Sourcing products from China for your Amazon store can have its challenges. Often times our expectations for a product’s quality in relation to an advertised price are unrealistic.
Low Minimum Order Quantities (MOQ) with Low Pricing
Frequently Amazon sellers see pricing listed on Alibaba with a low MOQ, and think that’s the price they should expect to pay from a factory directly. Unfortunately, that price is not always realistic or available from a factory due to several reasons:
- Alibaba does not advertise that the price is the same as the MOQ that’s listed, and it almost never is that price. Think of it as an ad that says, “Prices as low as $XX,” where the price is never actually that low.
- Factories can’t produce your product at the lowest price they advertise and may have an MOQ that’s 10x that listed price for your quantity because it doesn’t justify their cost. When they’re manufacturing a product it comes with certain manufacturing costs, including:
- Production set-up – this is a big one as it often takes the same amount of time to set-up equipment for a run of 500 as it does to set-up for a run of 10,000.
- Opportunity cost – they would rather make more money doing a larger job than your small one, so they need to drive the MOQ price higher.
- Raw material – this is both raw material cost and the MOQs that are set by their raw material suppliers. Your product could require 10 different raw materials or parts, and one of those suppliers can be the one with the high MOQ that they in turn have to pass on to you (either through price increase or MOQ increase).
- Assembly set-up – the cost to set- up the assembly line after production may be the same for a small run as a large one.
These are just two reasons that they might not be able to meet your MOQ at your desired price. If you keep pushing for that price keep in mind that may come with a trade off such as cheaper materials, less strict manufacturing practices, and cutting corners.
Tips for Pricing and Quality
Now that you have a better understanding about the way MOQs can be misleading, here are a few other tips about pricing and quality.
- Higher price does not always mean higher quality. It could be a regional thing – one factory has fewer resources nearby to create the product, so the price is higher than a different region.
- It is okay to do some negotiating on price with the factories, but if you haggle too much, they may get you the better price, only to compromise the quality of materials or manufacturing processes to achieve the price.
- If you start with a low quantity, the rule above also applies. The factory may get you a fair price at your low quantity, but the quality will suffer.
- Ask for the price at different quantities to see which yields the best price break. If you know you will need more product in six months, stock up in one large run vs. two small runs for a much better price.
- Always ask the factory for a sample for their initial pricing, and if possible, a sample for the product at the lower pricing (pre-production sample). Compare the two samples to spot the differences.
- Once you receive a physical sample, use it to set key quality indicators (KQIs) and have a company (like Noviland) perform a quality control assessment based on these KQIs to objectively say what’s conforming and non-conforming.
As you can see, navigating the ins and outs of pricing, quality and quantity can be a little tricky. Noviland can make this process so much easier for you as we have vetted all the factories we work with, can help select a factory that is better suited for your product, can help get you samples, has employees in China that can go to the factory to check on production, and can get you the best shipping rates (another cost you need to factor in to your price). We are also a knowledgeable and friendly resource for any questions you have about the process.