A supplier quote is only the beginning of inventory cost. Freight, insurance, import charges, inspections, prep and domestic delivery can all change what one sellable unit really costs. If those costs are left out, a product may look profitable on paper while its cash requirement and margin are understated.
This guide explains a transparent way to estimate landed cost before sourcing. It is an educational planning method, not customs, tax, legal or financial advice. Charges and obligations vary by shipment, product, route, Incoterm, jurisdiction and business arrangement; use current quotes and qualified advice where appropriate.
The basic landed cost formula
Landed cost per sellable unit = (product purchase cost + packaging and product-specific prep + freight + insurance + duties and import charges + brokerage and handling + delivery to destination + other shipment costs) ÷ sellable units received.
Some businesses separate product cost from logistics cost, while others combine them into a single landed-cost figure. Either approach can work if the categories stay visible and you avoid counting a cost twice. The important point is to allocate shipment-level costs across the units you expect to sell.
What belongs in a landed-cost estimate
Product purchase and product-specific work
Start with the supplier unit price for the exact product, material, finish, packaging and minimum order quantity you plan to buy. Add costs that are required to make the unit ready for your sales channel, such as inserts, custom packaging, labels, barcodes, kitting or product-specific inspection.
If a supplier price is quoted in another currency, record the exchange-rate assumption used for planning and keep a buffer for movement. Do not treat an old exchange rate as a guaranteed final cost.
Freight, insurance and shipment handling
Include the full route to the destination you are modeling, not only the international leg. Depending on the quote and agreed terms, that may include origin handling, international freight, cargo insurance, destination handling, port or terminal charges, drayage, brokerage and delivery to your warehouse, prep provider or fulfilment location.
Read each quote carefully. A low freight headline can exclude charges that appear later. Record what the quote includes, which charges are estimates, and what conditions could change the amount.
Duties and import-related charges
Duties, tariffs, taxes and import fees can be material, but their treatment depends on the goods, classification, country of import and transaction. Add only figures supported by your current quote, broker, official source or qualified adviser. Avoid using a generic duty percentage as a final answer.
Whether a tax is recoverable, an expense, or needs to be tracked separately is also business- and jurisdiction-specific. Keep that decision explicit in your model rather than silently folding it into every product calculation.
Losses and sellable units
Divide by the number of sellable units you expect to receive, not automatically the number ordered. Inspection failures, transit damage, samples or units kept for photography can reduce the units available to earn revenue. If the expected loss rate is uncertain, test a cautious case.
Worked example: allocating a shipment across 1,000 units
Imagine you order 1,000 units. The supplier price is $8.00 per unit and product-specific packaging costs $0.35 per unit. Your current shipment-level assumptions are:
- International freight and origin handling: $1,500
- Cargo insurance: $100
- Duties and import charges: $600
- Brokerage and destination handling: $250
- Delivery to the prep location: $300
- Inspection: $400
The product and packaging cost is 1,000 × ($8.00 + $0.35) = $8,350. Shipment-level costs total $3,150. The total inventory cost is therefore $11,500.
If all 1,000 units are sellable, the estimated landed cost is $11.50 per unit ($11,500 ÷ 1,000). But if you expect only 980 sellable units after a 2% loss allowance, the same total cost becomes about $11.73 per sellable unit ($11,500 ÷ 980). The difference is small in this example, but it becomes more important when margins are tight.
Use the Landed Cost Calculator to enter these components as editable assumptions. It calculates a transparent per-unit estimate and does not retrieve quotes, exchange rates or customs data for you.
Do not confuse landed cost with total Amazon selling cost
Landed cost helps answer, “What did it cost to get one usable unit ready?” It does not automatically include the expenses of making a sale on Amazon. Referral fees, fulfilment charges, storage, advertising, returns, discounts and other selling costs need their own place in the profitability model.
After you estimate landed cost, bring it into the Amazon Profit Calculator with your intended sale price and selling-cost assumptions. For a US FBA planning scenario, the Amazon FBA Fee Calculator lets you enter a fulfilment-fee estimate and a referral-fee rate or manual combined fee. Verify figures with current official marketplace information; these tools use the values you provide.
Use a sourcing checklist before you commit
- Confirm the commercial terms. Know which transport, insurance and import costs are included in the supplier or freight quote and which are not.
- Collect written assumptions. Save supplier quotes, freight offers and broker information with dates, quantities and conditions.
- Allocate costs at the planned order quantity. A lower or higher order volume can change the cost per unit.
- Model sellable units conservatively. Account for expected rejects, samples, damage or other non-saleable inventory.
- Test a cautious case. Increase freight or import assumptions and reduce the sale price before deciding the margin is sufficient.
- Recheck after final dimensions and classification are known. Package size, weight and product details can affect freight, fees and handling.
Common landed-cost mistakes
The most common mistake is using only the supplier price when deciding whether to source. Others include dividing shipment charges by units ordered instead of sellable units, treating a preliminary freight quote as fixed, missing prep and destination charges, or mixing tax treatment into a model without understanding it.
Another is double-counting: for example, adding freight inside a supplier “delivered” quote and again as a separate freight line. A simple source note beside each number helps prevent this.
FAQ
Is landed cost the same as cost of goods sold?
Not always. Landed cost is commonly used for inventory cost before sale, while cost of goods sold can follow accounting rules and may include or exclude items differently. Use the definitions that fit your accounting method and seek professional guidance where needed.
Should Amazon fees be included in landed cost?
Usually it is clearer to keep Amazon selling, fulfilment and advertising costs separate from landed inventory cost, then combine them in a full profit model. This makes it easier to see whether a margin issue comes from sourcing or from selling costs.
How often should I update landed cost?
Update it whenever the supplier quote, order quantity, freight quote, currency assumption, import cost or expected sellable-unit count changes. Revisit it before a material inventory commitment.
Does this formula calculate duties or taxes automatically?
No. LandedLedger does not provide live customs, tax, shipping or exchange-rate data. Enter and verify the figures that apply to your own shipment.