MOQs bring value to various parties: manufacturers, suppliers, wholesalers, and sometimes retailers if your brand can apply MOQs through distribution partnerships. Regardless of your position, here are 7 best practices to implement minimum order quantities:
Tips for manufacturers and wholesalers
Encourage higher-value orders
You can motivate your customers to spend more by using some incentives such as discounts for multiple units or bundle pricing to increase average order values. Offering a lower unit price if customers buy more is an efficient way to move inventory faster, while customers are also happy to get a good deal.
If you’re a wholesaler that provides goods to retailers, you can establish an MOQ based on tiers for style or collection. For example, purchasing 10 pairs of shoes at $50 each, 20 pairs of shoes at $48 each, and 30 pairs of shoes at $46 each. Retailers can buy more units to reduce the cost per item and increase their margins.
In addition, you can devise your pricing structure by volume or cost. For low-cost items, you need a higher minimum quantity order to ensure profit. For higher-cost products, a lower MOQ is more suitable, since the products are already expensive. This strategy will help you make a profit no matter the quantities you sell.
Tips for retailers
Boost inventory turnover
From the retailer’s perspective, placing a large purchase order can save you the cost of goods sold, but can increase the cost of storage. To minimize that, you need a higher inventory turnover ratio. Since you invested more cash upfront, you have to sell your inventory faster to free up cash flow.
To boost your stock turnover, seek different approaches to attract and retain customers. Flash sales, loyalty programs, discounts for introducing friends, etc. are a few ideas.
Remove slow-moving SKUs from your shelf
For small retailers, meeting big minimum order quantities can be a financial pressure. You don’t want to spend too much for stock that isn’t selling well but wasting warehousing fees. Holding on to inventory for too long will eat into your profits.
Therefore, have regular reviews to spot which products are bestsellers and which ones are hanging in the warehouse for too long. Get rid of the worst-performing SKUs and save money to manage a few products that bring good earnings. You can run a promotion to push sales for the idle stock, and eliminate these items from your order next time.
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