Understand Your Holding Costs

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Reach Your Break-even Point
To set an MOQ, both suppliers and merchants need to know their break-even point—the price at which they neither make a profit nor a loss. Suppliers set their MOQ above this price to ensure profitability.

For instance, if it costs a supplier ₹30 to make a product, the break-even point is ₹30. If an ecommerce business spends ₹8,000 to buy 200 units from the supplier, its break-even point is ₹40 per unit.

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Some products can be a little more expensive to store as compared to others, due to their size, storage duration required, and special warehousing needs. You’ll be in a better place financially if you don’t keep such items in your stock for long.

Understanding these holding costs, the expenses incurred to store products in el-salvador phone number list a warehouse, helps you avoid overstocking and the financial strain of excess inventory. This is the reason that suppliers might wait for orders before producing or storing goods, and merchants should be cautious of high MOQs.

4. Set Up Your MOQ
After collecting all that information, you’re now ready as a supplier or merchant to allocate an MOQ. Now, let’s say:

Your brand expects to sell 500 units next quarter.
Your break-even point is ₹300 per unit.
It costs ₹50 per unit per quarter to store your product.
If you stock the 500 units you plan to sell, it will cost you ₹1,75,000 in total. To make a profit, you’ll need to price each unit above ₹350. The exact pricing will influence your MOQ.