Landed Cost

Landed cost is the total cost of a product from the point of manufacture or purchase to your warehouse door. This comprehensive figure includes the purchase price, international and domestic shipping fees, customs duties, tariffs, insurance, currency conversion fees, handling charges, and any other costs incurred during transit. Understanding your true landed cost is essential for accurate pricing, profit margin calculations, and making informed sourcing decisions.

Why it matters for e-commerce brands

For Shopify and DTC merchants, knowing your landed cost is critical to maintaining healthy profit margins and competitive pricing. Many brands underestimate their true product costs by only considering the supplier's invoice price, leading to thin or negative margins once all shipping and import fees are factored in. Accurate landed cost calculations help you compare suppliers across different countries, determine minimum viable order quantities, and set retail prices that cover all expenses while remaining attractive to customers.

Example

A Shopify store sources yoga mats from a Vietnamese manufacturer at $8 per unit. However, the landed cost is significantly higher: international shipping adds $1.50 per unit, U.S. customs duties add $0.80, freight forwarding and handling fees add $0.60, and marine insurance adds $0.10, bringing the true landed cost to $11 per unit. If the brand only considered the $8 purchase price when setting their $25 retail price, they might have assumed a $17 margin, when it's actually only $14. This $3 difference per unit directly impacts profitability calculations, advertising budgets, and the viability of offering free shipping promotions.

Related terms

• Cost of Goods Sold (COGS)
• Freight on Board (FOB)
• Harmonized System (HS) Code
• Incoterms
• Duty Drawback