3 words you need to know for your fashion startup!

Have you ever wondered why new launch iPhones at Singtel, Starhub or M1 sell out?

Because technically if Singaporeans are buying iPhones throughout the year, why don’t our Telcos just stash these phones in a warehouse and not risk you porting over to another provider if your desired iPhone with them is out of stock?

The simple truth is this: unsold inventory can generate huge losses for businesses and these companies order by the container-loads! And an extra container of iPhones that are unsold can generate hundreds of thousands or even millions in losses.

I’ll tell you why that all makes sense later but before we dive into the details, here are the three words that you need to know to start your fashion brand:

Minimum. Order. Quantity.

Let’s get right into it.

1. What is MOQ (Minimum Order Quantity)?⭐️

MOQ refers to the minimum number of units per good required by a purchaser or buyer for a buyer-seller relationship to be formed. For smaller and simpler sellers/factories, it can be as low as 5 pcs per purchase but for the massive gargantuan factories, it needs to go as large as 100,000pcs per order.

When in China this March, I overheard a factory producing shoes for Primark at ONLY US$1 per pair!

The catch:

The minimum order quantity for $2 is 100,000 pcs!

2. Why is MOQ important? ⭐️⭐️

MOQ is important because the best factories are not going to occupy their time with ikan bilis companies with ikan bilis amount of orders. They want to swim with the sharks and whales with huge orders to meet their sales targets. They want to give preferential treatment to brands that promise the most profits.

Capitalism thrives on such reciprocal relationships and smaller companies with smaller orders are often ignored. This means that these smaller companies are commonly left to bottom feed ‘algae’ amongst poorer factories that have lower standards and qualities. The poorer factories might actually even sell their products at a higher price than the better factories to meet their profitability targets (especially if the orders are really small).

This means that a lousier product may even be more expensive, due to the lack of economies of scale for smaller companies!

3. How is a higher MOQ achieved? ⭐️⭐️⭐️

A higher MOQ is achieved by scaling the business and its customer base. This ensures that you do not get caught in a situation whereby you have an entire container of unsold iPhones. i.e. If I have 800 customers ordering a subscription of skincare sets on a monthly basis, I definitely am not worried about ordering 1,000 sets!

Scaling the business involves a significant amount of customer acquisition.

1. It can include introducing new product lines

2. Expanding across new geographies

3. Building a large physical presence

This allows you to reach container loads of orders (a good measure of critical mass) and you can start achieving economies of scale from there.

Every fashion startup should aspire to reach container-load shipments because it ascertains that a certain threshold of quality and critical mass has been achieved. And all your steps related to the business should always be towards achieving a higher MOQ.

(Side note: I know you guys love to throw shade on Love, Bonito’s quality on Lemon8 but it is common knowledge amongst factories that I engage with that Love Bonito products are of a VERY RESPECTABLE quality due to their high MOQs. Yes, send your hate over I thrive on anonymous troll hate🫰🏻)

4. MOQ and Quality⭐️⭐️⭐️⭐️

The correlation between MOQ and Quality is obvious. With a higher purchasing power, you get to make more demands with factories. Take for example the Canton Fair (which I am revisiting next week).

This is a showcase of various products for factories across China and it hosts buyers from all around the world. People like Walmart, Target in the US, Tesco in the UK, Uniqlo Japan etc. fly in from all around the world to establish strong working relationships with factories.

These factories don’t do sales of thousands of dollars. Their annual sales reach hundreds of millions of USD per year. If you’re not ordering at least $500K of product annually, they are highly disincentivised to speak to you.

5. The pot of gold at the end of the rainbow 🌈

The bad news is that it is ridiculously tough to attain this critical mass.

The good news is that once you get there, things become way easier.

Factories jostle to work with you.

Price, quality and speed improves multifold.

Customers are satisfied.

It becomes a virtuous upward cycle that runs on its own.

🏃🏻‍♀️🏃🏻‍♀️🏃🏻‍♀️

So to all of you considering starting your own fashion brand, don’t give up when you run into brick walls! Trust me it gets way better after you attain your critical mass so don’t lose hope! Keep working towards those larger MOQs!

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