What Is Landed Cost and How to Calculate It

Landed cost is the total cost of a product after you add purchase price, freight, duties, insurance, and other charges needed to receive it. It is the number you use when you want to know what one unit truly costs in your warehouse or store.

In wholesale, the landed cost calculation starts with the supplier invoice and then adds every inbound charge tied to that shipment. If a fee is part of getting the goods to you, it belongs in the total. If it is not tied to delivery, leave it out.

You can calculate landed cost at the line level, the pallet level, or the shipment level. The method is the same: gather all inbound costs, assign them to the products they support, and divide by the units that receive those costs.

Start with the product cost on the invoice. Then add freight, fuel surcharges, customs duty, broker fees, port fees, drayage, insurance, and any prep charges that apply to the same shipment. If one cost covers several items, allocate it in a consistent way, such as by weight, carton count, or invoice value.

The key is to avoid mixing landed cost with overhead that does not move with the shipment. Rent, salaries, and software are operating costs. They matter to margin, but they are not part of landed cost unless you intentionally build them into a broader cost model.

When the shipment contains more than one SKU, the landed cost calculation should show each item’s share of shared freight or import charges. That gives you a unit cost you can compare against wholesale price before you accept an order or set a list price.

If you price from invoice cost alone, you can miss the charges that arrive later. That can make a product look profitable on paper and weak in practice. Landed cost keeps your margin check grounded in the full inbound expense.

It also helps when you compare suppliers, factories, or routes. A lower invoice price may still produce a higher landed cost if freight, duties, or handling are heavier. The landed cost calculation lets you compare the full picture, not just the quoted unit price.

For wholesale teams, landed cost also improves decisions on minimum order quantity, reorders, and channel mix. You can see whether a case pack, pallet, or mixed shipment leaves enough room for margin after inbound costs are assigned.

Suppose you buy 100 cases from a supplier. The invoice shows product cost, and the shipment also includes freight, customs duty, and a brokerage fee. You add those charges together, then divide by 100 cases to get landed cost per case.

If a shipment carries several SKUs, you can split shared freight by weight or by carton count. The point is not perfect math. The point is a method that stays consistent from order to order so your margin review is comparable over time.

Once you know landed cost per unit, you can set wholesale price, check gross margin, and test whether the product fits your channel rules. If the margin is too thin, you may need a new supplier quote, a larger order, or a different shipping method.

Many teams use a landed cost worksheet to keep the inputs in one place. A clean worksheet makes review easier when invoice price, freight, and customs charges arrive from different vendors.

Common charges often include supplier invoice cost, inland freight, international freight, customs duty, brokerage, port fees, drayage, insurance, and warehouse receiving charges tied to the inbound shipment.

If a charge does not help move the goods into your control, think carefully before adding it. The goal is to capture the cost of getting salable inventory into place, not to load unrelated overhead into the figure.

• Supplier invoice cost
• Inbound freight
• International freight
• Customs duty
• Brokerage fees
• Port and drayage fees
• Cargo insurance
• Receiving or prep charges tied to the shipment