As we all know, Alibaba.com is a B2B marketplace which invariably means high Minimum Order Quantities (MOQs). So what if your budget is strictly limited but you still want to deal with suppliers on Alibaba – what’s the best way to negotiate LOWER MOQs when dealing with large companies on Alibaba?
This is exactly what Russell asked about in his email:
Firstly I want to say thank you for this wonderful resource you’ve created. I’ve always been interested in creating an eBay business and thanks to your blog finally took action earlier this year buying and selling used items on eBay.
I’ve done pretty well from this and have built up a decent fund to buy goods in wholesale, which is what I’m really interested in. But I don’t think my starting budget is quite good enough to buy from China, judging by some of the MOQs I’ve come across in my searches on Alibaba.
Forgive me if this is a stupid question but is there any way I can bypass these minimum order quantities?? Of course I can continue flipping used goods if need be, but I am really keen to get started with a proper business now that I have some decent eBay experience.
I look forward to hearing from you.
First off, you have to understand that not all companies listed on Alibaba are equal. In general, there are two large groups of suppliers:
- Trading companies
Manufacturers – self-explanatory really – these companies manufacture the products in-house and will usually have very high minimum order quantities. And for a good reason, as manufacturers on Alibaba will very rarely hold any stock – they manufacture it for each order.
Many customers want to put their logo (OEM) on products and the packaging so it makes no sense for manufacturers to hold stock. Each batch of products is made to order and they obviously won’t “run” the factory, arrange assembly lines etc., to make just 10 products. Keep this in mind when you negotiate with true manufacturers as there will be a minimum order level that they simply won’t go beyond.
Trading companies – this is what you could call a typical “wholesaler”. They simply buy from factories to re-sell in smaller quantities. But unlike UK/US wholesalers, Chinese trading companies often don’t keep any stock at all, just like manufacturers, instead they source products on demand, as orders come in. This won’t be the case with all trading companies but those who carry loads of unrelated products, in various product categories, often follow this route.
There are trading companies who specialise in niche products (specific product categories) and they will usually hold a certain amount of stock to fulfil orders immediately. This type of trading company/wholesaler is perfect for people with small budgets as usually there won’t be any MOQs at all or they will be very low, like 10 units.
So my first advice for people with small budgets would be to look for trading companies first, that is if your budget is many times below manufacturer MOQs. Yes, there are risks when you deal with trading companies as you never know where they get their stock from, which could cause quality control issues, quality difference in on-going orders and so on. But it really is the best way to source directly from China in relatively small quantities.
But what if you have found a great manufacturer on Alibaba but you simply can’t reach their MOQ? Can you negotiate it?
In most cases you can easily negotiate MOQs by at least HALF (50%) if your know how to do it properly. Of course there will be suppliers who don’t negotiate MOQs but from my years of experience, I can safely say that most suppliers will negotiate. Here’s how to do it…
First of all, you have to contact the supplier you want to deal with, if you haven’t done so already. I have a separate post on how to make first contact with Alibaba suppliers here.
You just want to introduce yourself and ask all the usual questions, like:
- Prices for the products you’re interested in;
- OEM options (putting your own brand/logo on product and/or packaging);
- Payment options;
- Shipping options;
- Order lead time (how long it takes to produce and dispatch your order);
- Sample availability;
So you basically start building a relationship with the supplier and find out all the essential information for the products you’re interested in.
At this stage – DO NOT start to negotiate MOQs! Not yet.
You want your supplier to see that you’re serious so first thing you should do (if everything looks fine) is to order a SAMPLE of the product. Samples are often free if it’s a cheap product but you usually have to cover the shipping fee (via courier).
If the product is more expensive, the supplier will ask you to pay for it. And often they’ll charge a higher price than wholesale. Don’t be put off by this. Suppliers do this to avoid RETAIL customers buying single units from them directly. If the sample price is higher than the wholesale price, suppliers are usually more than happy to credit the cost back to you on your first real order.
Ok, so the first step is to order a sample of the product. And I recommend ordering samples from at least 2 different suppliers, ideally 3. This will give you more options and an added advantage when it comes to the negotiating stage.
Once the product samples arrive, you inspect them, test them, compare them to samples you have purchased from your eBay competitors and if all looks good, you can proceed to the next stage which is the actual order placing process.
IMPORTANT!!! When talking about negotiating the MOQ, you have to be realistic with the numbers. It’s perfectly reasonable to negotiate the MOQ from 1000 to 500, if that’s all your budget allows, but 1000 to 100 is not gonna happen. You can of course try, after all what’s the worst that can happen, but just bear in mind that the chance of you being successful is very low.
Now, contact the supplier and inform them that you’re happy with the sample quality and would like to organise your first order.
Say that as this is the first time you’re buying from them, you want to test how everything goes with a smaller quantity. So instead of 1000 (manufacturer’s MOQ), you would like to test the waters with 500 units for your first order.
See what the supplier says – it’s not unusual for them to accept it straight away. Sometimes they will increase the price of the product slightly for lower MOQs, that’s fine as long as it makes financial sense for you to order at that price.
IF the supplier says no or only slightly lowers the MOQ requirements AND doesn’t mention a higher price, offer to pay them a bit more at your target MOQ.
If they still say no, say that their competitors (hence why you want at least 2 samples from 2 different companies, if not 3) are offering lower MOQs – in your target MOQ region. So ask them to match that offer.
IF they still say no, you can ask them if it would be possible to add your order to the next time they manufacture this product for someone else. This will only be possible if the other order isn’t OEM of course.
If everything else fails and after several attempts the supplier still doesn’t budge on their MOQ, you simply have no choice but to:
- Increase your buying power to meet their requirements. Maybe you can wait a month or two and save up a bit more.
- Look for alternative suppliers offering the same product at lower MOQs.
If you can’t find ANYONE to supply the product at levels suitable to your budget, you may need to re-think your strategy and maybe look for cheaper products to import. This is actually the most common mistake many newbies make – they pick a product that is NOT suitable for their buying power and end up buying OVER-PRICED units from trading companies or Ali Express.
Remember that a high MOQ not only gives you the best product price, it will also significantly lower your shipping cost per item, especially if you use sea freight where it’s not unusually for the shipping cost to be practically the same for 1000 or 500 units.
But if you follow this system, in most cases you’ll be able to negotiate minimum order quantities on Alibaba by at least 30% and if you do, I always recommend doing a factory inspection before you actually place your order and send any money.
You may be surprised to hear this but quite often an inspection report will uncover problems with the supplier and you may re-consider your options. It’s not unusual to find out after an inspection that the so called “manufacturer” is a trading company and simply acts as a middle man between you and the real manufacturer. In cases like these, it’s always better to find and deal with the manufacturer directly.
Yes, an inspection costs $100 but if your order is of a decent size, this money will be well spent to avoid further risks dealing with the supplier.
Ok, that’s it for today!
If you would like your question to be featured in our future Reader’s Question Friday posts, feel free to contact me via my Helpdesk here. I will personally answer all questions and will pick the best one every week for the next in-depth Reader’s Question.
Have a great weekend everyone! 🙂