May 6, 2016 by Andrew Minalto - 6 Comments

How to Reduce the Minimum Order Quantity on Alibaba by 50% and MORE!

alibaba-moq

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:

Hi Andrew,

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.

Russell

First off, you have to understand that not all companies listed on Alibaba are equal. In general, there are two large groups of suppliers:

  • Manufacturers
  • 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?

Yes, absolutely!

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;
  • Etc.

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:

  1. Increase your buying power to meet their requirements. Maybe you can wait a month or two and save up a bit more.
  2. 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! 🙂

Thanks,
Andrew

6 Comments
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  1. Hi Andrew,
    Thanks for this post – very useful for companies just starting out. There is one supplier who I’m considering progressing with, who are a Trading Company. However they do not have any certificates on their profile. I was wondering do they types of certification that we should look for in manufacturers differ from those we should expect from a Trading Company? If yes what types would you want to see from a Trading Company? They tick the boxes on most of the 12 points but lacking here and no AliExpress store.

    Many thanks,
    Tom

    1. Andrew Minalto

      Hi Tom,

      You would be looking more for product related certificates, like CE for example.

      Company itself should just have export licence to sell goods internationally from China.

      Andrew

  2. Hi Andrew,
    Thank you for all your valuable advice. I am just wondering if you have any tips for negotiating price with Chinese suppliers. At what point is it expected that price negotiation should take place? I have paid their asking price for the sample and they have given prices for 50+ and 100+ etc. Are these prices generally negotiable – or only the MOQ’s (is the price that they have quoted for a certain number of pieces the price and that’s it ?)
    For example, I have received the following prices:
    Sample 180usd
    50pcs 155.25usd
    100pcs 149.25usd
    500pcs 143.35usd

    So in this case, for my first order, if I wanted to see how I went with 25pcs – is it common practise to negotiate the price as well as the MOQ, or do you generally have to pay what they have asked? In this case if I asked to reduce the MOQ to 25pcs would I expect to pay 155.25usd, or should I try to negotiate a lower price again?
    I would appreciate any advice in relation to this subject.
    Thanks,
    Kirstie

    1. Andrew Minalto

      Hi Kirstie,

      Yes, of course – usually you can negotiate prices too.

      In your case though, you want to order lower quantity so you’re already negotiating MOQ in first place so it’s unlikely you can get down the price too. You can try of course as there’s no harm in asking.

      Usually though, the most effective price reduction can be achieved with greater quantities, not going below supplier’s MOQ.

      Andrew

  3. Hi andrew

    So I have been in contact with a few suppliers on Alibaba regarding purchasing a few products that are related to a niche market that I want to sell into. After searching through a few suppliers I found one that looks very professional and have been trading on Alibaba for about 8 years.

    They make the same product that alot of the other suppliers do. The difference is the other suppliers are making the same old looking product over and over again. This supplier is making something that looks pretty pleasing and everyone hat has seen the images say it looks really good and that they would buy one.

    I sent them an email regarding buying this product, and they told me it is still just in design, and that they dont actively make it. They told me if I wanted to actually have it made that they would require $3400 to cover the material costs and labour costs of producing it. This does not include the cost of the MOQ which they are saying is 500. I am trying to negotiate with them to get a lower MOQ, but they are not budging and are saying it is not worth their while to go lower.

    I am trying to get samples from them but they are saying they will only 1-2 samples, and those samples would be without the part that needs to be designed and produced, hence the $3400 i was quoted earlier on. Which really dosnt seem worth it to me. Without samples, and samples with the main part how can I even know how good the product is

    My questions is really why would they actively be selling something on Alibaba and then saying it requires $3400 to go in to production, which dosnt include MOQ. To order MOQ + cost would be $5500. They dont look like a scam company and have been trading on Alibaba for 8 years, and they are a gold supplier, and have been site assessed, and I really want to source this product. Does anyone have any advice?

    1. Andrew Minalto

      I don’t know what the product is of course but from the sound of it – their R&D department creates new models/types of this product and if someone is interested in them, then only they start manufacturing it.

      The cost of $3400 is probably to cover creation/manufacturing of moulds that are needed to make this product.

      It’s not un-common situation.

      Thanks,
      Andrew

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