What landed cost includes
The unit price on a supplier invoice is rarely the full cost of getting that product ready to sell. Landed cost adds everything else it takes to get the item from the supplier to your warehouse: freight and shipping, customs duties and taxes, insurance, and handling or brokerage fees.
For domestic purchases with a nearby supplier, landed cost might barely differ from unit price. For imported goods crossing borders, the gap can be substantial—duties and international freight alone can add a meaningful percentage on top of the invoice price.
- Unit price (the supplier invoice cost per item)
- Freight and shipping to your warehouse
- Customs duties and import taxes
- Insurance during transit
- Handling, brokerage, or other fees incurred before the item is sellable
Why landed cost changes pricing and margin decisions
A product bought at $10 a unit that looks like it carries a healthy margin at a $15 selling price can turn out to be barely profitable once $3 of freight and duty per unit is factored in. Pricing or margin decisions made off unit price alone routinely overstate real profitability on imported or freight-heavy goods.
This compounds across a catalog: a supplier switch that lowers unit price but increases shipping distance can still raise landed cost overall, even though the invoice looks cheaper.
Allocating landed cost per unit, not per shipment
A shipment landed cost total is only useful once it is divided back down to a per-unit figure, since that is what feeds into margin and pricing decisions for the actual product. The simplest approach spreads shared costs (freight, duty, insurance) across units proportionally by value or by quantity, depending on which better reflects how those costs were actually incurred.
Getting this allocation right matters more as a shipment mixes multiple products at different unit prices—splitting shared freight evenly per unit, rather than per dollar of value, can meaningfully distort margin on the cheaper items in the mix.