The formula
Landed Cost = Product Cost + Freight + Duties & Tariffs + Insurance + Handling
Divide the total by the number of units for landed cost per unit — the number that actually belongs in your margin math.
The components
- Product cost — the wholesale or unit price on the invoice.
- Freight & shipping — inbound transportation to your store or warehouse, including any per-order or per-unit charges.
- Duties & tariffs — customs charges on imported goods.
- Insurance — coverage on goods in transit.
- Handling & fees — brokerage, port, fulfillment, or processing charges.
A worked example
You order 200 units at $12 each ($2,400). Freight is $300, duties are $180, and handling is $120.
($2,400 + $300 + $180 + $120) ÷ 200 = $15.00 per unit
The invoice said $12, but each unit truly cost $15 to land — 25% more. Price off $12 and your real margin is far thinner than your spreadsheet claims.
Why it matters
Landed cost is the honest input to every downstream number: markup and margin, GMROI, and the profitability ranking you use to decide what to rebuy. It also makes vendor comparisons fair — a lower invoice price from a distant supplier with heavy freight can land higher than a pricier local one. Only landed cost reveals which deal is actually better.
Allocating freight fairly
When one shipment carries several products, freight and duties have to be spread across them. Common methods allocate by unit count, by weight, or by value. The method matters less than being consistent — an unallocated freight bill is a margin leak hiding in plain sight.
Landed cost in Vendee Pro
Vendee Pro captures landed cost at the line level on a purchase order — per-line wholesale plus shipping-per-unit — so the cost basis behind your margin reporting reflects what each unit truly cost to put on the shelf, not just the wholesale figure. See PO basics →
Frequently asked questions
What is landed cost?
The total cost of getting a product to your shelf: the unit price plus freight, duties and tariffs, insurance, and handling or brokerage fees. It’s the true per-unit cost a buyer should price against.
How do you calculate landed cost?
Add product cost, shipping and freight, customs duties and tariffs, insurance, and handling fees, then divide by the number of units for landed cost per unit.
Why does landed cost matter?
Margins from the invoice price alone overstate profitability because they ignore freight and duties. Pricing and margin decisions should use landed cost so reported margin reflects what the unit truly cost to stock.
How is landed cost different from cost of goods sold?
Landed cost is the all-in cost to acquire and receive a unit; cost of goods sold is the cost of the units actually sold in a period. Landed cost per unit feeds into the cost of goods sold figure.
Know what your inventory really cost.
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