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What is MOQ?

What is MOQ?

One practice by wholesale dealers to make maximum profits efficiently is Minimum Order Quantity or MOQ. In a B2B market, MOQ is affecting both buyers and sellers so its important to know how to derive benefit out of it whether it be the seller’s end or buyer’s.

What is MOQ? The lowest quantity a seller allows buyer to buy at a time is called Minimum Order Quantity. Why should it be set? So that sellers don’t waste their time and resources on orders that’ll give them almost no profit or straight loss. How should it be set? A seller should set a break-even point before setting an MOQ. The break-even point is the point where the quantity of the product manufactured is giving no profit and no loss, the cost of resources used in manufacturing is equal to it’s retail price. The MOQ is set above break-even depending upon the ratios of profit.

Now after we know what actually MOQ is, a question that pops up is how should it be set?

First of all what you need to do is market analysis to get an idea of prices prevailing in the market. The rough estimation of the best price (better to be a little low than market for competition) that you can offer can be forecasted through market price evaluation.

Costing of one unit of production is the second step towards setting an MOQ that’ll include all expenditures of manufacturing, transportation and storage. While calculations it can be seen that some expenses stay constant regardless of the number of units produced. This is the key for setting the MOQ; the point where the fixed costs are minimum to a level that your pricing meets the market price should be equal to the price of quantity you offer as MOQ.

 

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