How to Negotiate with Suppliers for MOQ? (Complete guide)
by Joey Peng | Date: 3rd-Sep-2019
When it comes down to place the first purchasing order with the Chinese supplier, especially with Alibaba suppliers, the biggest challenge many Amazon sellers face is to meet the Chinese supplier’s requirement for a minimum order quantity, also known as MOQ. It’s the least amount of product that a manufacturer is willing to produce for you per production run.
So, how to negotiate with suppliers for MOQ? How can we convince the supplier to change their MOQ to our desired quantity? In this article, I’m going to share with you some awesome negotiation tips.
Gentle reminder: If you want to learn how to find the best manufacturers on Alibaba and avoid middlemen or resellers. You might want to check in our another article “How To Find The Best Manufacturers On Alibaba (Avoid Middlemen)?“. It includes 4 steps and a searching guide to help you through.
Before we get started, let’s figure out the 2 questions.
Question No.1: Is The MOQ Quantity Real?
The answer is Yes and No. Some of the MOQ quantity is completely made up, it’s a subjected number your supplier ask you to follow when you place the first purchase order. Some of the MOQs are real because in order for the factory to produce the product, not only they have to buy a minimum quantity of raw material but they also need to set the machine up. Sometimes the setup time is very long and it’s very expensive.
So, if you are customizing a product, they may have to buy a unique component just to run your order and therefore they need you to buy a minimum order quantity. Assume your supplier’s MOQ is real, which give us another question.
Questions NO.2: Why you, as the buyer, want to buy the quantity less than your supplier’s MOQ?
Your primary reason to buy a smaller quantity should be using a smaller quantity to validate the supplier’s production quality. If your reason is “I’m not sure if this product is going to sell” or “I don’t have a lot of money right now”. Well, these are valid reasons but if you’re not sure if this product is going to sell, please go back and continue to validate the market research and make sure that you feel confident to move forward.
Furthermore, if you don’t have a lot of money (which I understand) but keep in mind, after this small quantity buy you’re going to need more money in order to continue to buy more down the road.
So, regardless of your reasons, please don’t and never to use these reasons “I’m not sure if the product is going to sell” or “I don’t have a lot of money”. Don’t let your supplier sense your weakness, you need to always negotiate from a position of strength and confidence.
Now you’re confident going into the negotiation, when to negotiate then?
Let’s say you’ve got quotes, you got 4 suppliers’ quotes, they all have a different price and different MOQs. It’s so tempting to start negotiating right away. But wait, please don’t waste time because you don’t even know if their samples are going to work out yet. But in this process, now you can plant a seed.
You can tell the supplier like this: “Just for you to know, our first purchase order quantity may be lower or higher than your MOQ, it depends on your product sample quality.”
After you get the samples and evaluate the samples, you’re serious about getting into customization stage, such as redesigning the product, customizing the logo, different variations, and different colors, maybe customize the packaging. Now you can put your cards on the table and start to negotiate.
So How To Negotiate With Suppliers For MOQ?
To guide you more comprehensively, I will show you with a common scenario, along with a step by step 4 round of negotiation techniques. You will learn how to negotiate with suppliers for small order quantity.
For instance, your supplier MOQ is 1000pcs and your desired buying quantity is 300. Now you’re going into the negotiation with the supplier.
Negotiate with Suppliers for MOQ – Round 1
Remember I said previously, if your reason is “I’m not sure if this product is going to sell” or “I don’t have a lot of money to start”, don’t use these reasons. If you’re customizing your product, you can say something like this:
“Given the improvements & customizations we are making, we think it is CRITICAl we get the first production run done right. For the first order, we have decided to order 300pcs to validate your company’s production quality.”
And give her some specific reasons:
- “We need to make sure [x, y, z key specs] are done right;
- We need to test packaging durability to make sure the design is sufficient to sustain the potential shipping damage;
- This small order will also help us gather market feedback so the next Large Order is done perfectly.”
What are the key specs? You should know if you’re customizing your product. If you don’t know, go onto Amazon, find that item that is close to what you’re going to make and read the negative reviews. That should give you some warning signs for your product, so use those as your key specs for your supplier to validate.
These are very valid and fair reasons. If your supplier agrees by now, that is good for you. If you got the answer like this:
“Sorry, we can’t make 300pcs, we will lose money.”
That is fine, they said they will lose money, now you’re going into negotiation round 2.
Negotiate with Suppliers for MOQ – Round 2
On Round 2 they said they are going to lose money, what about you? You understand that:
“Understand. We certainly don’t want you to lose money, especially for the long run.
That is true because your business partner if they lose money they cannot support you. And, specifically not only they lose money, you actually lose more money, you’re in this together. So you can say something like this:
To order a small QTY like this our company will lose a lot MORE money because we are going to pay a lot more on shipping. As you know the air freight alone will cost us [tell her the air freight cost]. That is why we only want to do this ONE TIME just to make sure everything is donw right.”
So you basically put yourself on an equal footing with them. They said they will lose money by running your smaller order quantity and you tell them, not only they lose money, you too, you lose more money, and you’re in this together as a partner.
Therefore, if your supplier understands they may give you a smaller MOQ right now. But if they continue to say something like this:
“I understand, but my boss said we can’t produce 300.”
Oh no, He(or She) is pulling the boss card, you have to go into the negotiation round 3.
Negotiate with Suppliers for MOQ – Round 3
If you’re going into the negotiation round 3, you can start by being a little bit more playful. Because even though the negotiation is very serious, you can still build report with the representative from your supplier side, you can start by saying something like this:
“Your boss still says no? Should I talk to your boss directly?:). We have successfully sold many products. Your company seems to be the most difficult to work with on MOQ. We are a serious buyer, for any new product launch we have to spend a lot of marketing dollar to promote it. For example:
- Half of your 300 units will be given away FREE.”
- And, we will spend lots of money on logo, photography, and packaging.
- After receiving your first 300 units, we are going to spend a lot MORE money one advertisement.
Miss/Mr[beautiful/handsome], we plan to sell A LOT OF YOUR products. You are going to make a lot of money for your boss!”
So, this is the key point, before this supplier walks away and say something like “OK I will talk to my boss one more time.” She’s walking away.
While she’s walking away, you got to put your foot down by saying something like this:
“Thank you. I hope you don’t lose your business because of your MOQ.
- Right now we are comparing two suppliers, your company is one of them.
- We’d love to work with you but you need to let me know by Tomorrow if 300pcs order is OK. If not, we won’t waste more time on this.”
Basically, this is what you’re showing. You’re giving her a deadline, you’re signaling her your willingness to walk away. This is quite powerful, if you show this, 80% of the time your suppliers should be able to give you their compromise to your lower quantity buy. In this case of 300pcs instead of 1000pcs.
However, if you’re really facing a challenge, you get this on the round 4.
Negotiate with Suppliers for MOQ – Round 4
If your supplier is saying something like “Sorry my boss still said no, because…”
Now you have to really listen, listen carefully of their because, because that is their true NO, their true reason of they can not work with you to lower their MOQ. If you listen carefully, you will be able to score on the final round.
In the final round, I’m going to share with you 5 negotiation tips to really take it home.
- Share the Setup fee with the supplier
If their because is their setup fee, for example, if they say Oh, our setup fee is very high. You can ask them how much? $200, $300? How about I share a little bit with you? Be flexible working with them, understand they do have a setup fee, therefore, you’re willing to share with them because you’re partner with them.
- Buy less unique component
Is that because they have to buy a minimum quantity of a unique component for your customized product? If that is true, ask them can you buy smaller quantity for that unique component? I’ll pay a little bit more if you have to so I don’t have to buy the minimum quantity for the entire product. Ask them.
- Pay a slightly higher price for a lower QTY buy
If they really cannot lower the MOQ and said they will lose money. How about offering a slightly higher price? For example, if their MOQ price for 1000pcs is 5 dollars. You can offer maybe I will pay you $5.30 or $5.40, for a 300 quantity buy, ask them.
- Increase quantity a bit more to 500pcs instead of 300pcs
Instead of buying 300pcs, how about I offer to buy 500pcs, still less than your 1000pcs but I’m trying to compromise and make it work.
- Draft a PO at 300pcs to them to show your commitment
You can draft a purchase order and send it over to them and show your commitment and show that you’re serious of working with them. If they still say no, you know they can’t. But most likely, by now, you should be able to score.
Summarize
After you try all these negotiation techniques, I’m pretty sure you’re having a good chance of getting what you wanted. Even if you make a little bit of compromise doing the negotiation, you learn a lot from it. You know now a lot about your supplier’s cost structure, their decision-maker and also their negotiation style. And the most important at all is that they know that you’re a serious buyer, you’re a professional buyer, they cannot run you over and take advantage of you.
I hope these negotiation tips can help you when you’re dealing with the suppliers. If you like this article, please Like, Subscribe and Share the content. If you have other questions, comment below we will discuss it for you. And, if you’re looking for a sourcing agent to help, we’re here for you always.
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