If you’ve ever thrown an extra item in your cart to qualify for free shipping, you get the concept of a minimum order quantity, or MOQ. For businesses, some manufacturers and wholesalers require a certain unit volume or dollar amount per order—and they may turn away customers who are not willing or able to meet that requirement.
While it may seem counterintuitive, losing smaller orders can actually lead to higher profitability. That’s why it’s essential to understand how minimum order quantity works and why some sellers—particularly in low-margin or highly customized markets—have MOQs in place.
Minimum order quantity is the fewest number of units a business is willing to sell to a single customer in one transaction. While retail stores can sell individual items, manufacturers and wholesalers often require orders of dozens, hundreds, or even thousands of units.
MOQs may be based on the number of units or the total order value. Manufacturers typically sell in bulk to wholesalers, who then sell in bulk to retailers—both levels in the supply chain often use MOQs.
A minimum order quantity is the fewest number of units required to be purchased at one time. For example, if a supplier sells a product for ₹100 per unit with an MOQ of 100 units, the minimum order value would be ₹10,000.
This threshold ensures the supplier can cover setup costs, administrative expenses, raw material requirements, and still make a profit.
Suppliers implement MOQs for strategic reasons that support business sustainability. For high-demand or costly-to-ship items, suppliers may require large orders to optimize logistics and reduce waste.
Minimum order quantities significantly affect inventory management for both sellers and buyers. Sellers must plan production and storage carefully, while buyers must assess whether they can sell or use the ordered quantity within a reasonable timeframe.
Factors to consider include perishability, fashion cycles, storage costs, tied-up capital, and potential savings from bulk purchasing.
High MOQs require suppliers to hold more inventory and tie up more working capital. However, they benefit from lower administrative costs, bulk purchasing savings, and reduced ordering frequency.
The trade-off is a higher risk of inventory obsolescence, particularly in industries like fashion or electronics.
Low MOQs reduce inventory holding requirements and lower the risk of obsolete stock. They can increase inventory turnover but may result in higher administrative and fulfillment costs due to frequent, smaller orders.
Businesses must balance flexibility with operational efficiency when choosing the right MOQ strategy.
