concessions in order to meet the other party in the middle. Allow the factory, for example, to extend the delivery time if they are at full production capacity for large orders in their peak season, and only have time to produce small orders afterward.
Alternatively, the buyers could take the initiative to raise product unit price by 3% or 5%, as long as they can afford it. This increased amount of money paid to the factory may not cover the production cost, but the factory will regard the other party as a trustworthy buyer, and be willing to work with, and possibly reduce their MOQ later after the trial order, for the sake of the long-term business relationship.
#2. When it comes to the topic of MOQ, there are two things we recommend you avoid
2-1. Do not order products that must be manufactured using molds
First, do not order products that must be manufactured using molds, as the operating costs of molds and machines used in the production process are significantly higher. In addition, there are also MOD requirements for raw materials used in the molding process. Unless you can buy molded products from stock, the MOQ for such products is more than 2000 pieces.
2-2. We should be truthful with suppliers
Second, when negotiating MOQ, we should be truthful with suppliers. In fact, in my career for more than ten years, I have met many of these types of customers, who, after obtaining a favorable price with a huge quantity, place small orders of MOQ quantity or even less. This negotiation mode is clearly not a win-win situation, and it would only irritate most suppliers rather than lead to a long-term mutual perspective.
#3. Conclusion
While MOQ is an important factor to discuss with suppliers when importing promotional items from China, other factors such as quality, delivery date, and, most importantly, price are also important in a business operation.
If you have questions such as, what are the points to pay attention to when negotiating with China’s promotional items suppliers? How can we establish a cooperative and mutual trust business relationship with your Chinese suppliers? What do Chinese exporters of promotional items dislike? simply click the following link for more information on doing business with Chinese suppliers:
