Landed cost is the total cost of getting a product into your possession and ready to sell, not just the price your supplier charges. It includes the unit cost plus freight and shipping, customs duties and tariffs, insurance, import fees, and any other costs incurred bringing the product to you. It is your true cost per unit, and it is the number your margin and pricing should be based on, because the supplier invoice alone understates what each unit actually costs you.

How do I calculate landed cost?

Add every cost of getting a unit to you and divide by the number of units. Start with the supplier price, then add freight and shipping, customs duties and tariffs, insurance, import and handling fees, and any other costs in the journey, then allocate those shared costs across the units in the shipment. The result is your true per-unit cost. The discipline is capturing all the costs, not just the obvious ones, since the smaller fees add up and quietly erode margin if ignored.

Why does landed cost matter for pricing?

Because if you price from the supplier invoice instead of the true landed cost, you understate your cost and overstate your margin, which means you can be selling at a real loss while your numbers look fine. Pricing and margin decisions built on landed cost reflect what the product actually costs you, so you set prices that genuinely profit. It is the foundation of accurate contribution margin and therefore of every product-level profitability decision.

What costs do people forget in landed cost?

Commonly: customs duties and tariffs, freight and last-mile shipping, insurance, import handling and broker fees, currency conversion costs, and storage or fulfillment fees depending on the channel. These smaller, less visible costs are exactly what gets left out, and together they can be a significant share of the true cost. Forgetting them makes a product look more profitable than it is, which is how brands scale products that actually lose money.

Playbook Operations systems

Landed cost: the number behind your true margin

The supplier invoice is not your real cost per unit. Landed cost adds freight, duties, and the fees of getting a product to you. Here is how to calculate it, and why pricing without it quietly loses money.

January 5, 2027 7 min read

The number on your supplier’s invoice is not what your product costs you. By the time a unit is in your possession and ready to sell, you have also paid for freight, duties, insurance, and a handful of fees, and that total, the landed cost, is your true cost per unit. Price from the invoice instead and you can be selling at a loss while your margin looks healthy. Here is how to calculate landed cost and why it is the foundation of real margin.

What landed cost includes

Landed cost is everything it takes to get a product into your hands, ready to sell:

The unit cost from your supplier
Freight and shipping to you, including last-mile
Customs duties and tariffs
Insurance on the shipment
Import, handling, and broker fees
Any other costs in the journey, currency conversion, storage

Sum all of it, allocate the shared costs across the units in the shipment, and you have your true per-unit cost, the number that should drive every pricing and margin decision. That import cost ecommerce brands so often understate is exactly what a proper landed cost calculation surfaces.

The supplier invoice is the cost of the product. Landed cost is the cost of having the product. You sell the second one, so price from it.

Why pricing from the invoice loses money

The invoice understates your real cost

Price from the supplier number alone and you understate your cost and overstate your margin. The gap, freight, duties, fees, is invisible on the invoice but very real in your bank account. Products that look profitable on invoice cost can be losing money once the full landed cost is counted, and you would never see it.

Landed cost feeds contribution margin

Your true contribution margin starts from landed cost, not invoice cost. Get the landed cost wrong and every downstream profitability number, per-SKU margin, ad budgets, pricing, is wrong in the same direction, optimistically. Landed cost is the foundation the whole margin picture stands on.

Calculating it well

Capture all the costs, especially the small ones

The discipline is completeness. The forgotten costs, duties, last-mile freight, insurance, broker fees, currency conversion, are exactly the ones that quietly erode margin, and together they add up. Capture every cost in the journey, not just the obvious freight, because the small ones are where the hidden loss lives.

Calculating landed cost

Start from the supplier unit price, never stop there
Add freight and last-mile shipping to you
Add customs duties, tariffs, and insurance
Add import, handling, broker, and currency costs
Allocate shared shipment costs across the units
Price and calculate margin from landed cost, not invoice cost
Stack channel selling fees on top for full profitability

Landed cost is the operations-systems number that keeps your margin honest: the difference between knowing what a product costs to make and knowing what it costs to have and sell. Brands that price from it set prices that genuinely profit; brands that price from the invoice scale products that quietly lose money, and wonder why revenue grows while cash does not.

If you are not sure your prices reflect the true landed cost of your products, building that number into your margin math is exactly the kind of clarifying work a Growth Audit delivers.