Minimum And Maximum Order Quantity For Your Wholesale Business
Buying products in bulk from the manufacturer at a discounted price and selling to a retailer in bulk at a higher price is called wholesale. Generally, wholesalers are considered the intermediaries between the manufacturers and the retailers. But a manufacturer can also act as a wholesaler.
Wholesalers apply different business restrictions for their customers to maximize their revenue. Applying minimum and maximum order quantity restrictions are two of the major and popular techniques. These restrictions help to make up for the reduced profit margin for many wholesalers.
Now, let us first know what is minimum and maximum order quantity and then explore the importance of these terms in the wholesale business.
What is Minimum Order Quantity – MOQ?
Minimum order quantity or MOQ in short is the minimum amount of a product that a wholesaler allows a customer to buy. Selling a single product to an individual customer might be profitable for a retailer. But, for a wholesaler, MOQ is essential to meet its target profit margin.
The question that is often asked is – what is the purpose of minimum order quantity? Well, minimum order quantity helps to accelerate the profit margin in wholesale business by ensuring a minimum bulk order. So, a wholesaler should know how to apply minimum order quantity for his online wholesale business.
What is the Maximum Order Quantity?
Maximum order quantity means setting up the upper limit of products your customers can buy. For instance – you have set 300 units or $600 as the maximum order limit of a product. That means, a buyer can not buy more than 300 units of that product or he can not order more than $600.
Importance of Minimum And Maximum Order Quantity in Wholesale Business
In wholesale business, bulk order is important. The more you can control your customers’ orders, the more profit you generate.
Applying minimum and maximum order quantity restrictions has different consequences. Before applying these restrictions, know what are the importance and what output they will bring to your wholesale business.
Importance of Minimum Order Quantity
The question that is often asked is – why is minimum order quantity important? Well, Minimum Order Quantity or MOQ allows suppliers to get rid of more inventory quickly and increase sales volume. MOQ is also applied to weed out the “bargain shoppers”.
Applying MOQ restrictions when you run a wholesale business online is important. Here is why –
- Manage Inventory In a More Efficient Way
- Lower Your Inventory Cost
- Maximize The Profit Margin With Minimum Order Quantity
#1. Manage Inventory In a More Efficient Way
Minimum Order Quantity (MOQ) helps a wholesaler get an idea about the minimum quantity of any product a company needs to have.
Determining the right MOQ is important to managing your inventory proficiently. But setting MOQ does not have any standard formula. Here is what to consider while determining the right MOQ –
- Forecast the demand for the product
- Calculate the inventory cost
- Calculate the volume discount
- Set higher MOQ for low-cost products
- Set lower MOQ for higher-cost items
#2. Lower Your Inventory Cost
For wholesalers, dealing with a large number of products requires a large inventory or warehouse. Storing products for a long period of time in the warehouse will increase inventory costs.
Set a minimum order quantity for products so that you ensure the fast-moving of the inventory. This will ensure that your customer buys a minimum threshold amount of the product. Though you will lose some small buyers, this will help to reduce your inventory cost by reducing the reliance on warehouse space.
#3. Maximize The Profit Margin With Minimum Order Quantity
An eCommerce wholesale business owner can easily manage the order sizes by applying Minimum Order Quantity – MOQ restrictions. This will ensure a better profit margin.
For instance, a wholesaler sells phone cases and he has 5000 cases in stock. Selling in small quantities might take months or years to empty the inventory. Setting an MOQ of 50 or 100 can help empty the inventory faster. So, you can sell more products in less time which eventually leads to a higher profit margin and faster sales.
While setting a Minimum Order Quantity to maximize the profit margin consider the following points –
- Set MOQ to empty your slow-moving stock. This will reduce inventory costs.
- Set MOQ at an optimal level so that you ensure satisfactory profit with each order.
- Apply higher MOQ when your raw materials or processing cost more.
Importance of Maximum Order Quantity
In recent times, running a wholesale business online is competitive. Setting maximum order quantity restrictions helps wholesalers reach more customers with the available products. Here are a few noteworthy reasons how maximum order quantity restrictions affect wholesale business –
#1. Avoid Shortage Of Inventory Problem
One of the extreme sides of the supply chain cycle is a shortage of inventory. Shortage of inventory defends you in fulfilling customer demands.
To avoid understocking of inventory, find out the fast and slow-moving inventory. Apply maximum order quantity restrictions on the products which are high in demand. When you know the customer’s maximum order limit, you can easily estimate the amount of inventory you need to keep in stock.
So, apply maximum order quantity restrictions to prevent uncommonly large order quantities.
#2. Keep Products In Stock Always
Set the maximum order quantity to ensure that you have products in stock always. While applying maximum order quantity restriction on a product, consider a few things before setting the maximum order quantity –
- Set maximum quantity restrictions when you are selling products at a discount. That way, you can prevent customers from buying a large amount of the products at a discount.
- Find out your fast-moving products. Set maximum order quantity restrictions on these products so that you never have zero products in stock.
- If you want to reach more customers with a particular product at a time, set maximum order quantity restrictions on that product.
#3. Reach More Customers
A wholesaler’s one product has created a demand in the marketplace. But to fulfill the demand for that particular product, production might need time as well as the stock is limited at the same time. But the wholesaler wants to keep the flow and reach more customers with that available stock.
Now, it becomes a challenge, doesn’t it?
In this scenario, applying maximum order quantity restriction can solve the problem. It helps you reach the maximum number of customers at a time with your available products and avoid the fear of going out of stock.
For instance – you sell hand sanitizers in bulk and you have 10000 pieces of hand sanitizer bottles in stock. During emergency times, a few retailers can empty your stock within minutes. Setting a maximum order quantity of 100 or 200 will help you serve more customers at a time.
How To Apply Minimum and Maximum Order Quantity Restriction On Your eCommerce Store
Let us suppose you are running a wholesale business on the Shopify eCommerce platform. Now, how do you set the minimum order quantity per product in Shopify?
Well, you can set minimum order quantity restrictions on your Shopify store in three ways –
- Manual coding or upgrading to Shopify Plus
- Hire a Shopify Developer
- Use third-party application
If you are not willing to spend too much money monthly for Shopify Plus, hiring a developer might be a good option. A Shopify developer can customize your Shopify store theme and set MOQ.
Now, the recommended option is – you can install a third-party application on your Shopify store. It will allow you to set minimum and maximum order quantity restrictions with a little cost. But there are applications that offer a free trial. For instance – a Shopify app named MultiVariants – Bulk Order offers 3 days free trial. By installing the app on your Shopify store, you can easily apply minimum and maximum order quantity restrictions and other business restrictions as well. The app provides good customer service and it has many good reviews from different Shopify merchants also.
Wholesalers require many business strategies to apply. Minimum and Maximum Order Quantity are one of those. This helps wholesalers maintain their business strategies properly for a long period and benefits both wholesalers and retailers.
Minimum and maximum order quantity restrictions both have different purposes in wholesale business but with the same goal of maximizing profit margin and ensuring proper inventory management. Now the challenge is how you are determining your Min/Max limit and how easily you are going to restrict bulk quantity ordering from your eCommerce store.