When you start your new cosmetic brand, first thing you find out is that you have to purchase at least some thousands of products as initial order.
Why is that? Are we getting ripped off from manufacturers into buying so much?
We explain why there's such high MOQs for cosmetic products and how you can lower them.
MOQ stands for minimum order quantity. It’s the smallest amount of order acceptable for a manufacturer or a supplier to produce at a time.
Pretty easy to understand.
To make it easier to understand, lets say that you want to produce a line with 3 body creams, each having a different color and fragrance.
You’ve talked to some highly potential suppliers, and their MOQ is 5,000 pieces.
It means that you have to order at least 5,000 pieces of each of the flavour from them. You would have a total of 15,000 body creams in your stocks to sell.
The next thing you may want to know is why would a manufacturer or supplier set a minimum order quantity.
Well, the short answer is, they need to cover all the costs and still make profits from the cooperation.
But to go a bit deeper, you must understand that profit is not the only reason behind MOQs. Otherwise , suppliers could offer lower MOQs with a higher price to recover their costs. There are 4 big factors affecting MOQs in Cosmetic production that are :
Lets take our line of body creams back to understand each parameter in details.
1.Raw Materials MOQs
A body cream formula is usually a blend of minimum 10 to 12 different ingredients ( including your signature perfume) . Your manufacturer will purchase these raw materials to specialized suppliers or traders dealing with all cosmetic industry players.
note: purchasing raw materials online in small quantities is not feasible. There are some rules (called GMP) to produce cosmetics in the right way. Traceability , regulatory compliance are usually not present when you purchase online.
You must understand that for each ingredient, the supplier will also apply a MOQ. And Raw materials MOQ are usually quite high (typically 1000kg for an emulsifier – 25Kg for a perfume) , especially when it comes to specific ingredients (natural ones or the ones having most interesting properties for skin).
If your formula contains specific ingredients that will be used for your products exclusively (typically a perfume) , the manufacturer must consume all the stock with your order. Otherwise the Raw remaining materials might be lost & expire soon.
2. Mixers sizes
Your body cream has to be blended (we say manufactured) in big mixers that will heat , mix, blend the raw materials according to a specific procedure.
Each Manufacturer has different mixer’s sizes to make their products. The mixers should never be loaded at less than 70% of their capacity. Otherwise the mixing paddles would not dip enough in the mixture, leading to quality issues.
Lets say a manufacturer tells you he is having a 1Tonn mixer for creams, this means that the minimum he can “blend” in this mixer will be 700Kg. But the optimum is 1000Kg to get the best cost as time to blend 700Kg and 1000Kg is the same.
So, for our example, manufacturer will have to produce minimum 700Kg for each formula i.e each fragrance. Considering a 200mL jar is the packaging , this means 3500 pces minimum per batch manufactured. Each fragrance being a different batch we end up having 3*3500 pces body creams produced MINIMUM.
3. Packaging Minimum order Quantities
Choosing the right packaging is a key point in maintaining low MOQs.
You have to consider all packaging components : for example for our body creams, we will have :
Typically MOQs for packaging components start from 5,000 pces for plastics if you go for a standard mold. In case you opt for personalized packs or printed bottles, it will rise to 10,000 pces each print.
Printing MOQs for labels can be lower with digital, but the price is very high. Offset and flexo print usually starts for 5,000 pces. Direct prints are usually starting from 10,000 pces.
Except if you accept to pay for unused packagings, your manufacturer will set his MOQs in order to consume it all.
For sure, the price is very dependent to quantities. Always do your math !
see this example for a plastic bottle :
The price for 2500 pces was USD 0,9/Pce + 250 for transportation = total amount for 2500pcs is 2625 USD
The price for 5000 pces was USD 0,45 / Pce + 300 for transportation = total amount for 5000pcs is 2550 USD
It is cheaper to get more quantity ! This is due to the fact that starting a plastic machine requires time and setting which cannot be absorbed on 2500 pces only.
4. Filling lines changeover
Now we have our packaging and raw materials blended. Your manufacturer will need to fill & pack your product.
This is the most manpower consuming operation in a cosmetic manufacturing. Unless you have a very large production (we talk about 500,000 pces runs) this step will not be fully automated.
Private Label manufacturers usually use semi-automated machines that are easier to set and more flexible. Indeed, the very automated machines have less flexibility to accomodate various packagings sizes and shapes.
Before they will be able to start running your products, there sill be minimum 30 to 45 minutes spent for setting all the requiered machines to fill, cap & label your product with the right quality. In some cases, if packaging shape is “difficult” it can be much more. This cost is fix , whatever the quantity will be filled afterwards. During that time, there is no other product coming out of the line and the maintenance team (engineers & experienced technicians) have to be present.
Suppose this 30 minutes setting time costs 1000 USD to the manufacturer (considering staff salaries, electricity consumed etc) . If you produce only 2000 pces after that , this costs 0,5USD/PCE. If you produce 10,000 pces the costs goes down as low as 0,1USD/PCE !
Simple math ! In case there is an unexpected breakdown or quality issue to be fixed, it is same ! and will be fully on manufacturer !
This is the reason why, most of the manufacturers prefer to not go for small run. Even if they increase price, their margin is too likely to be “eaten” with a small unexpected situation as there is not flattening for the risks.
To get lowest MOQ, the best is to think strategic during product design stage !