6.5 - Your Pricing Strategy & Unit Economics (Difficulty: Beginner | Path: Launch)

Understanding Cost of Goods Sold (COGS) & Landed Cost (Beginner)

What is it?

Landed Cost is the *total* cost to get that single product into your customer's hands. It includes your COGS *plus* all the other 'hidden' fees like shipping, handling, payment processing fees (e.g., from Shopify & Stripe), and any import duties.

Why is it important?

How to Calculate Landed Cost (Simple Example):

• Product Cost from Supplier (COGS): $15.00
• Shipping Cost to Customer: $5.00
• Payment Processing Fee (approx 2.9% of $25 sale): $0.73
• Total Landed Cost: $20.73

✅ Do's and ❌ Don'ts

• Do: Use the 'Cost per item' field in your Shopify product admin. Entering your `Landed Cost` here allows Shopify's analytics to show you your true profit margin on every product.
• Don't: Only use the supplier's product price as your 'cost.' You're forgetting shipping and fees, which will destroy your profit.
• Do: Calculate this for *every single product*. A mug has a different landed cost than a t-shirt.

Real-Life Example:

A beginner sells a t-shirt for $25. The POD provider charges $15. The beginner *thinks* they are making $10 profit. A pro knows the real math: $25 (Sale) - $15 (COGS) - $5 (Shipping) - $0.73 (Payment Fee) = $4.27 actual profit. This is the difference between thinking you have a 40% margin ($10/$25) and *knowing* you have a 17% margin ($4.27/$25).