Landed cost: the true cost of a product once it reaches your shelf
The price on your supplier's invoice is not what a product really costs you. By the time stock is sitting on your shelf, or checked in at a warehouse, you have usually paid for shipping, duties, fees, and prep too. That full figure is your landed cost, and it is the number your pricing and margins should be built on.
The formula
Total landed cost = product cost + inbound freight + duties and import fees + insurance + payment and transfer fees + prep and inspection
Landed cost per unit = total landed cost ÷ number of sellable units received
Divide by sellable units, not units ordered. Damaged, missing, or rejected units still cost you money, so they raise the cost of the good ones.
What to include
- Product cost: the supplier's price for the order.
- Inbound freight: shipping from the supplier to you or your warehouse, including any freight forwarder charges.
- Duties, tariffs, and customs fees: whatever applies to your product and route. Check your own customs paperwork rather than assuming a rate.
- Insurance on the shipment, if you buy it.
- Payment fees: bank wire fees, currency conversion, or card fees on the supplier payment.
- Prep and inspection: labeling, bagging, quality checks, or prep-center charges before the stock can be sold.
Selling costs such as marketplace fees, outbound shipping, and ads are not part of landed cost. They come later, per sale. See gross vs net margin for where those fit.
Worked example
Illustrative figures only.
| Line | Amount |
|---|---|
| Product cost (500 units × $4.00) | $2,000 |
| Inbound freight | $380 |
| Duties and customs fees | $170 |
| Insurance | $25 |
| Wire and conversion fees | $45 |
| Labeling and prep | $130 |
| Total landed cost | $2,750 |
| Sellable units received (10 damaged) | 490 |
| Landed cost per unit | $5.61 |
The invoice said $4.00 a unit, but the real cost is about $5.61, roughly 40% higher. If this product sells for $15, pricing it on $4.00 would overstate gross margin by more than ten points.
How to split shared costs across products
When one shipment holds several products, spread freight and duties in a way that matches what drives the cost:
- By value for duties, since they are usually charged on declared value.
- By weight or volume for freight, since that is how carriers charge.
- By units for per-unit prep or labeling.
Common mistakes
- Pricing on the supplier quote and forgetting freight and duties entirely.
- Dividing by units ordered instead of units you can actually sell.
- Using an old landed cost after freight rates or exchange rates change. Recalculate each new order.
- Leaving landed cost out of your COGS calculation, which makes every profit figure downstream too optimistic.
Once you have landed cost per unit, plug it into your pricing formula and break-even point. Educational content only, not financial, tax, or customs advice.
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SellerSheetKit is not affiliated with Etsy, Shopify, or Amazon. Fee figures are summarized from official sources on the date above and can change; verify against your seller account. Educational content only — not tax, legal, or accounting advice.