Amazon MOQs – minimum order quantities – can be a seller’s nightmare, especially for new entrants.
Placing a first purchase order with a manufacturer is not as simple as adding items to your cart and checking out. You will often find that your sales volume or warehousing capacity can’t meet the minimums that they set per order. Particularly when dealing directly with manufacturers on sites like Alibaba, high Amazon MOQs can be devastating to your storage fees.
So how do you get Amazon MOQs down so your profit margins aren’t taking the hit?
The key is understanding each manufacturer’s concerns and knowing what negotiation tactics to use. Then you can negotiate hard, and know when to walk away.
What are MOQs?
A manufacturer’s minimum order quantity is the smallest number of items that they are willing to produce. This is usually based on what they need to produce to make a production run worthwhile. This cost doesn’t just take into consideration labor and materials, but also the set-up of machinery, sometimes with additional, unique components, which can be time-consuming, complex, and more costly.
Manufacturers will usually quote MOQs in the thousands, and even as high as ten thousand per order.
These manufacturers are also usually the ones with the best prices. This is because they are able to lower their per-unit costs when they do larger runs. These manufacturers consider 50 units a low MOQ but may be willing to give you a test order of 50 to 200 units.
Large manufacturers are confident in quoting these higher MOQs because they are business to business suppliers. They expect the businesses who order from them to have greater buying capacity than the average small business. This is how they make their money. Small business owners are expected to place orders with smaller suppliers or distributors. They also want to weed out bogus buyers who just want a discount and aren’t serious about selling the product.
What are Amazon MOQs?
Amazon MOQs are the product quantities that it makes sense for you to purchase as a retailer.
You need to figure this out in terms of the quantities that a supplier is willing to produce, and for what price. This can get more complicated if you’re testing the market rather than purchasing a product that you already know you can sell a lot of.
You don’t want to have too much inventory on hand because this will incur higher storage fees – whether you store product yourself or pay Amazon through the FBA program.
You must also consider the manufacturer’s reliability, and will want to discreetly test the product itself to make sure you don’t get a lot of defective items. Lower Amazon MOQs make more sense for you because you want to make sure that you want to work with this supplier before placing a large order.
Cost plays a huge role here. Ordering smaller quantities will bring your purchase costs up because the supplier will pass on their losses to you. It may be easier for you to deal with smaller suppliers and distributors, but this will also bring your purchase costs up because you won’t be purchasing at manufacturer prices.
This seems like a no-choice situation at first glance, but it doesn’t have to be. Lots of sellers successfully negotiate reasonable Amazon MOQs so that they can take advantage of lower purchase prices to boost their profit margins. They know how to find the best manufacturers and avoid middlemen or resellers. They also know to negotiate.
Below are 6 tactics to help you through and win in the same negotiation process.
Negotiating Amazon MOQs
Some manufacturers set their MOQs higher than the actual minimum because they want to discourage small orders to keep their profit margins fat. Who doesn’t want that? You understand this as a seller, and this will help you get in the right frame of mind to begin negotiations.
1. Plant the Seed on Sample Orders
You always want to request for samples before you even start figuring out your Amazon MOQs. Once you confirm the quality of each supplier’s product, then you can do the computations. Remember, each manufacturer will likely have different prices and MOQs.
When you make that request for samples, however, don’t miss the chance to plant the seed for your upcoming order. Tell them that you want to test the product, so you will be placing an order that may be lower or higher than their MOQ, depending on the sample quality.
2. The First-Time Purchase
You may not be sure that the product will sell, or don’t have enough capital to invest in a large order. Don’t ever say this to a manufacturer – they will see it as a weakness, and they won’t want to deal with you. Instead, say that this is your first purchase from them, and you want to test everything first with a smaller quantity, about 20-25% of their MOQ. Then wait for their reply.
Many manufacturers will accept this right away because it’s an actual order rather than a pricing inquiry. Expect the price to be a bit higher than what was quoted for their MOQ. If it still makes sense for you, you can place the order.
If you’re customizing your product, you may not get a positive response on a small order right away. The manufacturer might have to buy a unique component for it and will therefore need you to meet their MOQ to run the order. In this case, you may still be able to negotiate that by 30% or more.
To show that you’re serious about the customizations, tell them that it’s vital to test that the first production is done correctly. Give the specifications that you will be checking for. Then ask for your Amazon MOQs to validate production quality. Support that lower MOQ by mentioning that it will also serve to gather market feedback so that improvements can be made, then the next order will be larger.
Remember to shoot for the 30% range. They will probably not be able to run super low quantities because they will lose money. If the manufacturer does not agree at this stage, try the next tactic.
3. Empathize and State Your Concerns
If you get that initial response from a manufacturer, always begin your reply by saying that you understand their position. Tell them you definitely don’t want them to lose money, especially in the long run. This is all important because it sets the scene for giving them the expectation that they will make money with you long term. As your business partner, if they lose money, they can’t support you, then you lose more money. So take this seriously.
After setting the tone and the expectation, add that you are also losing money by placing a small order. You are actually losing more money than they are because shipping costs are higher for small orders. They know what air freight costs are like. Then tell them that you only want to do a small order one time to make sure that everything goes well before you place a larger order.
By placing yourself on equal footing with manufacturers, you’re saying that you’re in this together as partners. If they understand, they may accept your set Amazon MOQs. If your contract says that the boss won’t allow it, it’s time for the next tactic.
4. Add Charm and Details
Build rapport with your contact by continuing to empathize.
You can be a little bit less professional, as long as your overall tone still stresses that you are serious. You can offer to speak directly to the boss, for instance. Then assure them by telling them how your company has sold many products and that you are a serious buyer. Say that their company seems to be more difficult than others when it comes to MOQs.
Then reiterate your costs by telling them how you will spend a lot on marketing to promote this new product. Give details like what percentage of the order you’ll give away for free and how much you’ll spend on advertising to generate interest for the next, large order. Then say straight out (instead of hinting at the expectation) that you plan to sell a lot of their product, and that they are going to make a lot of money for their boss.
At this stage, you don’t want contacts to walk away. At the same time, you want them to feel that you are willing to walk away if they won’t budge.
You need to make sure they understand that they will lose your business because of their MOQs if they don’t rethink your offer. Conclude each message by making it clear that you are talking with another short-listed manufacturer – it’s them or the other guys. Tell them you prefer them, but make it clear that you’ll take your business elsewhere if they can’t agree to your Amazon MOQs. And give a deadline, ideally within 48 hours so they have time to get back with the boss and give you a firm answer, considering the time difference.
Most of the time, a manufacturer will agree to your proposed on-time lower quantity. If they still can’t do it, try to expand your order.
5. Mix and Match Your Order
To sweeten the deal, offer to purchase a variety of different products from each manufacturer. You will be requesting your Amazon MOQs for each, but from their perspective, the total is a large order. You’ll still have to consider the limits of their MOQs for each product, but it can make them more willing to negotiate.
You’ll also be spending more, so make sure you can cover the costs. At least you won’t get stuck with a huge volume of a single product if you can’t find anyone willing to meet your Amazon MOQs. This compromise spreads your risk and capital over a more varied product line, which is better for you.
You can also get around manufacturer MOQs by asking them for products that they have on hand. They won’t normally keep large quantities of ready stock because it’s not cost-effective. They will, however, tend to produce a slightly higher number of items per order to keep a margin of error. This means that they may have overruns that are not actually defective. Another buyer may also have recently canceled an order that the manufacturer hasn’t been able to offload.
Ask them about any products they have that don’t require manufacturing and offer to take them off their hands. They will usually be happy to get rid of these items in any quantity. If, however, you still get another negative response, you have one more chance to make a deal.
6. Give a Little
A manufacturer may still not be able to give you the Amazon MOQs you want. Your contact will probably give you their reasons at this stage, because you have been open about yours. Pay close attention to the reasons given, because this is their final “No,” the real reason they can’t meet your Amazon MOQs.
This is your last chance to score, and you have a few more cards to play here, depending on the reasons they give.
If they say that the setup fee is the problem, ask them how much it is, and offer to pay for part of it. This shows them that you are flexible (not expecting concessions to come from their side only) and serious about partnering with them.
Maybe manufacturers can’t meet your Amazon MOQs because they also have to buy that unique component for customization at a MOQ. Ask them if they can negotiate that MOQ. Say that you can pay a little bit more because you understand that they will have to also pay more for a smaller order of that component. You also have to test this component, after all, for the first run to make sure that everything goes well.
If manufacturers simply cannot produce at the level of your Amazon MOQs because it won’t cover their costs, offer to pay a slightly higher price. Alternatively, offer to buy a higher quantity, say, 50% of their MOQ instead of the 30% you started at. Let them know that you are trying to compromise to make it work. Send that message along with a drafted PO that shows your offer. This shows your commitment and should persuade them to agree to your proposal.
If they still say no and don’t offer any other terms, then you know for sure that they really can’t lower their MOQ.
When you reach an impasse with your list of lower-cost manufacturers, you need to find and begin negotiations with other suppliers. There will always be at least a handful of suppliers who are willing to meet your Amazon MOQs. The only question is the price point that you can work with.
As you test the market with new products, you can work with a smaller supplier. Then you can move over to the big manufacturers with higher MOQs and lower cost as you grow.
Always keep your options open.
Never end a negotiation on a negative note. You may want to come back to them later. You also don’t need to feel trapped into making a purchase that is larger than you feel comfortable with. Just be polite, saying that you can’t place a large order until you’ve tested and launched the product.
Alibaba is the best place to look for manufacturers because they usually offer the best prices, being a wholesale marketplace.
They also have better controls in place so you can verify suppliers and feel safer from fraudulent sellers.
If you still can’t make a good deal in view of your Amazon MOQs, however, you can try negotiating with suppliers on other marketplaces:
DHgate – a wholesale marketplace where suppliers deal mostly with smaller businesses, therefore offering smaller MOQs. You can pay DHgate suppliers after your order is confirmed received, which further lowers your risks even when you have to pay a higher per-unit price.
AliExpress – a business to consumer website where you can find smaller manufacturers to sell to you wholesale at smaller MOQs. Supplier verification can be difficult here, though, because it’s hard to tell if you’re dealing with a manufacturer or a small seller, so beware of scams.
Global Sources – a middleman that connects businesses with reliable manufacturers. You can seek their help if you are having trouble finding suppliers on your own, or if you simply don’t have the time to do it yourself.