x New merchants who import goods do not have much experience in the definition of the minimum number of orders MOQ means?
x You are not sure about the calculation, role, and classification levels of MOQ?
x your business and business household are in need of making negotiations on the new MOQ level in the most effective way?
In this article, Proship.vn we will focus on answering all questions that many private, businesses, business households, ... are interested and set above. First, not only what is the definition of MOQ, what role MOQ has for business, ... but also the factors that affect the price of MOQ so that the merchants have the most appropriate adjustment strategies.
What is MOQ? How is MOQ classified?
It can be understood, MOQ stands for the phrase "Minimum Order Quantity". Join Proship to understand this term and the classification of MOQ:
What is MOQ?
What is MOQ? MOQ means the minimum number of orders, is the lowest amount of inventory that the supplier is ready to sell. If you cannot buy MoQ of a specific product, the supplier does not sell that product to you.
The minimum number of orders is at least the number of units required to buy at the same time. In e -commerce, it is often used by manufacturers or suppliers in the context of running production, although the seller can order MOQ for different types of orders.
Levels of moq
How to classify the MOQ index is divided into two levels:
- Low MOQ:
Often corresponding to the minimum number of orders from 1 to 50 units. With this MOQ level, the business also shows some position and experience. Businesses supplying to this MOQ index are newly established, newly participated in the market or units that are ready to trade to attract new customers.
- Moq is high:
Above> 50 units and unlimited specific quantities. Usually large enterprises, have long business time in the market, the financial situation is stable and highly appreciated in the field. High moq allows them to optimize operation.
How does MOQ play a role?
MOQ in business with the roles must mention:
Guaranteed cash flow
The supplier is based on the MOQ indicators to determine the optimal price on each product and offer the right price. By determining the minimum number of orders, the supplier can plan the financial and long -term production to ensure the most effective cash flow.
Increase profits
MOQ helps increase profits at suppliers and merchants. Because in fact, when determining the minimum number of orders, the supplier will not worry about the issue of imported people with too little quantity, making profits not as high as importing in a certain amount.
Or on the customer's side, when importing in bulk, the capital is less, from which the profit of revenue from the sale will also increase significantly.
Optimize transportation costs
When the minimum number of orders is determined, customers will save relatively shipping costs because according to the rules, the more the goods are imported, the more shipping costs will decrease.
Limit inventory
Determining the most appropriate MOQ will minimize inventory status. Because then the number of goods sold is measured appropriately with the number of productions and suppliers also calculates a minimum of certain goods at each sales.
Factors affecting Minimum order Quantity MOQ
When calculating MOQ, the supplier is based on many factors to give the appropriate index. Factors directly affect MOQ:
Supplier size
Depending on the size of the supplier, large or small, the MOQ level is also different. Accordingly, small -scale suppliers often give a lower MOQ level than a large -scale supplier.
Mold price/sample price
To meet the market demand, especially products with unique designs will require many different patterns. Therefore, in the production process, the supplier must spend a certain cost for the mold.
Therefore, MOQ is determined at a higher level, which can occur to offset production costs and bring profits to the supplier.
Product classification
MOQ is usually determined by product classification with low or high price. Typically cheap products such as school tools, clothes, household items, ... MOQ will be high. The products are expensive such as jewelry, furniture, ... MOQ will be lower.
Production requirements by order
With products that require separate design, the manufacturer must cost more than usual for designs or materials to serve customer needs. To make the appropriate profit, MOQ must be raised higher.
How to calculate the standard and negotiate the new MOQ level
What is the MoQ calculation formula and how to effectively negotiate the new MOQ level? Proship would like to answer as follows:
How to calculate the precise MOQ
To produce an effective MOQ, businesses need to consider the following factors:
- AOV (average order value): equal to the total revenue divided by the number of orders during that time;
- Production costs: costs for the only product include: raw materials, labor, electricity, machinery, ...;
- Application cancellation rate: The percentage of guests cancel the application compared to the number of orders assigned;
- Conversion rate: The percentage of customers buying products compared to the number of customers viewing products.
MOQ calculation formula:
MOQ = (Production cost x conversion rate) / [average order value x (1 - Single cancellation rate)]
* Example - You are trying to import apples from the US with the parameters:
- Production cost: 0.1 $
- Price 1 apple: $ 0.5
- Conversion rate: 15%
- Single cancellation rate: 5%.
From the above data, it can be calculated based on the formula:
MOQ = (0.1 x 15) / [0.5 x (1-5%)] = 0.03
=> Your MOQ is 0.03 apples, equivalent to 30 apples for every 1,000 potential customers.
How to negotiate a new MOQ level
New MOQ negotiation tactic should consider:
- Request to receive half of the inventory right now, the rest one day later;
- Find a substitute, lower quality to reduce production;
- Use capital mobilization from the community to sell a large number of products to cover MOQ;
- Use the price of a company compared to the price of another company;
- Proposal to pay other fees for ordering less products.
What is MOQ and the knowledge that needs to know about the minimum quantity of minimum orders, which have been informed quickly for the import -export business enterprises ... Proship Logistic is proud to be a professional multi -method shipping unit - Contact immediately 0909 344 247 for advice on transportation solutions, storage, foreign bonded warehouses, customs declaration, etc.
