Landed cost is the true per-unit cost once everything required to get the goods onto your shelf is included: unit price, freight, duty, insurance and handling, divided by units. It matters because pricing decisions get made from it, and a product priced off the invoice price alone can be sold at a loss without anybody noticing.
Work out your landed cost per unit
Nothing is sent anywhere. The calculation happens in this page.
Landed cost per unit = (unit price + freight + duty + insurance + handling) ÷ units
Reading the result
Compare the result against what you thought the product cost. The gap is the part of your margin that was never really there, and on an imported line it is routinely large enough to change whether a product is worth selling.
Landed cost is the correct floor for pricing decisions and for discount limits. A promotion calculated against invoice price rather than landed cost can take a product below cost while still looking like it has margin in it.
Recalculate per shipment rather than once. Freight rates and duty change, and a landed cost worked out two years ago is a number about a different world.
When the number looks wrong
The two inputs most often wrong are at opposite ends of the calculation.
- Units ordered instead of units received. If part of the consignment was damaged or short-shipped, the landed cost per surviving unit is higher, because the freight was paid on all of it.
- Freight left out because it was invoiced separately. A separate invoice is still part of what the goods cost. This is the single most common omission.
- A result close to the invoice price. Plausible for a domestic supplier with free delivery, and implausible for an import. If you are importing and the numbers barely move, something is missing.
Where the inputs come from
- Total unit price: the cost of the goods themselves for the whole shipment, before any of the extras.
- Freight, duty, insurance, handling: every cost incurred between the supplier's door and your shelf. Customs brokerage and port charges belong here and are routinely forgotten.
- Units: what actually arrived in sellable condition.
The derivation and a worked example are on the landed cost definition.
Common questions
What is included in landed cost?
Everything required to get the goods onto your shelf: the unit price, freight, duty and tariffs, insurance, and handling charges such as customs brokerage and port fees.
Why does landed cost matter more than invoice price?
Because pricing and discount decisions get made from it. A product bought at 8 that lands at 11 has a completely different price floor, and using the invoice price means discounting into a loss without seeing it.
Should I use units ordered or units received?
Received, in sellable condition. Freight was paid on the whole shipment, so any shortfall or damage raises the real cost of each unit that survived.
How often should I recalculate?
Per shipment. Freight rates and duty change often enough that a figure from a year ago is describing different conditions.