- Landed cost is the full cost to move goods from supplier to destination and make them sellable.
- Supplier invoice value alone usually understates true cost and can lead to underpricing.
- Track both shipment-level cost and landed cost per unit before quoting customers.
- Update estimates with final invoices to keep margins accurate over time.
What costs should be included?
A complete landed cost model should include every charge between supplier dispatch and final delivery.
- Product / invoice value.
- Origin costs: packaging, supplier documentation, loading, local handling.
- Freight: sea, road, air, courier, and container costs.
- Insurance.
- Customs: duties, tariffs, broker fees, and customs clearance.
- Taxes: VAT/GST/import tax where applicable.
- Arrival costs: port charges, unloading, warehousing, and final delivery.
- Overheads: bank fees, FX costs, inspections, compliance, and admin.
Landed cost formula
- Product Cost + Origin Costs + Freight + Insurance + Duties + VAT + Arrival Costs = Total Landed Cost
- Total Landed Cost ÷ Units = Landed Cost Per Unit
Landed cost structure
Step-by-step landed costing flow
- Lock one shipment scope and one currency for all costs.
- Load supplier value, freight, and origin charges first.
- Apply duty/tax assumptions and add destination local costs.
- Divide by sellable units, then validate price floor and margin.
- Update with final invoices after clearance to improve next quote.
Worked example
Supplier invoice: €8,000. Origin costs: €400. Freight: €1,200. Insurance: €100. Duties: €500. Arrival/local handling: €300.
Total landed cost = €10,500.
Landed cost per unit = €10.50.
If pricing is based only on the €8.00 supplier unit cost, you miss €2.50 per unit in additional cost.
Common mistakes
- Using supplier price as the real cost.
- Forgetting arrival charges.
- Ignoring currency conversion.
- Mixing VAT/tax treatment incorrectly.
- Not separating per-shipment, per-pallet, per-box, and per-unit costs.
- Not updating estimates after final invoices arrive.
Frequently asked questions
What is landed cost?
Landed cost is your all-in cost to get goods from supplier to your warehouse or delivery point, ready to sell. It includes much more than the invoice price, so it gives you the real cost base for pricing.
What is the landed cost formula?
A practical formula is: Product Cost + Origin Costs + Freight + Insurance + Import Duty + Taxes + Arrival Costs = Total Landed Cost. Then divide total landed cost by total units to get landed cost per unit.
What costs are included in landed cost?
Include supplier invoice value, origin handling, freight, insurance, customs/broker fees, import duty, and destination charges like unloading or local delivery. Include VAT/GST only when it is non-recoverable in your business.
How do you calculate landed cost per unit?
First total all shipment costs in one currency. Then divide by the number of sellable units received, not just ordered units, so damage or short-shipments are reflected in true unit cost.
What is the difference between product cost and landed cost?
Product cost is what you pay the supplier for the goods. Landed cost is product cost plus the full import and delivery chain, which is why landed cost is usually higher and better for margin decisions.
Does landed cost include VAT or import duty?
Import duty is typically included because it is usually non-recoverable and part of true item cost. VAT/GST is included only if you cannot reclaim it; if recoverable, track it separately as a cash-flow item.
Why is landed cost important for pricing and profit margin?
If you price from supplier cost only, you can underquote and lose margin on every shipment. Landed cost gives a realistic floor price so quotes, markups, and margin targets hold after clearance and delivery costs hit.
Can I use a landed cost calculator for boxes or pallets?
Yes. Calculate total landed cost once, then allocate it by units, boxes, or pallets depending on how you buy and sell. This is useful when logistics charges are negotiated per pallet or per carton.