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Ahh, the minimum order quantity. It’s the most overlooked lever a print shop can pull.
Want to re-define the terms of a business’s services? Serve different customers? Make more money? Simplify a business?
Change the minimum order quantity. So why don’t more print shops pull this powerful lever?
- Why “flirting with customers” is expensive
- How MOQs move you upmarket
- “Calculating” an MOQ (not so easy!)
- Why apparel is the perfect e-commerce item
Minimum order quantity – or minimum dollar amount?
I think it has something to do with the way minimum order quantities are set in the print industry. It’s a bit arbitrary: usually something like 12 (or 48) shirts.
The conversation is pretty common and it goes something like this. A customer calls and asks: “hey, I was hoping to get about 7 shirts printed for my Bored Ape NFT club. Can you do that?” The shop is excited but has to turn them away because their order minimum is 12 pieces. They can’t convince them to just go ahead and print 5 more Bored Ape NFT club shirts because there are only 7 people in the club and they don’t have plans to give away their special shirts.
But what if the conversation goes another way and the shop just had a minimum dollar amount instead of a minimum quantity?
“Hi, I’d like 7 Bored Ape NFT shirts please,” the customer says. And the shop can simply reply: hey, that’s great, we’d love to do that, but it’s $500 for the shirts because our minimum order amount is $500.
“Oh, that’s no problem,” the customer says, and now everyone in the universe is a little bit happier and the print shop just sold 7 shirts for about $71 each without having to argue over pricing.
Okay, so perhaps this situation is a bit idealistic. You’re probably not going to find people that will just hand-wave away $71 shirts (but if you do, you should definitely try your best to hold on to them). But “hey, look, I’d love to chat about your cat’s birthday party or your kid’s soccer tournament or whatever, but we have a $500 minimum order” is easier to understand and simpler to explain than “Could you bump that to 12 shirts? We have a 12 shirt minimum order.”
Why does it feel worse for a business to say you have to clear this arbitrary hurdle and it’s a weird quantity we came up with compared to you gotta pay this amount to shop here?
I don’t know. But it does feel that way.
Flirting with customers: why MOQs work
Flirting with customers about their orders has a price. And that price has a name: administrative overhead. We’ve explained how administrative overhead is a major drag on calculating pricing before. It’s a leaky spigot. Chatting about the order and going back-and-forth and even just answering messages and emails for bad orders are not cost-free activities. Particularly if the business is paying a bunch of people to do it.
The weird truth about print shops is that people seem to underestimate their value. Yes, it’s a meme that your best customers will just pay you whatever you need to get the job done because they know how much the merchandise is worth.
No one is under the impression that this transaction is anything other than t-shirt arbitrage. “I’m selling you this shirt for $13 that I paid $6 for so you can sell it for $25” isn’t coming out of anyone’s lips, but we all understand that’s what’s really going on.
Or even worse, the totally ignorant customer. Don’t you just print the shirts in the back? Why can’t you just spool up the machine for a couple of mine?
Instituting a minimum order price is a kind of psychological barrier. It justifies the value. How? Because it just does. Pay the price, or walk. You must be this tall to ride the ride. Sorry!
Using MOQ to go upmarket
One of the more entertaining stories from 2020’s Impressions Expo at Long Beach was the story of a shop in California. Plagued by low-volume orders and bleeding cash, the owner made a desperate move. He blacked out the windows, locked the building’s front doors, and put a massive sign up that said “144 PIECE MINIMUM ORDER. CALL US” with their phone number.
What happened? Business went up 300%. Customers came flooding in. The bad orders went somewhere else.
144 pieces is a bold move. It’s a sharp climb upmarket. Thousands of dollars are in play. But the result is indisputable. Customers become more disciplined, professional, value-driven (not price-driven), and simply better for the business.
The power of the minimum order quantity for a print shop boils down to three major points:
- Better planning. Knowing that every order meets a minimum criteria makes budgeting much easier. It makes projections and estimates simpler. It even makes your capacity planning much simpler.
- Know your minimum profit. If you know your minimum job size, you can track how long each job takes and understand exactly how certain jobs delve into unprofitable territory.
- Reduce time spent on bad inquiries. A clear written policy on your minimums will reduce the number of spammy, low-value inquiries you have to waste time replying to.
So how should you set your minimum order size? No one can tell you exactly – there isn’t an agreed-upon formula here.
Guess and test? Building your MOQ
Ultimately, it’s not very comfortable to “guess-and-test” with an entire business on the line. Setting an arbitrary MOQ feels a bit like shooting at a target you can’t see. But it is not. Instead, this process narrows the field of eligible customers. You aren’t marrying the MOQ, you’re experimenting with it. The complications arise because of the nature of the work that print shops do: they add value to a product by finishing it.
Large manufacturers are typically tasked with calculating minimum order quantities to stay profitable. Making 500 custom rubber duckies might only net them a few dollars – while 50,000 will make the job worth their time.
Their calculation is actually simple. They look for the break-even point and forecast demand. Orders below either point are rejected. There is some ambiguity here, of course. A factory in China might charge a premium for the first run of a product, or simply set a very high MOQ.
They have to cover the cost of their tooling and process. They have to dial in the equipment and test everything until a product that meets standards is produced. Sometimes they’ll cut the customer a break after a couple of rounds of orders and drop the MOQ quite a bit.
“Look, we were going to give you 50,000 pieces. But now you can just order 10,000 if you want to.” The customer is relieved because they don’t have to store so many items and deal with so much risk. They’ve both made enough money to be satisfied with the outcome. This is a win-win.
Calculating the minimum order quantity is more difficult when an operation is complex like screen printing. But there are huge advantages a print shop has because of the unique nature of the t-shirt (and virtually all other textiles too).
“The t-shirt is the perfect e-commerce item,” Danny Sweem (M&R’s CEO) likes to say. But there’s more to it than that. It’s not just the perfect e-commerce item.
Apparel dodges a lot of the complications that arise from selling other goods. It has an outrageously low storage cost. You don’t need to refrigerate it. It’s not fragile. It is not particularly heavy or bulky. The “carrying cost” in manufacturing is the percentage of how much it costs to store something (say, $10k overhead for a big storage facility for a ton of shirts) compared to how much that business can sell it for (say, $100k worth of shirts). A 10% carrying cost isn’t terrible.
But, like anyone who has tried ordering pullovers in the right color over the past few months can understand…carrying costs are compounded by the fact that the print shop sort of acts like a middle man in the equation. Your carrying cost is also your cost of acquisition, which has gone way up. “Hey, can you order us a few dozen hoodies in that nice royal blue” used to be a nice sound. Now it is basically a screeching command to go spend hours searching through barren catalogs.
Pick-and-pack operations (where a shop simply pre-prints different designs and ships them as orders roll in) might simplify the calculation, but they introduce their own complexities too. There’s a given overhead to printing that the shop can know, they spend a few days a month banging out the prints that they sell for their pick-and-pack customers, and there’s simply some minimum quantity that these customers have to order to take part in the pick-and-pack service. Then the shop prays that their pick-and-pack customers are actually able to drum up enough demand to keep coming back.
It’s not hard to imagine a Costco-like situation where a print shop says: “Hey, look, we know our MOQ is really high. But if you pay us $100 a year, you’re in the club. You can order however many shirts you want.”
Frankly, I’m surprised no one has done this yet (or if they have, they’re just not on my radar).