Landed Cost

Landed cost is the total cost of getting a product to its destination warehouse, including product cost, freight, insurance, duties, fees and handling.

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What Is Landed Cost?

Landed cost is the full cost of a product once it arrives where it will be stored or sold. It goes beyond the price paid to the manufacturer and includes everything spent to move the goods, clear customs and get them onto warehouse shelves. Knowing landed cost per unit is essential for setting prices and understanding true margins, especially for brands that import inventory.

How It Works

Landed cost typically includes:

Product cost: the price paid to the supplier.
Freight: ocean, air or ground transport, including fuel surcharges.
Insurance: cargo insurance, if purchased.
Duties and taxes: import duties and any other charges due at the border.
Customs and broker fees: entry processing and brokerage charges.
Port and drayage costs: terminal handling and trucking from the port to the warehouse.
Receiving: the warehouse's charges for unloading and checking in the goods.

For example, if a brand pays $4.00 per unit to its supplier and spends a total of $1.50 per unit on freight, duties, broker fees, drayage and receiving, its landed cost is $5.50 per unit. That number, not the $4.00 factory price, should drive pricing and margin decisions.

Why It Matters for Ecommerce Brands

Brands that price products based only on factory cost can underestimate their costs and lose money on every sale. Landed cost reveals which suppliers, shipping methods and order sizes are most efficient. It also helps brands react when costs change, such as when freight rates or duties move. Tracking landed cost per SKU, and adding fulfillment and postage costs on top, gives a clear picture of profitability per order.

FAQ

Common Questions

Still unsure? Call (310) 415-7759 and talk to the team that packs your orders.

What is the difference between landed cost and cost of goods sold?

Landed cost is the cost of getting inventory to the warehouse. Cost of goods sold is an accounting figure for the cost of units actually sold in a period, which often uses landed cost as an input.

Should fulfillment costs be included in landed cost?

Landed cost usually stops at the warehouse. Pick, pack and postage costs are typically tracked separately as fulfillment costs per order.

How can a brand lower landed cost?

Options include consolidating shipments, comparing freight methods, negotiating with suppliers and confirming product classification with a customs broker.