The eight lines of a landed cost
Landed cost is what one unit really costs you, standing in your warehouse, ready to sell. Build it line by line and you will never be surprised by a margin again.
- Unit price at the factory, at your actual order quantity
- Tooling or setup cost, divided across the units it produces
- Inland transport in China and export clearance
- Sea, air, or rail freight for your share of the shipment
- Insurance, typically a small percentage of cargo value
- Customs duties and import taxes at destination
- Destination handling, clearance fees, and delivery to your door
- Inspection, sampling, and your own sourcing or agency fees
Divide freight properly
Freight is charged per container or per cubic metre, not per unit, so the same shipment costs very different amounts per unit depending on how full it is. Calculate the volume of one carton, divide by the number of units it holds, and you get a freight cost per unit you can trust.
Do not forget the cost of money
A deposit paid in March for goods that sell in July is capital you cannot use for four months. For small importers this is often the real constraint, not the price. Add currency conversion spread and bank charges while you are at it: they quietly eat a percent or two.
Sanity-check against the rule of thumb
For most consumer goods shipped by sea from China, landed cost tends to fall between 1.3 and 1.8 times the factory price. If your calculation lands far outside that range, you have either found a genuinely bulky product or forgotten a line.