Calculating Your Landed Cost
What is it?
Landed cost is the total price of a product once it has arrived at your customer's door (for dropshipping/POD) or your warehouse. It includes the manufacturing cost, shipping fees, insurance, and any customs duties or taxes.Why is it important?
If you only look at the manufacturing price, you are missing a huge chunk of your expenses. Shipping is often 30-50% of the total cost in e-commerce. Ignoring this leads to pricing your products too low.The Formula:
Landed Cost = Unit Manufacturing Cost + Shipping to Customer + Duties/Taxes
Real-Life Example
You are selling a hoodie via Print-on-Demand.
- Printful charges you $22.00 for the hoodie.
- Standard shipping to the USA costs $8.50.
- Your Landed Cost is $30.50.
Note: If you hold inventory, you also add the freight cost to get the goods to you.
❌ Common Mistake
Forgetting that shipping rates vary by destination. Your landed cost for a customer in New York might be $30.50, but for a customer in London, it might be $35.00 due to higher international shipping rates. Always calculate based on your primary target market or use an average.
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Curriculum: 7.2.2 - Calculating Your Total Cost Per Sale (Landed Cost) (Difficulty: Beginner | Path: Launch)
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